High taxes, low purchase price...can it be profitable?

Question

Is there a way to make this deal profitable or should I stop trying to put this puzzle together?

I’ve been watching this multi family on the market for some time now. It was up at 220k+ now it’s down to 104k.

There is a coach house with an additional 2 units. The city says it has to be demolished because it is no longer grandfathered in.

Is there anyways around this that anyone is willing to share? Can I split the lot possibly?

Next hurdle is the high taxes

The taxes are at 18k.

On the county website they have the value at 498k.

I talked to my property tax guy and he said he could get them down to somewhere between 8-10k.

How long would that take? Would I have to still pay the high taxes until I get them appealed and reassessed? Can I roll the holding costs into a 203k conventional?

Thanks for any help!

Patrick Moore · Answer

@Brent Paul The coach house in the rear of the property needs to be demolished and a new house would not be allowed. Taxes on the neighbors houses are half.

The cook county assessor has the property valued at almost half a million, if I purchase it for 100k it’s obviously not worth 500k.

The front house is a duplex with a basement that is only 2’ below grade, there is a lot of support beams but I’m sure it’s possible to add a unit down there.

The rent for the 2 existing units would be about 2400 a year.

Brent Paul · Answer

You definitely want to talk to the city about the property before making any kind of offers on it or even sub dividing land.  They will either tell you yes or no.  Being the other property will be demolished it does make sense the taxes would go down.  Even if the city allowed you to build after tear down you are talking some major costs to build.  Probably would take a year between planning and getting the city to approve it, sometimes they even have the neighbors vote on new builds.  Let them know your plans up front.  That way you can move on or go ahead with the purchase.

Recently the golf course near my parents house went to city council for the 3rd time.  They wanted to turn it into apartment buildings and townhomes.  All the neighbors voted no and city council also denied them.  Would it generate lots of taxes for the city? Yes, but some major reconstruction of the roads would need to be done.

You would have to generate some serious rent to make up for the cost of those taxes.  What does rent go for in the area?  Is it a duplex?  It's certainly possible you could make it profitable if the rent is high enough or if the city allows you to rebuild another multi family on the property.