All Forum Posts by: Bob Floss II

@Ronald P. If you are doing a sole member LLC, it's pretty straight forward. The biggest issue why people need a CPA or attorney to help is to make sure the process is completed. You would be surprised how many investors with their own LLC never sit down to write out their operating agreement with themselves. Skipping steps opens you up to liability.

@Ronald P. What's your business plan? If it's just you, it's pretty simple to set up. If you plan on having partners, it becomes more complicated. You always need to set the guidelines for a business venture with partners so there is not miscommunication later on when problems come up. 

I find it funny when people try so hard to prove the third biggest US market isn't a good place to invest.

@Kenny Dargert Partnerships are not something that’s boilerplate or have a form document. Each one needs to be uniquely crafted. As was said above, once you do the first one, you can copy and paste for future projects, but the first one is important.

You need to figure out if you want her secured on the property with a mortgage and note, become members of an LLC together, or do a JV agreement, or all of the above.

It’s extremely important to finalize the terms before taking money. Waiting until after can lead to misunderstanding and sour the partnership before you get started. 

@Mark Ainley Have you looked into the other subsidy programs? Section 8 isn’t the only one. 

@Nicole Duran I’m not in Logan Square but I’m there all the time. I’d be interested in helping. 

@Marc Latreille Oh man, I have to catch myself from writing an essay so I'll try to keep it cliff notes version.

Investors from all over the world figured out how cheap Chicago was about 5-6 years ago and there has been a buying frenzy up until about a year ago. I've personally done closings on probably 900 units just in the south side areas you linked and we still get inquiries every day because of the low prices and cap rates. Chicago is a world class city and strong jobs, transportation, and investment opportunities that has been under attack from investors and the government for the past year and its caused things to slow down. 

1. Expectations - Global investors around 2010-2012 figured out you could buy up properties all over the south side and easily hit a 15 CAP, which set off a buying frenzy. As more people figured out the prices were cheap and the inventory naturally was bought up, it left fewer properties asking more money. The same properties we bought at a 15 CAP are now asking at a 7 CAP. No one is buying at that number. On the north side, a 7 CAP is great because generally you don't have rent performance issues.....

2. Rent performance - You have to be careful with some of these buildings. The south side is block-by-block. One block can look great, the next is riddled with drugs and gangs. There are some wonderful properties that are filled with horrible people and you will never see a single rent payment on time. Trying to clean out the buildings is a nightmare, we've tried. If you go into eviction, you should miss 5-6 months of rent easy and forget trying to collect a judgment. If you have to remove them, the sheriff won't execute an eviction if the temperature goes below freezing because it's inhumane. Once we get into the dead of winter, the tenants know they can play the system.

3. Government - The State of Illinois is fighting over a series of legislation aimed at commercial property owners that have profited from everything above. Rent Control was proposed but didn't make it out of the legislative committee (that is mostly Democrat) mainly because they weren't prepared. They are preparing to go back at it again next summer. When the City of Chicago had a gap in the budget, they looked at raising the transfer taxes for properties over a million. If you sold a property worth $3.1 million, your transfer taxes to the city would jump from $22,000 to $79,000. It didn't get passed, but Chicago always needs money and it may come up next year again. We are also dealing with a potential jump in real estate taxes for all commercial properties that is still unknown, which is scaring investors.

In my opinion, there are still amazing opportunities in Chicago, but all the negative press is pushing people away. Chicago, more than any other city, requires having boots on the ground team members to keep you from making a bad buy. It's extremely easy to over pay for a property in Chicago or buy on a bad block. A lot of investors won't admit the reason they don't like Chicago is they made a bad buy and got burned. A brick duplex for $40,000 is great, but know it might cost $90,000 to make it habitable. If you are serious about investing here, get a team together and make sure they have your back. 

@Eudith Vacio Have you checked to make sure the association is healthy so the buyer on the flip can get fha financing? 

@Ryan Bird What's your investment strategy if you are looking at townhouse/single family in the nw burbs?