All Forum Posts by: Bob Floss II

@Kate J. There's always a pretty big drop off this time of year. Everyone is running around trying to squeeze in summer vacations and getting their kids ready to go back to school. Typically the last week of July and the first week or two of August is a dead zone. It should start to pick up again in another couple weeks and then the market stays relatively stable until about Thanksgiving. Between Thanksgiving and Christmas there's still some activity, but its much quieter. After Christmas its stays pretty quiet until about Martin Luther King Jr's birthday and then things start moving again.

HOWEVER, I've never been and never will be a fan of taking your property off the market. You never know when people are in a situation where they need to move and are looking for a home. 

I would not blame the market conditions and take a hard look at your property and your comps. If you've only had three offers and they are all "lowball" offers, you might be over priced. Your tying up money you could be using on the next project and lowering your bottom line by increasing your holding costs. It might be time to lower the price and move on to the next project.

@Lewis Yuan Not to be nosy, but I did a search and found the building. I still had a concern with the expenses and it was easier to pull up the property so I could look at the information.

Property taxes are determined by using the Assessed Value given by the county assessor.  The assessed value is 10% of the assessor's opinion on the market value of the property. So a property worth $369,900 will state an assessed value of 36,690. The property taxes on this building seem far to low for what properties typically pay in Cook County.  Sure enough, when I pulled it up, the assessed value of the building is 25,145, meaning they think the building is worth $251,450.  Now, the assessed value is very rarely correct (which is why you should always appeal taxes), so this doesn't mean the building is actually worth that amount. However, it does mean if you buy the building for $369,900, you should expect a spike in your tax bill the year after you buy it. Based on buildings in the area, I would expect your taxes to be between $7,000 and $8,000. I also noticed the seller lives in the building because they are getting a homeowner's exemption.  Last year the seller had their tax bill reduced $503 for this exemption. When you buy the building, this will also be added to the tax bill the following year. So estimate being in the mid 7's for taxes. 

I also noticed you are missing a few expenses. The heat/gas for the building is $1,500 a year and the electric is about $750 a year. If you put those in the expenses, the building has a NOI of about $3,000 a year.

In my opinion, the building is great for an owner occupant that wants to rent out the other two units to offset their mortgage. For an investor that wants to rent out all three units, the numbers don't look great. You can try to low ball them or find a better property.

Client bought a property, gut rehabbed it, property was broken into and stripped clean. He made insurance claim, put the property back the way he had it. Next day the property was broken into and stripped clean a second time. He donated it to a synagogue and wrote it off.  

Client paid his contractor $7,000 cash on Friday to complete a punch list so he can put a property on the market. Come Monday he found out contractor was murdered Friday night and cash was gone.

@Andy Mirza @Bobby Sharma All kidding aside, investors don't realize that some of the small suburbs surrounding Chicago have building and transfer restrictions that would make Chicago blush. You have to know which villages to avoid so you don't get stuck with a never ending project. 

The list above is a good start but you are missing a few: Cicero, Hillside, Bellwood, Elmwood Park, Evergreen Park, Franklin Park, Harvey, Harwood Heights, and Westchester.  

Calumet City and North Chicago are probably high on my list for annoyance factors. You have to personally go to their village hall to order the inspection (they won't do it over the phone) and then you have to go back and personally be at the property for the inspection.  The issue is Calumet City is a good 45 minute drive south of Chicago and North Chicago is actually about an hour drive north of Chicago (talk about false advertising). That's a lot of time driving back and forth.  Now if you live in or near those towns, you can get some great fix and flip deals. If not, you are wasting a ton of time and energy driving back and forth. 

I have a personal hatred for Hillside. I've done several closings there and the employees at the village hall are some of the nastiest, rudest people I have ever encountered.  I wouldn't want a property in Hillside if you gave it to me for free. 

I have a spreadsheet of all villages around Chicago that have some type of transfer stamp or requirement, PM me if you want it.

@Lewis Yuan What is the sources of the itemized expenses? Some of them seem a bit too low.

@Brandon Reda Everyone has offered a lot of great advice in regards to asset protection. I'll respond to your concern with the lawsuit. I would have to read the case, but a big part of piercing the corporate veil likely resulted from the fraud the defendant committed. You cannot expect to commit fraud, especially if done within the LLC, and expect it to shield you personally.

Take the time to make sure you are using your LLC or any other entity to its fullest capacity. When an attorney attempts to pierce the corporate veil, its very rarely comes down to one issue. The attorney and the Court will take into account a variety of factors to establish if you have a functioning entity or if the entity should be disregarded. It should be noted that Courts rarely allow piercing the corporate veil, but it has happened. Is it filed with the state, do you have an EIN, does the business have a bank account, are funds in the bank account commingled with funds from other businesses or personal funds, (to a lesser extent) does the business have its own phone number or office? Generally I tell clients, if you treat your LLC or S Corp like a functioning business and set it up to be a functioning business, you'll have the benefit of the corporate veil.

Lots of opinions on the factors involved with flipping houses, this has been an interesting read. I'm of the opinion that flipping is never dead, we merely go through periods where acquiring the right properties at the right price can be more competitive and challenging than others. I'm working on a flip of a single family home I got from auction at way below market value. I'll be able to put it on the market fully rehabbed for a price that will attract young families in the area. 

If you can put out a product that a young family with one or two children can comfortably buy, and you stay within the comps, you can't really go wrong.

@Chris R. It's been running rampant for over a year now. It hit my area pretty hard last year and most attorneys and title companies have taken measures to prevent it. Obviously you want to call to confirm wire instructions. 

However, it should not be overlooked that the reason fraudulent wiring instructions go out is someone's email has been hacked. The reason this scam has been so effective is the hackers have shown incredible restraint and patience before striking. They get access to your email and monitor your activity and wait for you to go to closing. When they see the opportunity to intercept a large wire, they pounce and send out an email with their fake wire instructions designed to look authentic. Victims have discovered their email must have been monitored for weeks or months before the crime occurred.  

Always think before clicking any links. Frequently the hack occurred when a party clicks a link to a "real estate purchase contract" in an email and they don't think twice.  If you don't know the person or have reason to be suspicious, don't click it. Always keep your anti virus up to date and run frequent searches. 

On a side note, this activity boggles my mind. When I send a wire from a bank, it's always a big production and the wire can be delayed for several hours. These scammers are receiving huge incoming wires that are then immediately redirected to an overseas account that cannot be seized. You cannot hold the bank responsible for you using the wrong wiring instructions, but I feel the banks should have some responsibility for allowing huge wire transfers to go overseas after immediately hitting the account. How does that not set off red flags?

@Emmit Giddings I have to agree with @J Scott. You either did not price it correctly or the work you did to the property is not in line with the comps in the area. Lowering the price that much means you missed the mark on your comps. We generally have a slow down this time of year when people take their summer vacations before kids go back to school. You may have to keep lowering the price. 

On the North Shore of Chicago? You can maybe find yourself a studio.