All Forum Posts by: Elizabeth J.

My husband and I will probably be closing on a 6 unit property in Chicago this summer and I am putting into place our team to maintain the building and make necessary improvements.  I don't live in the area anymore, but hope that with my attorney background and organizational skills, I will be able to manage this property from a distance utilizing the best team I can put together.  Up until now, we have only purchased condos and town homes for investment properties, so this is a much bigger undertaking.  In terms of other Chicago investors, is there anything in particular you know now that you would have done differently before in running a multi-unit building you own?  I am doing my best to get up to speed on all of the applicable state laws and local ordinances, but I am realistic that there will be some pitfalls and a learning curve along the way.  It's a bit overwhelming, so I appreciate your input!

The loan size will be about $600,000.  Thanks for the input!

We are looking to purchase a 6 unit building in Chicago, which requires a commercial mortgage since it is over 4 units.  This is the first time we have made a foray into commercial mortgages, and the fees and costs seem super high (could total close to $15K-$20K when all said and done!).  We have so far gone through a broker to locate two interested lenders--the broker's fee is 1% of the total loan amount and the fees for the lender are already about $6,000, not including any remaining costs at closing.  This amount mainly covers the lender's application and underwriting fees.  Wondering at this point, if we should just go to a local bank with a presence in Chicago; we no longer live locally, so that seems to be putting us at a bit of a disadvantage, since harder to build relationships with Chicago banks.  We are going to try Fifth Third Bank, since we have branches locally and I know they also have branches in Chicago.  Just wondered if anyone has any words of wisdom about obtaining commercial mortgages and whether the fees and costs are customarily significantly higher than with conventional mortgages.  Do these lenders ever negotiate on their fees/costs?  Do they ever eliminate the pre-payment penalty requirement?

I always discuss this with our real estate agent as he knows where much of the development is headed.  It appears in Chicago, that a lot of investment is headed south, to areas like Bridgeport, McKinley Park, etc.  The location is good and there are still good values.  The area is already pretty safe.  That is what I look for mainly--is an area already pretty safe, but looks like it on the upswing?  I like to check for where big residential development and big commercial development are planned.  As certain areas get more expensive, the adjoining areas may improve as things move out.  Certain areas west of Western Avenue may be perfectly fine, but it still may take some time before people view some of those areas as good investments.  

@Danny Duran This is a very informative post and echoes my thoughts, exactly!  I looked at many properties last weekend, mostly 3 flats.  There was one that was basically turn-key (although I could see many improvements it could need over time) in a very hot area of Bucktown proper.  The price was probably below the market--$589K for a 3 flat.  There were already 4 offers on the property when we saw it.  Yet, the cash flow was not there and it was not even close to making the 1% rule.  I spoke with our agent about the low price, with me thinking that it was a calculated move on the seller's part to drive a bidding war.  He was inclined to think that the seller did not realize the true value of this property, since his other properties were in a different part of town. The units were fairly small and the rents very low.  Assuming the property would probably go for over $650K in the end (due to the multiple offers), the rents would have to be increased significantly to even come close to there being positive cash flow.  The numbers totally did not work and I wondered why there were so many offers (probably more came in after I saw it).  It seemed like those seeking this property were not buy and hold investors but rather, people looking to sell in maybe 5 years and bank on the likely appreciation of the property.  I decided to forget about Bucktown, Lakeview and certainly, Lincoln Park, because the numbers wouldn't work at all.  I looked more in Humboldt Park, West Town, Bridgeport and Pilsen.

Thanks, Danny!  I guess I wondered if a $10 rent deduction or the like might sway someone to convert to the modern way of paying.  On some of our other properties, I receive checks, but with the mail, there is usually a delay where I am getting them 5 days after the month starts.  Our tenants have been very reliable in paying but I must say, the one tenant using Chase QuickPay, has been wonderful.  I love knowing the money will automatically be there when the month starts.  I think you are right, though, that just making it a preferred system may be enough--after all, it is much easier on the tenant and saves postage.  Thanks for your input!

Sydney, that would be wonderful--would love her suggestions.  Brie, those referrals for cleaning and snow removal and for any emergency repairs would be great.  We haven't secured the property yet, but I feel like I need to be planning ahead of time since there are many things to put in place.  If this deal doesn't work out, we will be buying something soon or later--so it would be great to know who to call.  I have a great painter/carpenter, but appreciate suggestions for other maintenance tasks.  We have a fantastic agent who is assisting me, so we have that part covered for hopefully, securing the building and then getting tenants.  Right now, the building is 100% occupied, but there will obviously be tenant turnover at some point,  I love Chase Quick Pay, but will definitely look at the other option you suggested, Brie.  Not having to worry about rent collection seems like half the battle.  Thanks!

Elizabeth

My husband and I are looking to purchase a multi-family property in Chicago.  I plan to be the property manager, though we no longer live in the area.  I plan to coordinate all of the maintenance/upkeep and have people in place to handle cleaning, snow removal, emergency repairs, routine maintenance, etc. by the time we purchase the building.  Would appreciate any tips on anything to consider in managing one's own property and/or any suggestions on good companies to assist with this.  I would also like to get the tenants on a direct deposit system for paying rent.  Have any of you offered incentives to tenants to do this and if so, what type of incentive (e.g. rent reduction, etc.) would you suggest?  Since we don't reside locally, I would rather not worry about tracking down tenants for rent each month.  Thank you!!

Pilsen might be another area near the others you mentioned, to consider.  I saw some 3 flats in the Bridgeport and Pilsen area over the weekend--some needed work, so if you are handy that might help.  Overall, they were relatively turn-key.  Parking was difficult in both areas, so you may want to look for a property with a garage or at least a parking pad.  Good luck!

Thanks, everyone!  I have a great agent I have worked with for years but I don't want to drive him crazy with my many brainstorms as to what I want to focus on next.  Thought it would be prudent for me to educate myself a bit more first on whether a multi-family property might be a good option at this stage and then tell him whether that is a good fit.  Have also considered at some point, having our family purchase a property that we use as a second home, with a rental unit (garden apartment, coach house, etc,) to defray cost of the property.