All Forum Posts by: Henry Lazerow

People have always complained about Chicago taxes but those same people have made a killing over time as the property appreciated and rents increased over time. 

In terms of housing bubble I can't tell you if we are in one or not but what I can tell you is as long as the rents cover the expenses of property you can ride out a downturn and still have a great investment over long run. I think now more then ever it's very important to make sure all property purchases have a positive net cashflow after all expenses. 

High rise development may have some effects on market but I do not see huge impact on the type of buildings BP members are buying. The high rise market is very differant then the 2-4 unit neighborhood apartment market. 

If you have any questions on any specific neighborhoods shoot me a PM. Some hot areas right now for "house hacking" which is what most people do for there first purchase are Avondale, Humboldt Park, Old Irving Park, Albany Park and Pilsen. If on a tighter budget Bridgeport, Mckinley Park and Marshall Square/Little Village. Avondale is on fire right now. 

 @Antuan La How you are you calculating this 27% COC? The way I would run numbers.....

$750 rent * .95 vacancy * .98 leasing * .9 property management = $628 gross rent

$75 taxes (will vary by city)

$50 insurance (will vary by city)

$50 trash/water (will vary by city)

$175 cap/ex wear/tear w/ averaging out bigger ticket items dividing their cost by life span. A water heater and furnace cost the same in a $37k place as a $200k place so doing cap/ex by a % of gross rents does not work accurately

Total expenses: $350

Net cashflow per month = $278 with $37k down that is under 10% COC

With leverage let's say $10k down and add a $30k mortgage expense (close costs/fees) so adds $161 per a month to expenses now at $511 expenses and net cashflow of $117 a month 11.7% COC

Are you calculating true net cashflow. This is after averaging out the costs of 1) roof, mechanicals, siding, flooring, etc. and dividing by their life span then also subtracting general maintenance costs (handyman type stuff frozen pipes, etc.) you see each year. For example if roof last 15 years and costs $7500 you should be subtracting $41 a month from net cash flow whether you see that cost that year or not. What about water bill, garbage, insurance, vacancy, property management? 

I want to learn more about strategies BP members have found effective for contacting expired/off market listings? I have had some success on LinkedIn as I assume these owners get a ton of direct mail spam and the messages show my profile and who I am. 

Any pitches you have used successfully or phrases you start off the conversation with when on a phone call? 

Looking to grow this aspect both for my own investing and for finding good off market deals for my clients. 

Thank you, 

The best deals in the MLS are the ones that got passed over then had a price drop then had another price drop and all of a sudden it's priced good but everyone already seen it.

For example here is one of my clients deals. It was originally listed $650k more then 6 months prior then over time dropped to $550k we got it $530k plus close credit. Deal ended up making six figures of equity after a rehab on re-appraisal.  https://www.biggerpockets.com/forums/664/topics/574866-who-said-you-can-t-hit-1-on-north-side-well-almost

I have "house hack" clients who do a lot of these. It's called Home Possible and you can do 5% down on 2-4 unit properties. There are income limits though for certain area tracts you can check these here by searching the property address http://www.freddiemac.com/homepossible/eligibility...

I am in Chicago and don't know anyone in Tennessee but would recommend searching for a lender who works with investors maybe ask on the BP local forum. On phone ask them how many Home Possible mortgages they have done. It's a pretty common program and any lender who does house hack buyers should know about it. 

Also in regards to your occupancy questions. Yes, you legally need to intend to live there for 1 year from close date and intend to move in within 60 days of close. 

I have been broker for two 1031 exchanges both times representing sellers when buyer doing the exchange. The process at least from our end was very similar to a normal deal and everything went smoothly. Close was same old. 

Sorry you had issues ^ these problems are typical to those areas. You are rarely going to get top notch work to code in a sub 200k D/F neighborhoods. Hardly anyone is even pulling permits down there until they already have violations. 

This is why I always guide clients to the north side or to the class B/C parts of the southside such as Mckinley Park, Bridgeport, Bronzeville, Kenwood, etc. You wont get 10 caps there but it'll be steady profitable returns with low vacancy. 

The whole idea of doing rehabs from out of state in D/F neighborhoods is extremely risky it's usually better to just take a lower stable return on a stabilized rented building. Chicago already offers higher cap rates then most cities of it's caliber. It's also good to have a 3rd party realtor representing your best interest (not a realtor who owns property) and then negotiate management by shopping rates. 

@Dan H. it's 95 LTV on an owner occupied investment property (1-4 units) heloc. PM me for the bank name

BRRR is still alive and going strong in our Chicago market. It's not always the BRRR you read about on BP though with the 100% cash out, etc. You can do that in lower priced high cap rate areas but in the class A to C neighborhoods it's more like build $100k of added equity and pull out $50k of it back to still cashflow a safe amount. I see a lot of owner occupant "house hackers" now instead getting a HELOC where they can pull some money out temporarily and then pay it back so the property still cash flows same as before once they repay.

Check out a BRRR deal diary I created for a client here https://www.biggerpockets.com/forums/664/topics/57...

To skip to the numbers.....

"Got my appraisal back last Friday 11/2/18 (actual appraisal happened 10/27) at 750k!

mini recap on the numbers:

530k purchase, 5% down, 7.5k seller credit.

Cash used was: 80k rehab + 30k down and closing costs + 11.4k holding costs = 121.4k

Current loan balance is ~502k

Looking for my next steps with @Landon Hoon on how to best use the equity gain. We're thinking the rate and term refi with a next day HELOC with access to 210.5k.

(750k* .95) -502k = 210.5k

Let me know your thoughts, excited for this to snowball!"