All Forum Posts by: Jake C.

Hi All,

I have a friend that had a large single family rental portfolio here in Chicago in 2012. He ran into some financial trouble, went through bankruptcy, and ended up with a remainder of his initial portfolio, about 17. 

All of these are in the city of Chicago and were once renovated to rental standard. They are now likely stripped but vacant and secure. Most of these are in Englewood, Roseland and one in historic Pullman. 

There is about 15K per door owed in property taxes and water bills. He has an investor that will pay off the liabilities in return for the homes, but I thought this might be an opportunity for him to donate the portfolio to an appropriate non-profit. Based on the home sizes, assumed condition and areas, and a light surface scratching of comps, I would guess these are worth 15-25K per door as-is depending on address, but this should not be relied upon and you'll need to do your own due diligence.

Does anyone here know of a non-profit that might be interested in a donation of this sort?

Thanks!

Congrats!!!

@Michael Sokoloff I do not recommend investing in South Side real estate remotely. They can be great investments, but a lot can go wrong. If you are not here to deal with it in person should it come to that, you will lose your shirt. I specialize in these areas and see the damage done to out-of-state investors firsthand. 

Love to see such activity in a Chicago thread!!

@Brant Biba Have you ruled out South Side/West Side? I know it's got a bad rap, and it is certainly a high touch form of management, but if done properly, you can get above average returns. 

For example, just looked at an 8 flat, mostly duplex 3/4 bed units in Park Manor that is fully rented but could use some TLC. Units are very desirable due to size/layout. Depending on how you go about it, likely an 11%-14% cap from day one.

@sergio aguinaga 

Independent agents usually have their preferred carrier for any given asset class. Call 3 or 4 of them. Ask them which companies they recommend for this and why. If they don't have a good product for you, ask them if they know any brokers who might. Get a feel for the market. Yes, this takes time. 

State Farm is one of the cheapest here in Chicago for low income property.

Also try to find an Erie Insurance broker. 

Agree with @Frank Wong & @John Warren. Stay in your local market, MASTER it, and you will reap greater rewards and less headaches in the long run. Maybe go to one oter market, preferably within a 5 hour drive. The one exception is if you live in a market with very low deal volume. If it can't support your goals, you have no choice but to look elsewhere. 

Reminds me of a story I once heard told by Yvon Chouinard (founder of Patagonia): He would go to Jackson Hole every summer to fly fish. On any one trip, he would constantly change strategies and flies to try and maximize the amount of fish he caught. One summer he decided to just stick with ONE strategy and fly. That summer, he caught more fish than ever before.

@Johnny Thompson Keep in mind that the right answer to this question will be dictated mostly by your expense ratio.  @Morgan Klein has the right approach of wanting enough in reserve to cover any emergency repair plus a few months of vacancy, but 6K in his market might be too little or too much in yours.

Also, whether you reserve on a per-house basis or portfolio basis depends on the size of your portfolio. If you have 20 properties, reserving 120K might be overkill. 

@Sergio Aguinaga You need to shop this around in your local market. If you were in Illinois, I'd refer you to a few people.

I will say that I used NREIG for a while not too long ago. It is important to note that they are repackaging larger policies and then reselling a portion of that coverage to you. They, and others like them, love to use Lloyds of London and Lloyds of London is one of the more difficult carriers to get paid out. These aren't deal breakers, but they are something to be fully aware of.

Don't be afraid to call State Farm either. Many people overlook them but they are competitive for landlords in many markets, like here in Chicago.

Bottom line: shop this around.

@Jordan Crosby It really depends on what your portfolio looks like. Do you own rentals that have equity? If yes, try to leverage these with a local bank to get a revolving LOC.

I was facing the same decision not too long ago and spent a lot of time weighing out the pro's and con's. 

My conclusion, and this was a conclusion based on my own situation, was that both hard money and conventional debt should be present in my toolbox.

I was able to find a bank that gave me a revolving LOC at 1% over prime, collateralized by a portion of my rental portfolio. I obviously want to use this as much as possible as it is cheaper and simpler than using hard money.

I simultaneously built a relationship with a local hard money guy so that if/when I run into deals that won't fit on my LOC, I can still execute.

Bottom line: If you can, get an LOC collateralized by equity in your properties. Short of that, use hard money.

Y'know, I've been turning this question over in my mind for the past 12 hours and realized something that I should have realized sooner.

My initial reaction to the question was something to the effect of "No use looking backwards!!" or, "I wouldn't change a damn thing!!". But I'm wondering if that is the right attitude? Of course, I cannot change the past. But I can sure as hell learn from it. 

Looking back, I would have done almost EVERYTHING differently! 

I would have focused on buying rentals in gentrifying areas, trading immediate cash flow for more upside. I would have spent more money on property mechanicals (electrical, plumbing, etc). I would have installed drain tile in every finished basement. I would have bought out my investors when interest rates were bottomed out. I would have bought more 2, 3 and 4 unit buildings instead of keeping a laser focus on SFR. I would have tapped into equity to finance more acquisitions instead of staying unleveraged.

So, while I don't regret anything I've done -- after all, it is all of my decisions/experiences that shape who I am today -- it is VERY important for me to look backwards and understand what I would have done differently, because these are all invaluable insights that now shape my investment philosophy moving forward. I can now better capitalize on the next real estate cycle.

Just ranting at myself here.