All Forum Posts by: John Clark

Quote from @Aishah B.:

I’ve been lurking on these forums for a long time and I think we’re ready to begin investing within the next year. 

We are looking to invest in MFR in Chicago and the surrounding burbs. Our criteria is as follows:

A/B class

Minimum triplex

Property will appreciate over time

will easily resell if need arises 

generates some cash flow after all expenses including property management

What areas should we be looking at? We have around 200k to invest. 

Get your head examined. Stay out of Illinois, and especially out of Chicago. Chicago's finances are beyond bankrupt, and the City has a law that allows it to increase taxes at the rate of inflation without running to City Council every year. Not that it "has to" raise property taxes that much each year, but it can. Care to think that the city won't do so?

Then there's the small matter of Chicago politics. Not only is Chicago in particular (and Illinois in general) very pro tenant, but people are pushing hard right now for rent control, good-cause-only eviction (no eviction to remodel, etc.), and God knows what. The penalties for even inadvertent violations are draconian.

The tenants are becoming more and more professional by the day.

To sidestep the tenant quality issues you are looking at class A neighborhoods only. They do not cash flow and the tenants are demanding. They pay for service, and they demand service. You break even in class A 'hoods daily and make it up with appreciation when you sell -- IF we don't commit suicide-by-rent-control. Two hundred thousand dollars will not give you both class A location and class A tenants. You might get the location, but the updates will kill you if you want to be good enough to attract tenants who can pay the freight.

Try northwest Indiana. Nice areas. Maybe not as class A nice as the top Chicago neighborhoods, but prices are somewhat better and the politicians slightly more intelligent.

Quote from @Ethan Romero:

 thank you, do you have any advice on how to find said executor or pr? 

 Listed for sure in the probate court files, and usually in the Will. The probate appointment will always be correct. Also get the name of the attorney for the estate while looking at the court file.

If you have a spare space in your breaker box, why not just run another circuit to the second bathroom?

Doubt if you could just replace the second outlet with a regular outlet, but the local code will tell you. One should use GFIs in "wet" areas -- places with water. So near your kitchen sink, bathrooms, etc. Check the electrical code. If you can get away with just replacing with a regular outlet, fine, but it wouldn't be as safe as GFIs on separate circuits.

looks like you blocked an exterior door from the kitchen during the rehabilitation. here's the fridge now, too?

Quote from @Andrew Michaud:

This is net cashflow after debt services AND expenses.

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As the old saying goes: You change the facts, I change the answer. Your original post mentioned debt service only, and there are plenty of people who don't account properly (let alone sufficiently) for expense items and think they are cash flow positive.

You still have to tell us what alternative investment opportunities you have, and how they compare to this one once you adjust for risk.

Quote from @Andrew Michaud:

Price is approximately $35,000/door for a total purchase price of $1,330,000. All buildings are in excellent shape, but are in need of roof replacements.

 Your math is wrong. Recalculate purchase price adding cost of roof replacement to the $1.33 million you're paying up front for starters.

Then calculate cash flow PROPERLY. There's a lot more to cash flow than just debt service. Can you pay all the expenses of the property (taxes, management, repairs, vacancies, general administration, reserves, etc. etc. etc.) out of that $110,000 each year? How much is left over?

Then compare your net return after all expenses (including tax savings on other income from depreciation) on the amount of money you're putting into the property and the time you will spend managing it, to the money you can make in some other investment. Adjust for risk. Look at your answer.

Quote from @Lauren C.:

Seems that any kind of statute of limitations would be a sort of delayed discovery thing (in other words, I couldn't have known until this very moment) but I'm not sure.

Yeah, I know- why didn't I look this up? It's because I walked through the apartment, asked him "Is this a legal bedroom? Because there is no closet." and he said "Yes, you don't need one in NY as long as there is a window." That is true, but turns out misleading. A full sized bed does fit and there was one in there at the time of purchase.

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Check with an attorney, but you probably have a statute of limitations problem. You could have looked it up. You chose not to. See a lawyer.

Quote from @Jeff Halverson:

I just don't quite understand what his "case" would be.  Am I volating any legal agreements between him and I?  I would think that the state can certainly take action against me but don't see how he would be involve other than as a wistleblower. 

Thanks again. 

 You could be interfering with his right to quiet enjoyment of his own property, or some other form of private nuisance. That could give him standing to sue if there's rowdy parties, etc. You have an antagonistic neighbor, and you didn't help your cause any by blowing past your "clear" certificate of occupancy limit of 12 with an AirBNB profile of 16 people.

The only thing you can do is what others have suggested: Make sure you comply with all state, county, and local, permits and requirements for short term rentals, and understand where your neighbor is coming from and why.

Quote from @Paul De Luca:

I don't disagree with your definition but like you said that is a bit narrower than the actual definition:

Gentrification: "the process whereby the character of a poor urban area is changed by wealthier people moving in, improving housing, and attracting new businesses, typically displacing current inhabitants in the process."

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I have heard of your definition, of course, I just find it too woolly to be of much use, as it allows all and sundry to scream "Gentrification!" (as if it's a bad thing) every time somebody puts a little care and pride into where he lives. It takes away the space needed for "improving" in the continuum of things. At least I can work my definition into a spreadsheet, and I have a riposte to the economic ignoramuses who want static, decaying, unchanging, neighborhoods. To each his own.

C'est la vie.

Quote from @Jeff Halverson:

I have a COO for 12 people but listed the property on AIRBNB at 16.

You didn't help your cause any by lying on your listing, so why did you do it?

Ask yourself: Would you like to be the homeowner neighbor of an absentee landlord who plays fast and loose with the facts in order to generate income from transients? Even if you "took down" the 16 person description, the attitude remains. No wonder your neighbor is loaded for bear.