All Forum Posts by: Joseph Konney

Not to push one way or another, but do consider the risks of hard money. Let's say you purchase in the winter and find out it is going to take two months for the electric company to approve and re-connect the electric connection to the property to enable basics like heat and water needed for construction (this happened to me). How long will it take to refinance, will you need a tenant in place to do so and for how long? What if you're over budget and don't have the LTV to do a conventional refinance? If you think you are going to do a lot of your own work, consider that non-owner occupied property requires a licensed and bonded contractor to pull permits and perform a lot of the work in many areas. That is not to say that you couldn't get insured and licensed with the city for $1-2k. I have found labor to be more expensive in the greater Chicago area's relative to some of the qoutes costs seen in BP posts from other areas.

Even with hard money, you typically need to fund the work and materials until the work is inspected by your lender, the check cut to and received/cleared by your general contractor. These are called "pulls" which there are usually a few of.

There are some highly discounted properties on Chicago's south and west sides which may reduce your purchase price and holding cost liability. They might take longer to sell or would be worth considering to refinance and keep as rentals.

In any case, I recommend having a lot of trade contacts lined up for bids and quotes and getting the job done quickly.

The loan limit is what it is and clearly there are some expensive areas within Chicago. There are also very inexpensive ones.

@Rachel Hertel - Check out west suburbs just outside Chicago along the highway that have similar commute times by car or CTA train lines to the city center like Forest Park, Oak Park, Berwyn, and Cicero. Prices are more moderate in those locations. Additionally, if you or your partner ends up needing frequent suburb access, you are positioned well for easy access to both the city center and suburbs with the highway access. 

In my opinion, it's hard to go wrong with a house hack that reduces your living expenses overall. Make sure to budget for all expenses, vacancy, and future capital expenses. Locking in interest rates now at historical lows is another perk of the market today. 

Particularly in Chicago, I like north Austin and Wood Lawn areas. 

@Orazio Difruscolo - Forest Park is a great choice. At first I rented there and then decided to buy a small multifamily to live in there. Easy access to the downtown and the suburbs through the 290 expressway and the CTA blue line is available 24 hours a day as it connects to O'Hare airport. 

PM and I can give you a referral to a lender. 
 

@Rene Smith - in a rough neighborhood, I would be very cautious to rent single family homes. When there is vacancy, it's a prime target for break-ins. I do invest in rougher areas of Chicago in Multifamily and install security cameras for piece of mind and mitigation of those issues. I've also been experimenting with the Ring alarm system which does monitoring for only $10 a month (no additional cellular or internet/WiFi required) on vacant property. It could potentially be an issue as you will get charged for false alarms, but it would help me sleep at night to know the property interior is still in tact. I also find that rougher neighborhoods of Chicago are taxed quite attractively compared to other parts of Chicago and the suburbs. I agree with @Account Closed that if you are concerned about being re-assessed you should try calculating and running your numbers at fair market value regardless of where they are at. Also look on the county tax website to see if they have any tax exemptions that you would not qualify for that are reducing their currently stated property tax. 

For Chicago as a whole from 2012 to today, the median MLS sales price has increased from approximately 175K to 285K with a 3% increase from 2018 to 2019. There has been an "exodus" from Illinois, but there are still areas appreciating strongly. Let's also not forget that there are areas where we see multifamily getting rehabbed to large single family. In my opinion, cases are few and far between where where single family will out perform multifamily as a rental.

@Rachel Hertel - Regarding potentially "not" qualifying, you need to understand FHA's "Self Sustainability" or "Self Sufficiency" test. Also, the 2020 FHA loan limit is $765,600 in expensive markets (note: that is the loan limit, not the purchase price limit). Find out more details from your lender or do a quick Google. Unfortunately, it might count as advertising to link you to some good articles from here.

Hi @Betseat Getachew

There are a lot of things to consider. If you are willing to deal with tenants and rental units, it can be a huge wealth builder and may reduce or eliminate your own living expenses. The more units the better in this case. You will be able to use the income from these units to increase the amount you pre-qualify to purchase as well. 

Location Location Location - what area is good for you depends on a lot of factors. Are you concerned about taxes, school districts, public transit, walkability, highway access, distance and commute time to work? From an investment side, cash on cash return, cash flow, appreciation, rental law and risk? Not enough information to answer your question.

If you are planning to buy in Illinois, especially in Chicago, Cook County, I recommend working with an agent who actually has several rental properties and is familiar with the landlord tenant ordinance in order to give you some pointers along the way. 

You may qualify for an FHA loan with less then 3.5% down. Conventional loans may require 20% down, but make your purchase offering stronger. It's best to talk with a lender about your personal finance situation and what you may qualify for. Feel free to PM for some local references.

Sounds like a good plan. It was good you talked it through with a couple of lenders. I'm not a lending expert, but I believe when you move out, you will have to refi your initial loan with a VA IRRRL.

You definitely lucked out with those loop holes to make that deal hot - nice sleuthing!