All Forum Posts by: Joseph Konney

@Rachel Hertel - I definitely recommend seeing what you can get pre-approved. There is a good chance you will not be able to see a property if you are not already pre-approved. Furthermore, you want to be in a position to make an offer when the right property comes along. Talk to your lender to see how income and expenses of the property and your gross income will weigh in on your pre-approval.

If you put enough money down, you will cash flow. If you lost your primary source of income, will you be able to cover the expenses of your property and for how long? The risk of break even cash flow is that you might underestimate your expenses so it is a good idea to budget positive cash flow to make sure you are not running at a loss. To be sure we are on the same page, if you are buying a 4plex and the income from three units gives you a break even, you are likely in good shape. If you are counting potential income from the 4th unit, my opinion would be to put more money down to have some breathing room in case of income issues. 

Find a detailed calculator (Check out BP's) and plug away. Use an interest rate a smidgen higher than the one your lender says is the current rate to account for an increase prior to closing. Make sure to budget in for maintenance, capital reserves, vacancy. After all monthly projected expenses, make sure you are still cash flowing.

If paying less than 20% down, you will likely need an FHA loan. FHA has a lot of safety requirements be met, for example, you can't have a closet pull chain light that doesn't have a globe cover and there must be no chipping paint inside or outside the home. If the seller will not fix them before closing, you need to do a renovation loan at a higher interest rate. You will have an easier time looking at recent rehabs or newer properties (most of Chicago has older inventory).

If you are using the income from the property to qualify for the loan, check the zoning before you put in an offer to make sure that it is proper. For example, if you have a 3-unit property on a lot that is zoned for single family or duplex, you can't count the income from the extra unit and that will lead to qualification issues down the line. 

Chicago is a very tenant friendly city. Make sure to read over the landlord tenant ordinance and if using an agent, use one that has his own rental properties to assist with orientation, advice, and resources to help you succeed.

Nice job! Care to share the loopholes you refer to? 

Great job- Did you purchase for $55K or $135K? How did you finance the 5-unit? FHA would be out unless you were scaling down to 4 units. Were both purchases MLS deals?

Hi @Alexiz Pedraza
I have invested in several rental properties in the Chicagoland area and take care of the property management as well. Feel free to reach out. 

It must have been somewhat in tact if you only needed 21K to rehab a 2-flat and at your purchase price, it sounds like that was a good find. How much out of the 21K was materials vs labor? What was asking price? Neighborhood?

Welcome to BP and thank you for your service!

I would speak with a loan officer to get a better idea of what you can qualify for and possibly for him to make recommendations on credit improvement.

Talk to a Realtor to get an idea of what locations might work best for your budget and strategy. Setup listing searches to better understand the trends and inventory. This will make it easier to know a good pick when you are ready to make a move.

Hi @Perla Pedroza - I have 24 multifamily rental units mostly in Chicago. Feel free to connect about REI.

I love the humor and how you keep it real exposing the reality of all these unexpected pleasantries. Keep up the good work and thanks for posting!

Always do an ITEMIZED walk through before move in with the tenant where you and the tenant sign and date. It will clear up any issues through your entire relationship regarding the condition of the property at move in and move out. As you clearly have not done this yet, I would make arrangements ASAP to do so.

Your late fee is extremely weak... unless that was a typo for $100.

Unless it's an emergency, the tenant should provide some notice before they are going to expense and deduct from the rent. Rental agreements usually state "broom clean finish", not "glossy shine finish with a scent of lavender". They aren't the king and this isn't the wild west.

As others have said, stay firm and good luck!