All Forum Posts by: John Warren

@Kevin L. be prepared for the emotions from your tenants. This is a people business ultimately, and I can guarantee you that a paying tenant won't be thinking about the "savings" over the years on cheap rent. Most of them are there because of the cheap rent and won't be able to afford other places. 

I always go in with a simple offer of this is the rent, and we are also comfortable giving you a (insert something you need to do anyways like a basic, white paint job or a new appliance).

This is one of the most uncomfortable parts of the business though, and the quicker you get over being able to have these conversations, the quicker you will be successful in this business.

@Michele Richard I would start in your own backyard first. Which area do you live in? Which areas make you feel comfortable? Normally you need to find a bread and butter B class neighborhood to make money in real estate. Look for the Star Bucks and Jimmy Johns to find the right type of neighborhood. 

You also will want to find an area that is very transactional. This is the part a lot of newer investors miss, but if you find a good neighborhood where very few properties trade then there won't be a market for you to find (or even know how to evaluate) a "good" deal. 

Welcome to the West Suburban Building Owner's Association!

We meet on a monthly basis to discuss topics pertaining to building owners and housing providers here in the Chicago suburbs. Our goal is to help you connect with like-minded individuals, stay up to date on industry hot topics, and to participate in resource sharing. We are a membership organization, but attending is free! We are centrally located to suburbs such as Berwyn, Oak Park, Forest Park, Elmwood Park, Lyons, Cicero, Stickney, Broadview, Bellwood, Hillside, Brookfield, La Grange and La Grange Park.

Join us at this month’s real estate meetup for an exciting panel on leasing. we will discuss tips and tricks and best practices for leasing. Don't miss it!

If you are interested in being on our monthly email newsletter, feel free to sign up here.

If you are interested, check us out at our new website! We are now officially a chapter of the Neighborhood Building Owner's Alliance as well!
https://www.wsboa.com/

@Jacob Nevarez welcome to the forums! As you look at buildings, pay attention to the mechanical setup. A boiler building will operate less profitably than a furnace building. Check who pays the hot water for the tenants' units. Check how many electrical meters there are, and if there is one for the common area. 

You are on the right track here! Which suburbs are you looking in? I have done well in Berwyn over my career, but there are so many places you can look. I would focus on an aera you already know and want to live as your base and get to know the inventory in your area. 

@Galvin Mendoza we manage a lot of larger buildings now that have a mixture of galvanized and copper pipes. Many of these buildings have anywhere from 6 to 24 units, and when you do work on one section it will clog some of the fixtures downstream. You can easily unclog a faucet, and even showers can be unclogged using an air compressor. Changing whole buildings over isn't always practical (or prudent) and we will be running buildings profitably with galvanized pipes in the walls for the rest of my career. 

With that said, if you have the opportunity to upgrade pipes you do it. I would honestly focus more on drain lines than just the supply lines. Those old drum traps in particular are pretty awesome to get cut out and replaced with pvc. 

@Hares Najand I have been on both sides of this one as both the owner and the manager, and I can tell you that turn over is a lot of work to manage at scale. I also can tell you that a good PM will make a bit of profit in the turn over. There is no doubt that on a one off basis you can do it cheaper, but having the infrastructure to turn 5, 10, 25 or 50 units in any given month is not simple and requires a real commitment. This costs money, and you are paying for the ability to have a unit turned at any time. 

A lot of Chicago proper housing providers only do move in fees. We still do security deposits in the suburbs, but not in Chicago proper. This is pretty common. One nice thing for you is that move in fees are income, whereas security deposits are not (unless you can claim damages). 

For delayed advertising, I cannot imagine trying to premarket a section 8 rental.... properties in C or D areas do not show well when the tenants are there. This would be even more true of a house where the tenants really live in the property and spread-out big time. We sometimes premarket, but it is on a case-by-case basis as it can be a huge time waste too. Many PM companies will not do so at all as it requires a high level of internal coordination and sometimes the tenant just makes your life a nightmare. 

If you are making money with this PM, I would not advise you to try to self-manage. I did this about 10 years ago and it was a huge mistake trying to manage remotely. These areas will require a good amount of on the ground knowledge that you probably don't want to spend the time getting. 

@Andrew Katz all investors run into this problem eventually, and house hacking is a strategy that only lasts so long. I would continue house hacking as long as you can get a loan for it. You will need to really start playing the long game though and focus on securing assets that have good underlying fundamentals as you will need to get more creative with the financing if you want to keep moving quickly. The alternative is to save up 20-25% down and do more traditional investing. That is really not that bad of an option to be honest as it forces you to be more conservative and to build your portfolio strategically. 

If you want to invest without partners and do value add deals, the path forward is private, bridge, hard money or DSCR (which are all sort of the same thing). I have been in the commercial investing scene since I started as an agent since I didn't want to buy in the same arena as my clients, so I have never had the luxury of 30-year fixed debt. Once you start thinking about how properties will perform in year 5 or 6, you can start thinking of your initial financing as more of a bridge to secure the asset, which allows you keep growing.

Too much of the initial advice here on BP is all about year one. That is good for a first-time investor, but actual investing is long term and is more about year 5 or 10 than year 1. As you referenced, you shouldn't need the money back for a while.

@Henry Lazerow I am part of the NBOA, and they are already working on this. There are a lot of ways to potentially roll this back that are being explored as this ordinance was rushed through with very little feedback from stakeholders. It is definitely a rough ordinance though. I think anyone who is looking to sell needs to move with caution for the next few months as there is very little information on how to proceed. We have a few sellers we are working with in these areas and we are working with our attorney on how to handle this. 

@Michael Pienkowski have you connected with @Mark Ainley? I believe GC Realty would manage Belmont Cragin well for you. 

@Alex Tokmazeyskiy is the deal something you want to hold for the long run? Maybe it is time to sell and trade up? If you have 200k in equity and you are cash flowing 14k per year, that is a 7% return on equity. Not terrible, but not amazing either. The question I would be asking is do you think there is more upside in the rents or the value on this deal that make it worth holding? Are there any looming CapEx things coming where you could dodge a bullet by selling?