All Forum Posts by: Michael Johnson

Hi Everyone,

I have my first property under contract in Chicago and I am hoping to close soon - I am planning on owner occupying. I am at the stage where I am starting to shop around for affordable home owners insurance for a 4 unit. Please let me know if you have any good recommendations or if you yourself are an insurance broker/agent - I appreciate the help!

Regards,

Hi Everyone,

Does anyone have any accountants they recommend working with who has experience dealing with REIs?  I bought my first property this last November and wanted to start searching for someone to help with my taxes. Thanks in advance!

@Tom Wagner You got it, sometimes its good not to overthink these things. That same money down on an IP in Milwaukee won't generate the same cashflow as as 3.5-5% down on a 4 plex in Chicago. All things considered, the FHA on a 4 plex in Chicago seems like the best option, thanks for the input!

All great questions. I just closed on my first duplex in Milwaukee a few months ago and I would say if the numbers make sense go for it. There are cycles in real estate just like there are in the stock market, you never really know when you are at the top. If your long term strategy is buy and hold just make sure you are being conservative with your repair, vacancy, property management and capex estimates (which you are) and you will be fine if there is a softening in the rental market. 

If the numbers work they work! I was nervous about acquiring my first investment property in Milwaukee but its been great since I closed. Some maintenance/repair issues have come up but since i accounted for them on the front end it hasn't made any difference. Feel free to reach out with any questions!

@Michael Facchini I appreciate the response. That is a great way to look at it especially with the fact that I can only have 10 conventional loans so I mid as well put as many units under each loan as possible. I definitely think I am going to go the 4 unit route for my first FHA coming up here.

@Paul De Luca Thanks! Yeah, I have been on the MLS for around a month and there have not been many 4 units that have come available. Hoping more comes available but as you mentioned a duplex with an extra garden/attic unit is a solid compromise.

@Jonathan Klemm Thanks, you're right, the best place to start is to identify what exactly I am looking for. Short-term cashflow is a factor for me and I want to get $200/door once I move out, however, long term wealth building is the primary goal. I appreciate the lender referral, I have not narrowed it down to anyone in particular yet. 

For the distressed properties you mentioned in Logan and Bucktown, how are you financing those? Hard/Private money? Sounds like you are using BRRRR method, correct?

 

@Crystal Smith That is a good way to look at it, I never thought of it that way. To your point its important rents rise with appreciation or it doesn't look as attractive to future buyers. I do plan on holding these properties for the long haul. ideally I want to get something that I can update the flooring, kitchen, appliances etc to get that increase in rents you mentioned. Thanks, Crystal!

@John Warren I appreciate your input! The only thing that gets me is if I'm not doing an owner occupied loan here in Chicago my growth will be slower due to the capital I need to do a 25% down investment property conventional loan. I have accepted that I won't be living for free with a house hack but I think it is feasible to pay around $800-1000 less a month than my current rent, which is a huge win in my books. 

In regards to what you usually account for in Chicago, what do you think is a reasonable Capex, vacancy, reapirs etc to plan on when running the numbers on a rental - 4-5%? I'm looking in the NW neighborhoods around Logan, Avondale, Belmont Craigin (I know this is your neighborhood of expertise) and the surrounding area. Thanks in advance!

@Tony Angelos thank you for the response. I have definitely noticed how few properties that come available that are fit my criteria, which is a little offputting. I'm not not real flexible with my moveout time of my current rented apartment, however, I am starting the search early (I have to be out by the end of June). The self sufficiency test is what I am most concerned about so I am hoping to I can find a few that work.