All Forum Posts by: Michael K.
Michael K. has started 6 posts and replied 341 times.
Post: Crazy prices on 2 and 3 flat buildings in chicago
- Investor
- Chicago, IL
- Posts 351
- Votes 175
@Mordy Chaimovitz also should have mentioned. You can use FHA and low-down payment options with duplexes, which inflates prices. As you get into bigger buildings it's harder to bring any less than 20 or 25%
Post: Crazy prices on 2 and 3 flat buildings in chicago
- Investor
- Chicago, IL
- Posts 351
- Votes 175
Quote from @Mordy Chaimovitz:
Can someone please explain to me why people are buying 2 flats that rent comps show $4,600 a month in income for 665k+? The income doesn't really cover expenses plus debt service.
Even if you tell me they are paying cash or very high down payments , shouldn't the price of multifily buildings reflect its NOI/cap rate?
Also, am i imagining it, or is there is no way these buildings will hold onto these values.
Would you forecast that there will be some big discounts on these in a few years as people realize that they cant afford to hold onto them
thank you!
Mordechai Chaimovitz
Post: Practice Rental Property Cash Flow
- Investor
- Chicago, IL
- Posts 351
- Votes 175
@Charles A. Kayuha Since your down payment is less than 20%, are you including PMI in your calculations? I see you have some additional expenses but not sure what those are.
Post: OOS investor looking for advice for 1st Chicagoland 2/3 flat
- Investor
- Chicago, IL
- Posts 351
- Votes 175
Quote from @Ronaldo Marion:
Hi My wife and I are small buy and hold investors (we own 1 SFR) based out of DFW and have decided on the Chicago market to add to our portfolio as the SF numbers in DFW no longer pencil out and there is very little small multifamily inventory in TX. I don't really have any idea about Chicago neighborhoods other than to avoid the "south" and "west" sides. I have done some basic research on the near west suburbs, Summit, Berwyn, Oak Park, Cicero and get the impression there is more consistency in these areas meaning I wouldn't need to know as much about each block like in Chicago proper, but I could be wrong. I am also open to Chicago proper, but I would need help identifying a decent areas.
I do have some questions for experienced Chicago investors:
Is there any inherent benefit to having property in the city of Chicago over a close in suburb? Do you think Chicago properties will appreciate better long-term vs a close suburb? For example here a property with a Dallas, TX address is more valuable than that same property a block away in Richardson, TX even though you cant tell the difference between the two areas.
Are the near west suburbs, Summit, Berwyn, Oak Park etc. decent buy and hold areas? Any other near suburbs with small multifamily that are B to C quality with strong rent?
I have been looking at 3 flats as 2 flats don't pencil out as well. Are there any inherent benefits to 2 flats over 3 flats in terms of potential rent and longevity of the tenant? Do renters feel "more at home" or lease for longer in a 2 vs 3 flat?
You've got lots of good questions packed in here @Ronaldo Marion. A couple of things to point out. #1 Some near suburbs of Chicago are still in cook county, so will share more similarities with the city than cities that lay in other counties. #2 Suburbs are often sprawling and can still change a lot from one area to another, just as neighborhoods in the city do. #3 The Chicago property tax rate is lower than a lot of suburbs, and in some cases there is a lot of variation, see this chart http://www.tax-rates.org/illin... #4 There is generally more multiunit stock in the city and near suburbs. In Chicago, you will find entire neighborhoods of 3-4 flats. #5 prior to covid there had been a long period of people moving back to the city, and corporate relocations into the city. That has been turned around post covid and with the new WFH culture. It's still yet to see if that shift is permanent or not.
Hope this helps!
Post: Invest now or wait for recession?
- Investor
- Chicago, IL
- Posts 351
- Votes 175
Post: Am I absolutely crazy here? (hint: probably.)
- Investor
- Chicago, IL
- Posts 351
- Votes 175
Quote from @Rick Petersen:
Okay, first of all, went through the free recorded session provided when you sign up, and it said you needed a plan to start with. Before I share what I'm looking at property-wise, I thought I would share my plan... I'm so new, I'm still working on figuring out if properties and strategies fit my plan...
Hey Rick, I think most of us are on this journey for the exact same reasons as you mention here. You've got the right mindset and are asking the right questions. As for the deal you mentioned, I would have to know a lot more details to tell you whether or not its a good one. But, I might ask the question - do you have to start so big? Not sure what your background is in, but unless you have enormous financial reserves and have experience in construction/rehabs I think starting with a small property (2-4 units) and learning the ropes while keeping your day job is the best first move.
Post: Mobile Home House Hack?
- Investor
- Chicago, IL
- Posts 351
- Votes 175
Quote from @Dren Aguado:
What are your guys opinions on house hacking a mobile home?
I think I could probably get a roommate to pay the monthly payment, so i can live for free. In Chicago, I feel like a mobile home is more in my budget and less risk because it's a brand new construction and turnkey.
Would I be able to use this property to scale? will it be harder to scale my portfolio with a mobile home compared to purchasing a traditional home?
Thank you if you read this!
Not a mobile home expert or anything, but if the purchase does not include any land you are not going to see any appreciation. Getting a loan on a mobile home can also be tricky. I would consider rent hacking first. Lower/eliminate your rent payments and save up some money. Good luck!
Post: Would you take this deal?
- Investor
- Chicago, IL
- Posts 351
- Votes 175
Quote from @Michael Mahung:
It's an Estate Sale so there is limited info about the property.
List price: $339,900
Financing: 3.5% down at 6% (est)
Debt Service & Closing Costs: $22,100 (est)
Est PITI: $2570.75/mo
Est Utilities (owner pays heat): $500
Repairs: $100
Vacancy (10%): $325
Lawn/Snow Removal: $100
Trash/Water/Sewer: $150
Management/Capex (10%): $325
Total Expenses: $4,070.75/mo
2ba 1ba: (owner occupied) ~$1050 arv
1bd 1ba: $800 ~$900 arv
1ba 1ba: $775 ~$900 arv
3bd 1ba: $1450 ~$1650 arv
Garage Parking: $50
Coin Operated Laundry: $10
Total Income: $3,085/mo
Estimated ARV Income: $4500/mo
Monthly P/L: -$985.75
Estimated ARV P/L: $429.25
Other expenses:
Renovating units (kitchens, bathrooms)
Upgrading electricity 100w to 200w for 4 units.
Replacing Original Windows (approx 40)
Unknown Age of Roof (rubber) & Heater
Tuck Pointing ~5-10k
Any feedback about the numbers or the deal itself would be greatly appreciated - does this seem like a good deal?
Compute the numbers based on the building being fully rented. Your living there is a flex cost that more than likely won't be permanent. Also, consider living in one of the smaller units (if possible). 339k for a 4 unit that can get 4000k+ rent per month is EXCELLENT, not sure how much work is needed to get those rents though.
Caveats are
#1 It very well may sell for more than 339K, estate sales are generally priced to sell quickly but can still get bid up.
#2 If it's that cheap it may be in a rough area where it's hard to get those rents and reliable tenants, or it may just be in really bad condition.
Hope this helps a bit!
Post: Invest now or wait for recession?
- Investor
- Chicago, IL
- Posts 351
- Votes 175
Quote from @Marcos Carbi:
Hey guys,
I'm thinking of going in on a duplex in a great, growing area of Fort Myers, FL. $380k, 2003 build, $30k of CapEx (paint, roof, AC, water heater), $3,300 monthly rent, $500 cash flow, 5% CoC return with a 6.125% rate.
I want to send an offer but my only dilemma is this recession we’re in/heading towards. The market the property is in is hot and has a lot of demand, but I wouldn’t want to get into it just to see the same duplex sell for much lower 6 months from now. What’re your thoughts? Should I go for it?
I’m reading a bunch of different articles on the future of multi-family homes so Im not sure what to think. Should I be waiting for lower prices? A part of me believes multi-family investments won’t be affected too much given they are investors with money, not primary home buyers.
I would tremendously appreciate your advice, thank you!
You're bringing 20% down and you are still only cash flowing $500 a month on $3300 rent? What do the taxes/insurance look like on this one? People who are telling you to focus on the numbers are correct. Factor in vacancies and repairs and if your cash flow still looks healthy, go for it. Nobody on these forums or elsewhere can really predict where the market is going (including you and me). That said, 5% CoC seems low, but If you said 5% cap rate in an area that's growing rapidly, then I would say fine. Double-check your numbers or post them here so we can check your work for you.
I noticed that you said new roof, AC, and water heater. Just be aware that none of those improvements (while perhaps necessary) are going to increase the amount of rent you can ask for. So that's probably why your CoC is weaker.
Post: Invest now or wait for recession?
- Investor
- Chicago, IL
- Posts 351
- Votes 175
Quote from @Nick Barlow:
@Marcos Carbinwjay what @Chris Seveney said.
The only caveat to add is that if it works today at 6.125% apr, buy, hold, and then it will work better in 18-24 months when you refi to a lower rate after the recession has come and gone, and rates are lowered to “stimulate” the economy after the recession. You might be able to pull cash out then too.
Folks haven’t discussed it much on this forum, but you can “modify” your loans. This is where you pay a loan processing fee and get a new apr on your loan.
Wow Nick, you know what interest rates are going to be in 18 months? Can I get some of whatever you're smoking?