All Forum Posts by: Paul De Luca
Paul De Luca has started 18 posts and replied 1807 times.
Post: First Time Investor needing mentor
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
Quote from @Shaniece Atkinson:
Hi I am a first time investor with no experience or properties. I recently found a property I liked and would like to first see if the deal makes sense. I want to do long term rental and will be paying cash to purchase. Do I need a realtor to assist me through the purchase? Do I need to setup a in person viewing of the property? What should be my next steps to move forward?
Given that you're a first time investor with no experience, I recommend hiring an experienced investor-friendly agent to help you with the purchase. You don't "need" a realtor but not working with one could hurt you (buying a property with major defects, improperly projecting the cash flow, not having a referral network of other professionals). It's generally worth paying for a professional for their knowledge and experience.
Post: FHA loan house hack. Lets talk!
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
Welcome! I've house hacked in Berwyn and I'm currently house hacking in Portage Park. If you need any help with planning & house hacking in the Chicago area, feel free to PM me and I'll answer any questions you have. Good luck!
Post: Rent or Sell Condo (our first home)
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
Quote from @Adam Moore:
Hi All - my wife and I are moving from Chicago to Ohio and are trying to decide whether to rent out our 2bed/1bath condo or sell it. We hope the home we buy in Ohio will be our home for the next 20+ years. We do not need the cash for a down payment on another house, though it would provide us a little more flexibility if we wanted to put more than 20% down to get a more comfortable monthly payment or if we wanted to do any renovations. We would attempt to DIY landlord - we have lived here for over a decade and have used and know many maintenance/service providers. My job will still be based here so I will be back in town ~4-8 times a year, for what that's worth. Our condo is in a desirable location in the Lakeview neighborhood near public transit. I do not think finding good tenants will be a problem now or in the future. I do not anticipate any near-term major repairs/upgrades, though the building is quite old (>100 years). All major appliances, AC unit, water heater are <5 years old. All new windows installed last year.
Relevant numbers:
Purchase price: $390,000 @ 3.00% rate, 20% down
Remaining mortgage: $278,000
Estimated sale price: $475k-$500k (I have spoken to a realtor)
Estimate rental rate: $3000-$3200/month (I have spoken to a rental specialist)
Current monthly payment (mortgage, insurance, tax, HOA): $2,200
Happy to provide any other info that might be useful. Thanks in advance for any thoughts!
If we take the low end of your estimates for the sale price ($475k) and $3000/mo in rent...
Your equity is $197,000 ($475k sale price minus $278k mortgage).
Your cash flow is ~$800/mo or $9600/yr
Return on equity = $9600 (cash flow)/$197,000 (equity) is 4.87% which isn't a bad yield for a stable asset in an A class area with good tenants. You do have to consider your time spent managing it as a DIY landlord, which could be more difficult than it's worth.
If you think you can invest your net sale proceeds at a higher yield than what the above yield, you should probably sell. But another thing to consider is the cost of taking the time to research and choose your next investment.
Post: Buying my first multifamily in Chicago
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
Definitely go for the 5% down conventional loan if you can, particularly if you're going for a legal 3-4 unit property. FHA can work on a legal 2-flat with finished attic or basement unit but it will need to be deconverted for the appraisal. If you have some cash you can put toward making cosmetic improvements to the unit (paint, flooring, kitchen, bath updates, in-unit laundry) that will boost your rents and make your cash flow better.
Post: Bought My First Investment in 2018 and Looking for my Next!
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
What's your buying criteria? Our team shares 2-4 unit/SFH/5 unit+ opportunities via our email list.
Post: Sad way to start out but starting out nonetheless.
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
Assuming you rehab the house and rent it out, what is the ARV and the estimated cash flow?
I think it would be best to pay off the credit debt and rehab the house with cash but if you want to remain more liquid it could make sense to get a HELOC. The above question will help you decide if it makes sense to get the HELOC or not. Is there currently a mortgage on the property?
Post: Home Price Growth Slows to Weakest Pace in 2 Years as Buyer Demand Remains Soft
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
Chicago with the 2nd highest home price growth for March!
Post: Prices don’t make sense in Chicago?
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
This is just the reality of real estate investing right now and specifically in Chicago I analyze a lot of properties and most of them don't make sense. When prices, mortgage rates, insurance, and other costs go up obviously that is going to hurt the bottom line. We're still in a seller's market as well so there's still more demand than supply. There are deals out there but they are harder to find. When I look at a listing, I can usually tell in the first few seconds if there is cash flow potential by just looking at the list price, taxes, and rent roll.
I've analyzed enough properties to know a 4-unit in Skokie for $700k-$900k with $15k-$18k property taxes and a rent roll of $1500 for each 2 bed/1 bath unit isn't going to work at 25% down. Especially when the owner has to pay the heat bill.
I just helped a client close on a 2-unit in North Austin to house hack where it should cash flow $300-$400+/mo once fully rented and have a 3-unit under contract in Brighton Park to house hack that should cash flow $100-$200/mo when fully rented. You can't be super picky in this market if you want to get something otherwise you'll be waiting around for something that may never come. Totally depends on your expectations and how realistic you are.
Post: New To Investment but looking to learn more about STR
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
Welcome! You are correct Chicago does have some STR rules and regulations you should be aware of.
I don't own any STRs but I think the book Short Term Rental Long Term Wealth covers the topic well.
Post: Underwriting software or spreadsheet
- Real Estate Agent
- Chicago, IL
- Posts 1,857
- Votes 1,504
BiggerPockets has a bunch of calculators you can use for underwriting if you go to the "analyze deals" tab. If you're interested in a spreadsheet template, feel free to PM me and I will share the one I use.