All Forum Posts by: PJ Kolnik

I'm closing on a 3 flat in Logan Square next week using an FHA loan. Even with the loan limits higher, the self sufficiency test still is a big obstacle in a lot of areas, not impossible but challenging.

Hi Bigger Pockets Members in Chicago,

Its been a long two months but I'm cautiously optimistic that I just locked down a 3 flat over in Logan Square Hermosa with a https://www.redfin.com/IL/Chicago/2441-N-Avers-Ave...

Overall cost: 506,000

3.5% down+closing costs: Approximately $26,000

Monthly Payment (PITI): $3760/month

Cash on Cash Return: 23.5%

Estimated total updates: $55,000

Estimated Cash flow: $4200 / month

Estimated CAP Rate: 6.8%

Rents:

Unit G (2 bd / 1 ba): Current 900 - Raise to 1100

- updates include:

-Adding in-unit washer dryer

-update kitchen, pretty much need a new kitchen and new appliances.

-update bathroom

- paint

- add third bedroom after moving the water heaters and electrical to the other side of the basement in the back.

- estimated budget: $25,000

Unit 1 (2 bd / 1 ba): Currently unoccupied - Rent for 1400. Because this is FHA, this will be the one that my wife and I will live in. I plan on projecting this rent and pay this into the overall cashflow of the building as if I am renting from myself.

- updates include:

- replace a broken window

- add in-unit washer dryer

- remodel kitchen

- update bathroom

- estimated budget: $20,000

Unit 2 (3 bd/ 1 ba): Currently Owner Occupied - Rent for 1700

- updates include:

- update bathroom

- re paint to match the unit below - unifying paint colors across all units seems to be a good idea

- new door and closet in the third bedroom, currently configured as more of an open office

-estimated budget: $10,000

Hi Bigger Pockets Members in Chicago,

Its been a long two months but I'm cautiously optimistic that I just locked down a 3 flat over in Logan Square Hermosa with a FHA 3.5% loan.

FHA can be really tough to secure properties in the area since there is so much on the appraisal side that is just out of your control, which is probably an overall good development since 2008. The self sufficiency test (75% of rents to cover the PITI) was the toughest since the rents are still all over the board in this part of Logan Square, but the comps finally won out and we were able to make the self sufficiency work out. Big props to Zack Redden with Berdan Real Estate and Aaron Gosser, my lender, for working tirelessly to research comps in the area.

This is my first deal and I'm excited to get started on some updates and also a bit in that - "what have I just done?" phase.

What I was hoping to find out from Bigger Pockets was some advice on updating the units to maximize the rents. I am pretty new at rehab / remodels and I am trying to build the overall budget and not overspend on updates which I think most new people do.

Any good contractors or overall recommendations are welcome!

Here's the deal:

https://www.redfin.com/IL/Chicago/2441-N-Avers-Ave...

Overall cost: 506,000

3.5% down+closing costs: Approximately $26,000

Monthly Payment (PITI): $3760/month

Cash on Cash Return: 23.5%

Estimated total updates: $55,000

Estimated Cash flow: $4200 / month

Estimated CAP Rate: 6.8%

Rents:

Unit G (2 bd / 1 ba): Current 900 - Raise to 1100

- updates include: 

-Adding in-unit washer dryer

-update kitchen, pretty much need a new kitchen and new appliances.

-update bathroom

- paint

- add third bedroom after moving the water heaters and electrical to the other side of the basement in the back.

- estimated budget: $25,000

Unit 1 (2 bd / 1 ba): Currently unoccupied - Rent for 1400. Because this is FHA, this will be the one that my wife and I will live in. I plan on projecting this rent and pay this into the overall cashflow of the building as if I am renting from myself.

- updates include:

- replace a broken window

- add in-unit washer dryer

- remodel kitchen

- update bathroom

- estimated budget: $20,000

Unit 2 (3 bd/ 1 ba): Currently Owner Occupied - Rent for 1700

- updates include:

- update bathroom

- re paint to match the unit below - unifying paint colors across all units seems to be a good idea

- new door and closet in the third bedroom, currently configured as more of an open office

-estimated budget: $10,000

I

Raymond, I’ve been looking a lot at this recently. For me it’s two things - CAP rate at purchase needs to be at least 6% with the ability to increase to 7 or 8 and the cash flow of the property needs to be at least $500 dollars above the PIT. I’m currently operating on lower reserves and I need the actual cash flow to be useful enough to contribute towards the O&M.

I grew up helping my parents rent out about 10 spots on our land out in Montana close to Bozeman. One thing we realized early on is that the travel trailer / RV market is just as strong as the mobile home market but you have the added benefit of getting them to leave easier when they are not the best tenant. There was one or two times where trying to evict the tenant AND get them to take their trailer with them was a crazy headache. In the end the people finally just left and we demolished their abandoned trailer with our tractor and started it on fire in a hole we had to dig out back - my childhood was pretty interesting. Overall, the RV and travel trailer clientele have been a much more consistent renter to market to over the past 15 years.

I work as a civil engineer for a utility engineering consultant. I'm just starting in real estate, working on closing my first three flat here in Chicago.

J&P Masonry is pretty good. I have a guy named Pawel Fit doing some on our building in a week or two in Bucktown.

@Robert Obniski I just shot you a connect request - but I am under contract for 2441 North Avers and plan on doing some similar work - how are your rents looking right now?

Dan, I live in Chicago as well and I will say that this weekend was a straight up Monsoon. I was actually looking a properties this weekend like 3 flats with basements, even the nice newer ones had water in them too. I would actually get the water out of there and try to assess between the contractor as well. You might actually take this opportunity to remove carpet from the basement and put in a hard floor surface that will drain more effectively.