All Forum Posts by: Crystal Smith
Crystal Smith has started 65 posts and replied 2754 times.
Post: City of Code Code Violations
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Quote from @Jared W Smith:
Quote from @Crystal Smith:
Quote from @Brandon Campbell:
I'm under contract to buy some distressed properties on the south side of chicago. Every property has a city of chicago municipal lien on them from violations from up to a year ago to many years ago. Our goal is once we buy these properties we will be looking to renovate them. Does anyone have any experience of getting liens released and not paying the fines or pay pennies on the dollar of the fines because they renovated the property made the properties in livable condition?
Secondly, does anyone have a point of contact that I can talk to with the city government to talk with them to let them know what my plans are and figure out a resolution for these code violations. I would assume they won't release any of the liens until the work is done on the property that mediates the condtion for them getting the liens in the first place, but I would feel alot more comfortable talking with somebody who understands I'm just buying the property and will do right by cleaning up these houses but don't want to get penalized for something that the previous buyers did.
Thank you in advance
We have experience dealing with the city. The bottom line is as follows: The city is not going to negotiate with you on not paying fines or paying pennies on the dollar for fines. That's not a thing. You need to figure that into the cost of doing business and your offer to the seller.
Regarding the code violations, you need to hire a contractor familiar with working with the city. Potentially a self-certified architect. Develop a scope of work with the contractor to include the code violations. Get the appropriate permits and have an attorney ready to go to court to get the liens released once the work is complete and approved. There are no shortcuts.
If there's a demo order on the building then you should submit your approved renovation plan to the court to delay the demo.
I'd advise getting a local Architect knowledgable on the area and Building Dept. processes with violation.
Most, if not all, Building Departments across the country will not allow an Architect to self certify work related to violations/non-conforming/non-permitted construction work.
-Jared W. Smith, RA - Principal Architect at Architect Owl PLLC (Licensed in NY & CT)
I was not recommending an architect to self-certify the work. In the Chicago market self-certified architect drawings get approved on average must faster than those who are not. That's our local experience.
Post: City of Code Code Violations
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Quote from @Brandon Campbell:
Quote from @Crystal Smith:
Quote from @Brandon Campbell:
I'm under contract to buy some distressed properties on the south side of chicago. Every property has a city of chicago municipal lien on them from violations from up to a year ago to many years ago. Our goal is once we buy these properties we will be looking to renovate them. Does anyone have any experience of getting liens released and not paying the fines or pay pennies on the dollar of the fines because they renovated the property made the properties in livable condition?
Secondly, does anyone have a point of contact that I can talk to with the city government to talk with them to let them know what my plans are and figure out a resolution for these code violations. I would assume they won't release any of the liens until the work is done on the property that mediates the condtion for them getting the liens in the first place, but I would feel alot more comfortable talking with somebody who understands I'm just buying the property and will do right by cleaning up these houses but don't want to get penalized for something that the previous buyers did.
Thank you in advance
@cr
We have experience dealing with the city. The bottom line is as follows: The city is not going to negotiate with you on not paying fines or paying pennies on the dollar for fines. That's not a thing. You need to figure that into the cost of doing business and your offer to the seller.
Regarding the code violations, you need to hire a contractor familiar with working with the city. Potentially a self-certified architect. Develop a scope of work with the contractor to include the code violations. Get the appropriate permits and have an attorney ready to go to court to get the liens released once the work is complete and approved. There are no shortcuts.
If there's a demo order on the building then you should submit your approved renovation plan to the court to delay the demo.
Thank you for your reply, this helps out a lot. Let me ask you this, if the houses are foreclosed on with the code violation liens, would they then be extinguished and could be released?
You have to think of correcting code violations as part of your scope of work. Either all or a portion of the scope of work related to the code violations should be shared with the building department so you or your contractor can get the appropriate permits. The process will include the building department coming out to review and approve the work when completed, after which they will log the approved work into the system and you can then ask either your contractor or attorney to approach the city attorney with evidence in hand and have the liens removed.
I will say this. We have had people from the building department review work, and approve it on-site, but then forget to record the approval in the system which then caused problems when attempting to get a lien removed. The lesson learned- Any approval you or your contractor receives on-site should be in writing.
Post: City of Code Code Violations
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Quote from @Brandon Campbell:
I'm under contract to buy some distressed properties on the south side of chicago. Every property has a city of chicago municipal lien on them from violations from up to a year ago to many years ago. Our goal is once we buy these properties we will be looking to renovate them. Does anyone have any experience of getting liens released and not paying the fines or pay pennies on the dollar of the fines because they renovated the property made the properties in livable condition?
Secondly, does anyone have a point of contact that I can talk to with the city government to talk with them to let them know what my plans are and figure out a resolution for these code violations. I would assume they won't release any of the liens until the work is done on the property that mediates the condtion for them getting the liens in the first place, but I would feel alot more comfortable talking with somebody who understands I'm just buying the property and will do right by cleaning up these houses but don't want to get penalized for something that the previous buyers did.
Thank you in advance
We have experience dealing with the city. The bottom line is as follows: The city is not going to negotiate with you on not paying fines or paying pennies on the dollar for fines. That's not a thing. You need to figure that into the cost of doing business and your offer to the seller.
Regarding the code violations, you need to hire a contractor familiar with working with the city. Potentially a self-certified architect. Develop a scope of work with the contractor to include the code violations. Get the appropriate permits and have an attorney ready to go to court to get the liens released once the work is complete and approved. There are no shortcuts.
If there's a demo order on the building then you should submit your approved renovation plan to the court to delay the demo.
Post: New to the Investor Real Estate realm - Needing guidance and advice !
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Quote from @Saad Khan:
Hello everyone !
I am a long time Charlotte native and have just ventured into purchasing a home for real estate investment/rental.
I went with a new home build and want to rent it out. I am trying to figure out a rental contract and how i can either procure/make or get one. I also am trying to figure out what type of policies i am able to set and if there are any exceptions then what type of fees i am able to charge or levy against the renter.
Before that i want to try to know what is a good property management company for beginners...i have heard that you can end up doing majority yourself and save some $$. I want to try it out for a couple months and see how it goes. I am trying to make this a self sufficient property including lawn maintenance.
What are some good sites to post on when i am ready to rent ? What do i need to do as far as protecting myself and the property from damage and to atleast recoup the cost of stated damage (is it in the form of taking the deposit ?)
My background is in tech. I was a previous Turo host for about a year so am aware of the risks and the type of stuff that can happen.
I appreciate any help or suggestions ! Thanks !
My recommendations below:
1. For a rental contract find a local agent that works with investors. Many local Real estate associations have created state-compliant contracts. You can also use the agent to run rental comparables to see how much you should charge. Zillow also has a rental comparable tool.
2. You can use the Bigger Pockets website to research property management companies or find other investors in your area and ask them who they are using.
3. We post rentals using Turbo-Tenant which then syndicates the rental on multiple sites.
4. Regarding protecting yourself- Make sure your tenants have renters insurance and you are named as a beneficiary on their insurance. Regarding the rental deposit- Much depends on your local laws. We've moved away from requesting deposits in my market for most of our rentals and now use move-in fees.
Post: Sell or HELOC reinvest to tap equity?
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Quote from @Sateesh Kumar:
Hello
I own a small multi family with 500k mortgage on a very low interest rate @2.5% it also has over 500k in equity. I need to relocate out of state and very confused if I should sell or tap on to it's equity using HELOC and reinvest in other properties although I don't have any solid plans on where to reinvest as yet. I was briefly toying with the idea of investing in SF in Midwest for cashflow or a bigger multi family up to 2 mil with great cashflow and appreciation. I am relocating to CA bay area and it's not making sense buying a SF there
I need to make a quick decision whether to sell or keep, appreciate your inputs.
Thanks
.
To your question on whether or not you should sell or tap into the equity. It's all about cash flow or putting a lot of cash in the bank that can be used to create more cash flow. If the cash flow from your current property is great then look for another property with great cash flow using the equity from the first to purchase. If however, you decide to sell I recommend you research and become familiar with 1031 exchanges.
Post: Using my own LLC to purchase a property with a 50/50 partner
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Quote from @Jackie Sawyer:
I am under contract to purchase a first rental property with my son 50/50. This will probably be his only investment, although I plan to buy several more in the next year on my own using an LLC. I am wondering if I should take title to this first property 50% in the LLC (as opposed to my name) and 50% in his name. Any comments or feedback on this?
I recommend you research Landtrusts and see if you can close the property inside of a LandTrust. We use land trusts to keep our names and our LLCs off of the public record. There are other benefits which I won't go into here. The only challenge we have run into with Landtrusts are some lenders won't allow it.
Post: Starting out with 25k - Best Passive Options Outside of house hacking?
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
@Michael T Walsh here are a few passive options outside of house hacking
1. Joint Venture- On this forum alone there are dozens of posters in the same situation as you. They have a little bit saved, chopping at the bit, not enough time.... I recommend allocating some time to meet those folks via meetups or forums like this and maybe create a Joint Venture that could either loan or invest in a deal on its own or in someone else's deal. You could be the passive person in the deal while one of the other partners is active.
2. Become a private lender- $25K isn't much but once you become active in the market you may find opportunities where you can lend $25K at a ridiculous rate. You'll need to do your homework on how to protect your investment if you go this route. But it's passive.
3. There are opportunities to invest in deals if you're accredited, either individually or as part of a fund. There are some opportunities where you do not have to be accredited. Again- Passive.
House hacking is the tip of the iceberg for getting into Real Estate.
Post: How would you start investing if you had $150k???
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Quote from @Jeff Hines:
Hey everyone,
I am a 28 year old who currently lives in NC. I just want to explain my circumstances and see how people with experience and knowledge in real estate would move forward if they were in my shoes. I have $150k in cash that I received from an inheritance and would like to use it to invest in real estate(I already have 6 months of reserves of my own money saved). I also have a credit score of 756.
My overall goal is to buy enough doors to supplement working full time so one day I can focus full-time on becoming an entrepreneur. I know that will take some time but I would like to get started ASAP! I took a few years out of work to take care and spend time with a family member whp passed, so I have only been working for a year now. This has caused me to have trouble with getting approved for loans/mortgages due to my work gap. I have done some research and have found a few ways I could possibly start investing in real estate. If you would take a different route than the ones I’m going to list below please let me know.
- Since I can’t afford to pay cash for a home here in North Carolina, pay cash for a home in places like Detroit, Alabama, or Ohio. I would then renovate, rent, and refinance. Rinse and repeat this process over time.
- Instead of paying cash use that money and spread them over multiple dscr loan so I can own more doors and just collect the cash flow after expenses.
- Wait another year so I can have two years of work history/W-2s. This would increase my chances of being approved for a FHA loan. This would allow me to save money compared to paying cash or the huge Down-payment DSCR loans require.
Are there any other no documentation loans other than DSCR loans that I should look into?
If anyone has any advice or recommendations on how you would get started in real estate if you were in my shoes please let me know any and all suggestions would be greatly appreciated!
The strategy that I recommend is going to differ from the responses that I see at the time I'm writing my response.
1. Since you have no experience- network and find the most active fix and flip investors in Charlotte, Raleigh or Greensboro. Become a very small private investor in one of their projects. Your objective- Learn, learn, learn. You can invest passively but your real goal should be to learn as much as possible. You may even want to arrange it in such a way that it's a JV between you and that investor
2. Get approved for a loan from either an HML or Private Money person- Why would they lend to you? Because for the most part, these lenders look at the deal you bring to the table, the hard asset. You will also be able to show you have good cash reserves, good credit, a W2 (they don't care about job gaps) and you were part of a successful Joint Venture with an experienced fix-and-flip investor.
3. Once approved set a goal- Let's say 4 fix & flips that net you $25K each; $100K; now you have a downpayment for one or more buy and holds. By the way- You may also decide not to sell the properties but refinance and rent.
My advice - use your cash to learn how to joint-venture on a deal with someone who has experience. While learning the ins and outs of how to evaluate and fix/renovate a property. Then turn your profits into assets that provide monthly cash flow.
Post: Looking for some boots on the ground partners in or near Urbana Illinois
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Looking for some boots-on-the-ground partners near Urbana Illinois. Reach out if interested and I'll send you our calendar to set up a call to talk. We're targeting the area for single-family fix and flips along with some multifamily and commercial properties to cash flow. #urbanaIllinois
Post: New Property Calculation Advice
- Real Estate Broker
- Chicago, IL
- Posts 2,815
- Votes 1,751
Quote from @Cameron Palte:
Hi all,
I'm planning on investing in my first rental property and want to get some advice on the math I'm doing to make sure I'm not missing anything. For starters I'm anonymized a lot of the information. The location is Chicago. It's a condo in the nice area of the city.
Property Price: $300k
Rent Collection (adjusted for 5% vacancy): $34k annualized
Property Costs (maintenance, insurance, taxes, hoa, management): $25k annualized (~50% HOA).
Putting this all together the best case scenario (assuming a completely paid off property) is $9k in annual income. Given that the property requires a $60k down payment the opportunity cost of that money in the S&P 500 @ 8% is $4800. That means in a 0% interest mortgage scenario the "net profit" of owning the property versus the S&P 500 is $4200.
Am I wrong for thinking that sounds low? It seems like condo appreciation in Chicago is effectively 0 (the property was sold for the same price 20 years ago). More so in a realistic scenario, interest rates will eat up most of that $4200. At 3.5% mortgage, which is a best case scenario, average interest across a 30Y mortgage is just a hair over $4200 annualized.
So what's should my takeaway be here?
1. HOA is simply too high for a property like this to be investable?
2. The only way for it to workout is to get desperate sellers where the price can be talked down to ~$275k to help with (1) and help with interest and down payment expectations?
3. This is simply what real estate investing is like. 90% of the time you match the S&P 500 on your down payment and that 10% of that time where you get appreciation and growth make it worth it.
Your analysis using one condo that has not gone up in value is too simplistic. So I'm going to be simplistic. The S&P 500 value on November 30 2018 was $2760. At the time I'm writing this post the value is $4514 about a 64% increase in value. Inside of that macro analysis are big winners and losers. The average condominium across Chicagoland was $200K in 2018. At the end of October 2023 the average resale value was $250K or 20% increase. On the surface you'd be better off investing in the S&P.
What does the professional Real Estate Investor do- That investor won't be using the macro analysis. He or she will be looking for opportunities where the cash flow will be positive (maybe $200 per month). Not much but over 5 years that's an extra $12000. In addition there are tax benefits or writeoffs unavailable if you just own or sell stock. That investor can sell a property and use a 1031 exchange to defer paying capital gains. There are other tricks of the trade including looking for opportunities to purchase distressed properties at a discount
That Real estate investor will also be invested in the S&P.