All Forum Posts by: Tom Shallcross

@Dave Kush  I personally invest in higher end stuff on the Northside of the city so there is less distressed to choose from, but the payoffs are bigger when they hit. The inverse is typically true for cheaper areas, more distressed opportunities, but lower profits gained per job. It's mainly a sliding scale up and down so pick which works best for your strategy. 

I've had recent success with DealMachine and we just recorded an interview with their CEO on this topic. I'll forward it to you once it goes live. 

@Sarita Scherpereel - thanks! Looking forward to it and will be a great event. I have a side bet this will be more crowded than the one @Mark Ainley did. 

@Matt Smith - as @Christopher S. mentioned you cannot use an ADU unit in Chicago as an AirBNB as the city's intent with the program is to provide additional affordable housing.

You also need to register AirBNB units with the city, which means you can't legally do an AirBNB with a non-conforming unit. 

@Faiz Kanash - I'd spend 10-20 minutes a day just cross checking available information on all the free sites as @Tony Angelos mentioned. You can see what rents quickly, what sits, figure out tenant expectations, what causes tenants to pay more....etc

If you are serious about buying in an area, you are going to need to get serious about underwriting and keeping a pulse on the market. This will sharpen your skills so you can make informed and confident decisions. 

It's still a very competitive market and those willing to put in the upfront work will continue to have the advantage of speed to decision and ability to see opportunity over those dabbling. 

That strategy is what many investors go after. However your numbers are flawed in this example and it wouldn't be worth the time, risk, nor effort. 

If you have an 800k back-end ARV and get 70% LTV, your new loan would be around 560k (also note that cash-out refis have a higher interest rate that no one accounts for in the BRRRR method). You originally bought for 660k putting 20% down so your original loan to pay off is roughly 530k. You pay off the 530k with new 560k loan leaving you with 30k cash to recoup from your original 180k investment. You're still out 150k between original down payment and funding the rehab and this doesn't even factor in closing costs from the two closings, holding costs, and your rehab inevitably being more than you think.

@Eudith Vacio and @Henry Lazerow gave you the answer, but also check if you're in one of Chicago's 5 ADU Zone. If you are, you have a clearer path to legalize one or both units as you can avoid the tedious Dept of Zoning steps. You will still have to comply with all of the Dept of Building requirements -height, egress, light per room...etc.

I'll be the first of likely several to say @Mark Ainley

@Shuvrajit Mukherjee - if you stay within the 4-unit range and owner occupy, then yes you have options at 10% down, even 5% down assuming credit, DTI...etc. You will definitely not cashflow while living in one of the four units (especially with such high leverage), so live in one of the four units for a year and make sure it's positive when you move out in a year.

For commercial lending in Chicago at this exact moment, the most aggressive I've seen is A&N that has 20% down options for certain scenarios. 

If there are existing daily fines, it is typical for the seller to be responsible for the fines up the point of sale. Regardless, you will be responsible for all violations. Submit your plans and ensure they are rectifying all violations. Chicago's Dept of Building will ensure you take care of these and you'll likely also deal with the the City's Dept of Law/Corp Counsel through the process. 

Note that most lenders won't subordinate to these liens so you need to pay cash or confirm your hard money/commercial lender can lend on the property. Same goes for title company, your attorney acting as your title agent will have to get creative to make it work. 

@Michael Johnson - I have a solid broker, Patrick Praxmarer, that should be able to find you something solid. I'll DM you his contact.