Victor M. Lopez - Realtor / Broker Associate
1 Parkway Plaza, Suite 100, Oakbrook Terrace, IL 60181
C: 630-660-1292 O: 630-954-4600 F: 781-609-0654
FIRST TIME REAL ESTATE INVESTORS
Before becoming a first time Real Estate Investor, here are some issues to think about before buying a multiunit building
Buying a multiunit building for the first time is a big responsibility, whether its a 2 unit, 3 unit, 4 unit, 8 unit or whatever, you got to make sure you got enough money or cash saved in the bank in addition to your mortgage loan, that can cover any unforeseen expenses that might arise during your new ownership of the property. The following are some issues you'll probably run into during the ownership of your property.
1) Roof leaks causing ceiling and unit damage. A new roof might cost $6000-$20,000 depending on its size and the contractor you chose.
2) Basement floods from broken water pipes, rain storms, or city sewer backups. Might cost $35,000-$45,000 to redo a 2 bedroom / 1 bathroom apartment. Make sure you got a good sump pump with backup batteries. Does the building even have a sump pit?
3) Leaky faucets from sinks and bathtubs, refinish bathtubs
4) Leaky running toilets, must be repaired right away. Think about your contribution to the melting north pole next time.
5) Roof repair, missing shingles might cost $500-$8000 depending on extent of damage.
6) Window repairs, screen repairs and painting
7) Door and wall repairs and painting
8) Floor repairs and refinishing and replacing. Real wood floors vs. laminate wood floors. $6000 real wood floors on top of concrete floor 1br, dining room and living room vs. $2500 laminate wood on top of concrete floor 1br, dining room and living room.
9) Tuckpointing for brick homes might cost $1000-$12,000 depending on contractor and scope and extent of work
10) Cleaning bathrooms and kitchens and appliances, a maid might cost $100-$250 depending on extent of work
11) Frozen pipes, burst frozen pipes and water damage
12) Roaches, mice, rats, termites, bed bugs, animal infestations - birds, squirrels, raccoons, cats problems from inside the units, to the building itself, to the outside yard and garage and alley and from neighbors. Make sure you check the perimeter of the building and look for any type of holes in the foundation or outside walls where mice can get in and seal properly with cement. Use chicken wire for old basement crawlspace foundation openings that need ventilation to avoid mold build up in crawlspace. Make sure there's no gaps under the outside door when closed, mice can slip under openings in outside doors. Spray the perimeter of the foundation twice a year to keep out bugs or hire an exterminator.
13) Smoke or cat piss smell damage in the walls and floors. To rectify smells like these, use Kilz Paint, it's use for a base paint for blocking smoke odors from fire damaged properties.
14) Cracked concrete foundation damage
15) Wood porch wear and damage, concrete stair wear and damage
16) Non code compliant issues around the property, like fences overlapping property lines, GFI outlets required in bathrooms and kitchen locations within 6 feet or water source.
17) Building code violations by the city or village - Find out if there is any building code violations on property. Building code violation is very expensive and may prevent you from renting the property until you can get an occupancy permit from the city of village. For Chicago you can go to
http://www.cityofchicago.org/city/en/depts/bldgs/provdrs/inspect/svcs/building_violationsonline.html
and look up the address to see if the property you're interested in has any building code violations.
18) Lead based paint on the walls, old radiators and old wood trims in buildings built before 1978 (Not good for kids when ingested)
19) Mold and mildew damage on the walls, windows from dryvit construction, in the basement, bathroom and kitchen appliances
20) Tenant complaints and damage, Landlord and tenant rights
21) Mechanical furnace issues and ongoing maintenance, filters must be replace every 3-4 months.
22) Radon exposure with dirt crawlspace or foundations, radon link to lung cancer. Radon is radiation naturally emitted from the earth.
23) Electrical issues - power goes out from tenant using portable electric heater plugged into a 10amp instead of a 20amp outlet breaker. Burned out light bulbs, bad wiring and improperly installed outlets and light switches. Electrical Meter not 100amp or 200amp services
24) Gas and Electrical Meters for each apartment not properly separated. Expensive to separate the meters properly. Make sure you know how to shut off a gas line and electrical panel and switches.
25) Sewer and Water bills. Know where exactly is the water shut off valves are and where the city water shut valve is too.
26) Garage and parking issues. Garage door maintenance and garage door opener
27) Neighborhood Issues, benefits and detriments, near a university or in da hood, public transportation locations by bus or train, near shopping and restaurants, schools, Think about the strategic location of the property. Location, location, location.
28) Curb appeal of the building, Is it well kept, grass and lawn care, tree trimmed? Is the tree scrapping the side your building, or scrapping your roof shingles or is it ready to fall down because its dead? You'll need a tree removal service, might cost $100-$900
to remove the tree, depending on the contractor you chose.
29) Unit cost repairs required before new tenant occupancy.
30) Hiring a contractor for any 24 hr. property maintenance issues or from tenant service calls.
31) Yard floods from the rain and pours into your property, into your basement, into your porch, rainwater sometime floods from your neighbors yard causing ongoing damage to your property. It's going to cost money to remedy your flooded yard situation, and send that water back to their yard or the alley.
32) A rotted 2 story wood porch might cost $15,000 to replace depending on contractor, extent of work and city permit costs.
33) Building laundry, in unit laundry repair and maintenance, Laundry - to have or not to have
34) Insurance - building insurance might cost around $1000/year for a legal 2 flat frame house.
35) Income / Expense / Rent Roll / Cap Rate reports - You'll probably want to get organized and put your income and expense report statement on a monthly spreadsheet on the computer to help your accountant during tax season or when you want to sell your building and the real estate investor buyer wants to see your building financial statement.
36) Buy low, sell high applies to the stock market and real estate. When looking for a multi unit building, you may want to think about buying a piece of crap in a nice neighborhood. You don't want to buy a Mercedes type property in a bad neighborhood, unless you want to. There are 4 types of neighborhood to consider when buying real estate. A, B, C and D. A is the high end luxury neighborhood, B is like a white collar neighborhood, C is like a blue collar neighborhood and D is a rough, warzone neighborhood. Most of the time you'll probably want to look in the B,C neighborhoods for multiunit buildings.
37) Types of heating and cooling systems, are you going to rent the property with heat and gas included? Furnace, boilers, radiators, central a/c, window a/c, wall a/c and its condition and maintenance.
38) Ongoing monthly property maintenance responsibilities, snow removal, grass cutting, changing light bulbs in public way, motion detectors, security systems, outdoor/indoor cameras, smoke detectors in hallways and bedrooms and carbon monoxide detectors.
39) Mailboxes and doorbells for each tenant
40) The monthly or daily visits to the hardware store like Home Depot, Lowes, HoBo, Menards, ACE for construction supplies.
41) Keys - you're going to have a lot of keys for your property and keys made at the hardware store. Keys made might cost $1 to $2.50 depending on the hardware store or local dollar store that makes the keys. You'll need a mailbox key, building key, front and back door unit key, garage key, laundry door key, and maybe a storage locker key.
42) Property Marketing - Buy and post a for rent sign, pay for an ad in the newspaper, post an ad online, or hire a realtor like myself to market, lease prepare and rent your property. Most of the time realtors will charge the landlord the first month's rent after the lease is signed by the qualified, landlord approved, tenant and landlord.
43) Lease Contracts, Move in and out check list, security deposits, move in fees, credit check fees, credit check applications, employment and landlord verifications paperwork you'll have to deal with.
44) Eviction case Lawyers - You'll need a lawyer in case you're stuck with a non paying tenants and you have to evict them. Lawyer might cost $1200 or more depending on the case and time of the year. In Illinois, tenants have more rights than the landlord. Non-paying tenants usually don't get evicted during the winter months. Sometimes you might want to offer cash for keys to get rid of the problem tenant. Going to court to evict a tenant is very expensive, including losing thousands of dollars in lost rent revenue.
45) Cashflow income - It's great to collect rent and build up your retirement account but make sure the multiunit property cashflows and makes your money. If you're monthly mortgage is $2500/mth. and rental income from the 3 unit building totals $2500/mth, which means you're only breaking even, is a bad investment. Like I said, owning a multifamily building is a big expensive responsibility and its a investment that has to make you money, or what's the point? If your mortgage is a $1000/mth. or less and the rental income is $3500/mth., then that's a good investment because your property is cash flowing $2500/mth to your pocket. You're in the business to make a profit, not to lose your property in a few years.
46) Mortgages - Make sure when you get a low interest, fixed rate mortgage. Know the differences FHA and conventional loans. If you're a vet, you would qualify for a VA loan. First time homebuyers who haven't owned a home for the past three years would qualify for a IDHA $5000 down payment grant, talk to your mortgage lender about it.
47) Liens against the property - Before buying a property, make sure there's no liens against the property during your title search. It will complicate the title transfer of the property to you. If there's a tax lien, association dues lien, mechanic lien on the title, make sure it gets paid off. Check your local county assessor website for liens against properties and who owns title to the property, Do your own due diligence.
48) Stigmatized properties - Has the property ever been a drug or meth house? Previous meth houses are really bad because the smell from the meth permeates throughout the entire building, like in the walls, floors and becomes a very unhealthy home. Did someone die there? Did something horrible happen there? Is the property located in a flood zone? Is the property haunted? Is the property structurally sound or ready to collapse on itself? Is the property close to a high traffic(highway) area? Is the property in a bad neighborhood where illegal drugs are sold? Are there squatters living in the property? Is the property in a blighted neighborhood? Is the property located to close to a polluting factory? Is the property too close to a noisy area? Is the property too close to an airport?
49) Zoning - Suppose you buy a 2 flat and you want to put in a 3rd unit in the basement but its zoned for single family and 2 flats, what do you do? You need to talked to a lawyer who specializes in zoning issues and then ask the lawyer to request for a variance in court. Requesting a zoning variance can be a lengthy expensive process so be prepared to spend some money. You can check the zoning of your neighborhood by going to your local city of village building department. In Chicago you can go to
and type in the address to find out the zoning of your property. Make sure your garden apartment complies with all building codes, so you will have to hire an architect to draw up construction plans and building permits and hire a reputable a general contractor whose licensed and bonded with the city or village. In Chicago, you must have 8'-0" ceiling height in the basement and minimum 2 exits out of the apartments. So if you have a low ceiling apartment like 6'-8", it's not a legal apartment and you might have to dig out the foundation to get the ceiling height and no one can live in apartment building while it's under construction, especially during foundation work.
50) Hire a full time maintenance person to maintain your property. Very important. The maintenance person should be a jack of all trades, one who you can trust to rehab the units when they become vacant, a handyman whose like a contractor who can paint, refinish floors, clean carpets, replace outlets and switches, fix and replace toilets, replace doors and windows, unclog sinks and unclog plumbing with a sewer snake machine, change lights, handle tenant issues, collect rent from tenants, collect tenant application and application fees and rent and security deposits or move in fees, repair or replace drywall, remodel kitchen and bathrooms, install carpet, laminate and real wood floors, patch concrete walls and sidewalks, cut grass, shovel snow, landscape trimmer, pick up debris around property, security guard and camera monitor, repair electrical panel and outlets, repair mechanical systems, repair hot water tanks, makes keys for tenants. Usually in a big unit building, a full time maintenance person would be assigned one of the apartments in the complex and sometimes pay half the usually rent for his services and paid a salary or hourly rate.
51) Hire a property management company that's CPM certified. Property Management Companies could range from a single managing broker to handle your 2 -3 unit property or condo or a large property management company that handles 500+ apartment units. To find a property management company, in your property neighborhood, to get a quote on how much they will charge to service your property, just Google 'property management' and the name of city or village or zip code of the location of your property. Not all property managements will service your building, if you have a 4 flat, some property managements will only manage minimum 12 unit buildings and charge 10% of total monthly rental income. They will handle all the property issues and maintenance, marketing apartments available, filling vacancies, rent roll, income/expense reports, monthly pro forma statements, cash on cash return, tenant issues, rent and deposit and move in fee collections, coin laundry collections and cap rate numbers but you will have to still pay any ongoing maintenance issues with your property. Apartment Pro Forma state example
Owning a multifamily building can be rewarding and challenging experience. Just be sure about your decision about owning one, before you make that big step.
Rental Property Business Plan
Rental Property Business Plan see weblink https://www.callporter.com/real-estate-investing-business-plan-ultimate-guide/
Commercial Property Income / Expense Reports
Make a spreadsheet excel program to keep track of your monthly income and expense reports. Quicken might have a income expense report you can use. It's important to have an income / expense report for your building, especially when it comes time to sell it. Your accountant would need it too to figure out your capital gains tax. There are companies that can help you get your capital gains tax deferred.
Commercial Property Rent Roll
Make sure you have an excel spreadsheet to keep track of your tenants by creating your own rent Roll spreadsheet or google online for Rent Roll spreadsheet samples. They sell property management programs but those can be kind of pricey.
Commercial Property Calculator Tools
biggerpockets.com - https://www.biggerpockets.com/real-estate-investment-calculator
Commercial Property Deals
Where do you find property deals?
1) You make the deal
2) Realtor can help you find and make the deal.
3) Bandit signs you create (WE BUY HOUSES! CALL 555-555-5555)
4) Probate Lawyers - People who inherited their parents home and want to get rid of it.
5) Property Auction websites, ebay classifieds, hubzu.com, bid4assets.com,
6) Bank websites - Bank of America REO, Wells Fargo REO
7) Government websites, usda.gov, hud.gov, va.gov, usa.gov, treasury.gov, gsa.gov, homesales.gov, usmarshals.gov, sba.gov, hudhomestore.com, https://www.biggerpockets.com/rei/government-owned-property/
Commercial Property Tenant Screening Process
1) Do it yourself - Do the credit check and background check yourself, do the running around yourself if your got the time
2) Hire a realtor - Using a realtor who has a managing broker's license can handle the same duties of a CPM Property Manager
3) Hire a property management company - Make sure they have a CPM (Certified Property Manager) certification. Property Managers usually renew their CPM certification every couple of years http://www.irem.org/credentials/for-individuals/cpm
Commercial Property Rental Business Plan
Commercial Rental Property Analyzer Calculator -
ROI - Return on Investment
Cash on Cash Return on Investment Calculator
Check out the Neighborhood Crime Rate for your Commercial Building Location in Chicago
Commercial Building Security Cameras
It's a good idea to install security cameras around your apartment building and interior entry ways. Most tenants feel more secure about a building with security cameras, because it makes it easier to catch a thief or document crime incident.
Call Manny for a quote 773-414-1222 or google a local security camera installer near you.
Commercial Parking for your Apartment Building
1) To protect your tenants parking spot, hire a towing company and post their NO PARKING SIGN in a conspicuous location.
S&S Towing - 4699 W Lake St, Melrose Park, IL 60160 Phone: (708) 538-0220
or google a local towing company for your city or village
2) Maybe the towing company can make permit parking decals for you or you can make your own parking decal at
or Call Jose from Intermedia Print W: 773-340-7661 Address: 3320 W. Lawrence Ave., Chicago, IL
or get your car decal at
3) Always assign a parking spot for every paying tenant to avoid any disputes by the tenant.
4) Always number the parking spot with paint or a posted number on a metal post around the parking lot. If you need a parking stripe painter, Mark works around the Chicago land area. Give him a call if you need you need your parking lot stripe painted and numbered
Mark C: 630-333-8165 or google a local painter that paints parking stripes.
5) Make it a clear to your tenant that the parking spot is only for their assigned license plate and car model and no other person can park their car there. Any other car will be at risk of being towed.
6) Work out any details with your tenant regarding moving in moving out procedures and when and where the moving truck is allowed to be located.
7) Parking can be included in the rent or you can charge a market rent for it.
8) Regarding parking lot oil stains, they can be removed with kitty litter or any other oil removing detergent, that absorbs the oil stain
9) Asphalt pot holes can be repaired, see weblink below:
10) Concrete pot holes click down below:
11) Precast Concrete Bumpers for Parking Stalls:
12) If you need concrete stairs, sidewalks or concrete bridge to your 2 or 3 flat:
Or call your local concrete contractor.
13) For more parking policy information go to:
Private Lender, Hard Money Loan Lenders
1)
Kurt A. Nederveld
Chief Executive Officer
Rainstar Capital Group
P.O. Box 140991
Grand Rapids, MI 49504
Direct: 616-821-6535
Fax: 616-588-6170
Email: [email protected]
Email: [email protected]
www.rainstarcapitalgroup.com
Learn about our Sister Companies:
www.rainstarmarketing.com
www.debtstarcapital.com
2)
Brian Murphy
Senior Vice President
Wilshire Finance Partners
1990 S. Bundy Drive, Suite #630
Los Angeles, CA 90025
CA BRE #01792922
O: 310-256-2238
Toll free: 866-575-5070
Email: [email protected]
3)
Century Capital Partners
Century Capital LLC
336 W. Passaic Street, Suite 310
Rochelle Park, New Jersey 07662
877-335-5464
www.centurycapllc.com
4)
Franchise Capital Advisors
9903 E Bell Rd
Scottsdale, Arizona 85260
480-355-4399
www.franchisecapitaladvisors.com
5)
Adam LeBlanc
Business Development
First Rehab Lending
327 Plaza Real Boulevard
Mizner Park - Suite 301
Boca Raton, FL 33432
Office: 631-847-8707
Mobile: 561-322-5535
Fax: 631-393-4685
Email: [email protected]
www.frlinvestors.com
Paul Smoot
Business Development
Office: 269-944-7296
Fax 888-973-6935
Email: [email protected]
6)
KTD Financing & Investment
John Ness
Commercial Mortgage Broker, KTD Financing & Investments
Mobile: 410-493-6272
Fax: 410-844-0474
Email: [email protected]
Website: http://www.johnness.com/
7)
Business Purpose Loans
Use your home for a Business Purpose Loan
Rates from 9.5* Monthly Interest Only Payments
12-60 Month Term (w/extension provisions)
UP to 70% Loan to Total Project Cos
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
22601 N 19th Ave Suite 112
Phoenix AZ 85027
O: 623-582-4444
www.level4funding.com
NMLS 1057478 AZMB 0923961
8)
Michael Norris
Managing Member
Cornerstone Capital Group, LLC
2288 Gunbarrel Rd Suite 154-374
Chattanooga, TN 37421
O: 423 400-8787
9)
Howard Linker
David Lessnick
OSTEND DEV LLC
1900 Western Ave,
Las Vegas 89102,
Nevada USA.
Call Line: +1(914)-368-6119
Tex Line:+1(702)907-9359
10)
Biggerpockets.com
https://www.biggerpockets.com/hardmoneylenders/illinois
11)
Facebook Private Lenders
https://www.facebook.com/groups/680267635373402/
12)
Steven Haig
National Account Executive
949.510.9497
13)
Todd Probasco
Refinance
708-205-2983
www.toddprobasco.com
14)
Visio Lending
(512) 334-1506
Visio Lending drops rates to our all-time lows!
Email John Sperling for new rate sheets and terms
[email protected] or call 512-334-1506.
15)
(866) 575-5070 | WilshireFP.com | [email protected]
Los Angeles Office | 1990 South Bundy Drive, Suite 630, Los Angeles, CA 90025
Mission Viejo Office | 25950 Acero Drive, Suite 345, Mission Viejo, CA 92691
16)
VFS investor loans are the fastest easiest way to purchase or refinance your
investment property - email me for more details
[email protected] or call any time 512-334-1506.
17)
Riverdale Funding, LLC*, All rights reserved.
Call Today: 888-505-1639
Our mailing address is:
18)
Stephen Page
305.790.8554
19)
ICG10 Capital, LLC. All rights reserved.
18851 NE 29th Avenue, Suite 1000, Aventura, FL 3318
Visit ICG10.com | [email protected]
20)
Sean Harrington | Sr. Loan Officer | NMLS # 631480 I Branch NMLS # 1248193
CMG Financial | 275 N. York Road Ste 400 | Elmhurst, IL 60126
Office: (847) 809-7458 | Cell: | Email: [email protected] | Web: sharrington.cmgfi.com
21)
Brad Lober
(818) 930-5571
Athas Capital Group 27001 Agoura Road Suite 200
Calabasas Hills, CA | 91301 US
22)
Stuart Solomon 415-793-9476
(415) 793-9476
Stuart Solomon | STUART SOLOMON, 336 North Louise Street, ste 11,
Los Angeles, CA 91206
23)
Mark Gregory
President
(O) 818.936.4800
(C) 818.406.2002
23274 Park Ensenada
Calabasas, Ca 91302
www.activecapitaladvisors.com
Ca BRE Broker # 01379884
Commercial Financing
Where do you go to get financing for your commercial building when a regular bank doesn't want to give you a conventional loan? Well here a several choices to choose from for financing your project.
1) Hard Money Lenders - They will give you a loan based on a higher than normal interest rate, don't care about your credit, but they do care about the income capacity of the property.
2) Angel Investors - Deep pocket individuals from all walks of life such as seasoned real estate investors, bankers, lawyers, stockbrokers, real estate developers, software developers, venture capitalist, etc.
3) Crowdfunding websites for your projects
4) Friends and family - Your will to contract the family member on title as joint tenancy and you two would work out your silent investors percentage of ownership such as I will loan you $200,000 for your project for 60% ownership of the building.
5) Grants for rehabbing your property a grant yourself and you got a lot of time on your hands, go for it. or a grant yourself and you got a lot of time on your hands, go for it. You will need an experience grant writer to get the grant because it is very time consuming to get a grant for your project. Unless you want to apply for a grant yourself and you got a lot of time on your hands, go for it.
Buying Residential and Commercial Property Bootcamps
David Lindahl - Buy 100 unit to 300 Unit Apartment Building in emerging markets
Larry Goins - Wholesaling homes and guerilla marketing
Ted Thomas - Tax Sales
Chris Johnson - Government Grants for commercial property, student loan grants, start a business grant
REICLUB
Ron Legrand - If you want something you never had, you have to do something you've never done. Stop trading dollars for hours and make real money.
REO, Bank Owned Single Family Homes
2 - 4 Multi-Unit Buildings
5+ Apartment Buildings
