Hey guys, just popping in to run through the details of this deal I’ve been working on for the past few months. I’m about to dive in, but I figured it wouldn’t hurt to double-check and make sure it’s a solid move. So, here’s the scoop: I’m diving into the world of being a first-time landlord, and I’ve got an agreement with a property management company to handle everything for me at a rate of 10% of the gross rents. I know I’m overpaying a bit, but I wanted them to be super hands-on with the property.
The property itself is located near Washington Park, right off the Green Line. It’s a 6-unit building with a mix of two-bedroom and three-bedroom apartments. The rooms are all pretty spacious, with around 1800 square feet, except for one of the two-bedroom units, which is slightly smaller at 1500 square feet. Each unit has a living room, kitchen, bedrooms, and bathrooms.
There’s also this interesting basement area with two separate entrances that used to be another unit. It’s been empty for years, and the current owner never bothered to convert it into a seventh unit due to tax reasons. The total monthly rent for all units comes to $10,820, and they all qualify for additional beds under the CHA program.
When it comes to expenses, there’s quite a list, including taxes, labor, repairs, and more. The property is self-insured, which seems a bit wild to me. All in all, the expenses add up to $39,572, with management costing around $12,334.80. Taking into account a 5% vacancy rate, the net operating income is approximately $67,541.20, which gives a cap rate of around 7%.
As I move forward, I’ll be doing my due diligence, but I don’t anticipate any major surprises given the current owner’s experience with managing properties. My main concern is the condition of the roof, so that’s something I’ll be keeping an eye on.
Looking ahead, there are some potential opportunities to increase income by charging for the use of washers and dryers and converting the lawn into additional parking spaces. The current owner is also planning to sell off the rest of his portfolio in the next few years, and if all goes well with this property, I might consider acquiring more from him.
Now, onto the deal itself: I’m looking