While doing my daily MLS online hunting, I came across a new listing for a 4-flat in Ukrainian Village. It did not throw a lot of rent so it did no good to me online. However, since it was in my West Town area of emphasis and had good curb appeal, I called the agent to make an appointment.
The property was listed with a very small suburban-based brokerage, and the listing agent did not show the property herself. Instead, I was to meet the owner at the building. I asked the listing agent for a phone number and she would not provide it and she insisted I just knock. I learned later that the agent was the cousin of the owner.
So I went out to see a 4-flat at 11 a.m. and it was bitter cold that day. I knocked on three different doors and finally, an elderly man named Ziggy came out to greet me. He hardly spoke any English and just kind of gestured and pointed me through the building. At one point I asked Ziggy if the furnaces wherein the basement and he said yes, and then I asked are the furnaces on the roof and he said yes. At this point, I realized my communication was not quite connecting.
The first thing I noticed was that the property had a fifth unit that was not mentioned on the listing sheet. The renter was there and he said he paid $1200 per month. This slightly below grade “English” garden unit had 8-foot ceilings, two entrances, and was pretty nice. It is clearly an illegal unit but basically it was a sweet bonus unit as it was very nice and currently leased which was not reflected in the MLS online listing sheet.
The next thing I noticed was that the apartments were all shockingly good condition. They were all gas forced heat with central air, drywall, and all of the bedrooms were 9×10 or bigger which means they could fit queen beds. The kitchen and baths were updated in 2010 and were of above-average rental quality. Right off the bat, I knew I could rent each of these apartments for $200 to $300 a month more with no improvements. I own a 4-flat just three blocks away so I knew the market rents in this Ukrainian Village Neighborhood really well.
Then I noticed in the living room that these were actually once 2-bedroom units that were de-converted to 1-bedrooms with oversized living rooms. The wall that formed the former bedroom was still 2/3 intact with an opening about 5 feet (2 door widths approximately). Each of these former bedrooms had a window and an oversized closet. So all I would have to do is to throw up a door, a few two by fours, and some drywall and $1,500 later I would have a 2-bedroom apartment. I knew I could get at least another $300 a month for these as 2-bedroom apartments on top of the under rented amount.
The last thing I noticed was that the building was on a 30-foot wide lot. But more importantly, the building was extra wide and took advantage of its wide lot being 24 feet from brick to brick. Most Chicago lots are 25 feet wide, with 22 wide buildings, and a 3-foot wide gangway. This width bonus is huge and explains why the room sizes were so good.
I also did a freedom of information request to pull any permits and building violations the building might have and was pleased to find that the building had no current or even previous violations.
We wound up buying the property for a steal.
My property is at a 9% Cap Rate & the annual cash flow on the down payment is 15% “Cash on Cash”!
Lastly, I am also helping my client challenge the property taxes with the Board of Review Outreach program at no charge.
There are properties out there which are:
- under rented
- not in their highest and best form (in a 1-bedroom form when they are much better as 2-bedrooms)
- not properly marketed by their agent (the property was shown by Ziggy, 5th unit not included in the online listing, and 2 BR possibility not mentioned)
These opportunities are there for someone who is willing to put the sweat out to find them and has the experience to recognize them.
This is just one of the ways I find my clients’ exceptional investment opportunities.