Chicago Reno Transformation - From Dark & Dingy To Bright & Airy
I knew I wanted to get into Real Estate ever since I was in high school. My passion for real estate greatly stemmed from seeing my parents build a portfolio over the years, which would later become their retirement nest egg. While in college, I decided to take real estate electives to further grasp this $7.4 trillion-dollar industry. Right out of college I temped for one of the largest residential property management companies in Chicago (Draper & Kramer). While at Draper & Kramer, I worked on the leasing side of the business by renting out high-rise units in the South Loop. Once I finished my temping contract, I switched over to fortune 500’s Jones Lang LaSalle, working in commercial property management. I would continuously listen to weekly Bigger Pocket’s episodes to learn more about residential real estate on the way to work as well. The experience of working for a publicly traded company was not a joyous one. However, I learned how important it was to document, file, organize, and be proactive.
During my transition out of JLL, my mom pushed me to receive my broker’s license. I decided to take a 2-week express course, which I highly recommend if you have the time and passion. Becoming licensed gives me the ability to view the MLS and represent other clients if I wish to do so. One of the best parts of being licensed is that I can receive a commission on any piece of real estate I decide to buy.
My father is also a licensed realtor and home inspector but, more than that, he is a well-versed handy man. His strong work ethic would later become the foundation of my career. My father would continuously have me work with him throughout college on various projects including installing floor tiles, renovating bathrooms, painting houses, and much more.
The knowledge he passed onto me, as well as past employers, set me up for success on my first real estate purchase, when I was twenty four years old. Last year, my friend (Jeremy) and I decided to purchase a three flat in the Chicago neighborhood of Irving Park. All three of the units were rented upon purchase and are currently on month to month leases. However, the bottom tenant lived in a very outdated unit. (See Photos).
Jeremy and I decided to finance this property through an FHA loan (those whom don’t know, FHA only requires you to put a minimum of 3.5% down). To qualify for the FHA loan, the owner must occupy the unit for the first year. We purchased the property for roughly $400,000. Our decision was to remove the basement tenant who was paying $650 a month in rent and renovate the unit to increase our cash flow. Our goal was to follow Brandon Turner’s BRRRR method (Buy.Renovate.Rent.Refinance.Repeat) as we thought through that method we would receive anywhere from $950-$1,000 a month in rent. The other two units are currently under rent for $1,250 and $1,300.
After completing the project, we ended up spending roughly $13,000 (self-financed) on the overall renovation. Some of the major expenses were:
Ceramic Tile Flooring $1,500
Granite Counter Tops $2,000
Faucet & Fixtures: $900
After the project was completed, we found a renter willing to pay $1,050/month. We are still waiting to build more equity in the property before refinancing out of the FHA loan. Over the last year, Redfin estimated property values have increased by 10% in our area. Projecting the value increase with a 9% CAP, we added about $40,000 in net value to the property.
This project was one of the most monumental experiences I have went through and could not have done it without my father, Jeremy and my friends support. I will continue purchasing and renovating to build my financial freedom. Any person whom has yet to take the large leap into real estate, I highly suggest you do. Take advantage of Bigger Pockets podcasts, forums, as well as their financial calculators.