Is the Chicago real estate market a good venture? Are other bidders running up the price on your ideal property? What’s the best way to invest $25K? Philip Michael answers these real estate investing questions on this segment of Ask Philip, or Slidin’ in the DMs. For the full responses, check out the video.
Q. What do you think about rentals in Chicago? I have seven, and I’m trying to add more.
A. In terms of markets, Chicago is a big metro market. It has all the fundamentals: You have big corporations, universities, people living there and people moving there. So, from that standpoint, there are indicators that it could be a good market to explore and dive into further. If you live there, that’s even better. And you already have seven — You have experience, even better. But one of the ways that you could expand is to figure out how to take out equity from one building. Once you have the first property, that can lead to the second, and once you have multiple ones, you can maneuver them like chess.
Another potential avenue you can explore is taking a blanket mortgage.
Q. There are so many people buying houses with cash that it’s running the price of the house up 20 or $30,000 over listing. I can’t understand why they’re saying I need 10 to 15% down.
A. You’re telling me your lender is asking you to put 10 to 15% down. Sometimes, they say that based on the information you gave them, they may have been limited or unrefined. Here’s what I would do. Make sure you have a pre-qualification letter. Then, say you want something up to four units because you only have to put 3.5% down, not 10 to 15. He’s just talking bogus; maybe he has an incentive of his own. Maybe he gets paid more from a mortgage like that. So, just get a second opinion.
In terms of the properties where you’re being outbid, maybe you should get in the game and bid more with them. Or what I would do is go somewhere where you can find something that works for you.
Q. I have $25K ready to go right now to invest. Never bought a property, good credit, have an LLC created. I appreciate any tips.
A. You’ve already done the most important work, which is to get enough money where you have a downpayment. If you have good credit and your job history, you can get a pre-qualification letter and find out what your exact buying power is. One more thing, you don’t need the LLC if you’re going the FHA route; you have to be the one signing on it. And the LLC won’t help you one bit because they’ll ask for 20% down.
If you actually like real estate investing and want to do it, you can find a three or four-family property, live in one of the units, rent the other ones out, and have those tenants pay for your mortgage.
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