Why Isn't Any Property In Chicago Area Cash Flowing?
We are a new investment group in the West Sub. of Chicago. When we started looking for 20-75 unit Apt. Complexes, we did not think our biggest obsticle would be finding one that has cash flow. How are these investors purchasing buildings that cash flow in the negatives?? Are we being too conservative in are reserves? We are allocating 7% vac, and 5% reserves. We have been searching since Nov. and have analzed over 40 properties and nothing has worked. Any suggestions?
Can you be clearer about your investment objective? There are many variables with your situation. How much do you have down? What is your investment objective? What is your investment strategy? What rate of return are you looking for? What is the minimum? How long do you want to hold the property? Do you want to buy it at a discount and work out the property? Do you want an "A-OK" property? Are you geography limited to the west suburbs? How far would you go for a good deal? What is your definition of a good deal? Are you going to manage the property? Regarding your financing - can you do a full doc or stated application? Is it an LLC, (or other entity), or you and your partners personally acquiring the property? Do you have any experience owning a property like you are trying to acquire? Do you have any experience managing a property like you are trying to acquire?
These are some questions you need to provide clarity on.
Phil
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Phil, sorry it took me so long to get back to your questions! Our group is an LLC with an objective of aquiring an investment property with positive cash flow. We are looking for a property around an 8% cap rate and about $1,000/unit/year return. We have an exit strat. of 3-5 yrs. We do have $300,000 in home equity that we can use as a down payment. We are looking to purchase something in the Western Sub. no more than a 30 min drive from Bolingbrook area. We would consider something that does need repairs but not major cash outlay, since we are a new company. We are finding that once you calculate debt service the building is in neg. cash.
The problem is that you are looking in a "hot' area and eveybody is trading on the expectation that prices will continue to go up.
You can join the thundering herd and hope they are right or you can look elsewhere.