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Real Estate Investment

How to Spot Up-and-Coming Chicago Neighborhoods to Purchase Investment Properties In

How to Spot Up-and-Coming Chicago Neighborhoods to Purchase Investment Properties In

By | Real Estate Investment

The trick to turning the biggest profits on investment properties is, like many other investments, buy low and sell high. In other words, find apartment buildings and other properties in neighborhoods that are currently attracting tenants enough to make the investment worthwhile, but perhaps isn’t SO popular yet that the property is too costly. Spotting these up-and-coming neighborhoods can feel a bit like a gamble, but when you know what to look for in neighborhoods that have great properties but not a lot of draw, it’s easier to get a feel for what’s to come. As a property management company in Chicago, we at Lofty are dedicated to helping property investors find the best investments. Here’s our guide for helping you determine which neighborhoods show promise.

Check Out What Businesses Are Moving In

If empty storefronts have plagued an area, but more and more businesses are beginning to sign leases there, it can be a sign of what’s to come. A rapid increase of restaurants or brewpubs, coffee shops, bars, boutiques, and more can be an indication that a neighborhood is on the rise. Likewise, if more chain offerings move in—think places like Starbucks or Target—that can also bring more people to an area. People enjoy living close to a variety of businesses, and the busier a neighborhood gets, the more popular it becomes.

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Take a Look at the Transportation Offerings

If a train station or multiple public transportation stops are nearby a lot of buildings, it can be beneficial to look at those buildings as potential investments.

Many city dwellers rely on public transportation and will seek out housing that is nearest their most-used train or bus lines. If the neighborhood has a lot of public transit options and a lot of new businesses are moving in, this can be a sign that it’s time to buy.

Find Out if Any Large Companies Are Setting Up Camp There

Another thing that can bring a lot of people to an area of the city is when a big company, like Google, for instance, announced they’ll be opening an office there. Employees look for nearby housing, and that’s where your investment properties will come in handy for them. Take a look at news about businesses moving in, and maybe you’ll find some invaluable information.

Research the Average “DOM” or Days on Market Rate for Properties

In tough neighborhoods, when properties sell, they may sit on the market for several months. As those neighborhoods heat up, however, those properties sell faster and faster. This is a huge indication of how an area is doing. Check with real estate agents and your property management company in Chicago to learn about the trends in various neighborhoods in the city. Look for declining DOM rates—the faster properties are selling, the easier of a time you’ll have renting these properties out (and the higher demand means you’ll be able to price your rentals higher, as well).

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Look at the Neighborhood’s Demographics

Up-and-coming neighborhoods in many cities, but especially Chicago, are known for having a high concentration of “creative-type” residents. Because that line of work isn’t known for its fat paychecks (usually), people who rely on art, music, and similar livelihoods tend to find neighborhoods with relatively low rent. However, because these groups of people tend to have a following of people who want to be where the “cool” things are, those areas tend to increase in popularity, leading to increases in rent. Then, the whole cycle starts over. For instance, think of Wicker Park in Chicago about 15 years ago, or Logan Square five years ago. Both neighborhoods were the cheap, hip places to live, and nowadays, Wicker Park is home to booming businesses and hundreds of families, while Logan Square is currently seeing rent hikes and new restaurant openings on a near-weekly basis. Where will the next hot spot be?

Investigate City Improvement Plans

Look to city plans to see where people might gravitate to in a year or two. Are new parks being constructed? Schools? Trails? Amenities that people enjoy being near will cause an increase in popularity in an area, so try and check to see if the city has anything planned in the neighborhoods you’re looking to buy in. For instance, the creation of the 606 elevated trail is leading to an increase in growth on the blocks directly surrounding it.

Proximity to Other Popular Areas

Finally, look at what’s popular now, then look at the areas surrounding it. Where Wicker Park was popular, now it’s neighbors to the west (Bucktown and Logan Square) are heating up. Logan Square is pricing some residents out, who are now flocking to places like Humboldt Park, Avondale, and Hermosa. Take

Need Help With Your Investments?

As a property management company in Chicago, we at Lofty are dedicated to helping people make the best investments. That means providing sound advice on where to buy and what’s heating up, as well as helping you get the best returns on your investment properties in Chicago. We’re a full service property management company, and we’re ready to help you take care of all the minutiae related to owning investment properties, so that you can live the life you deserve rather than working constantly. To learn more about any of our services, contact us anytime!

Wondering if a switch might be right for you? Give us a shout and learn more.

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How to Prepare Your Chicago Investment Properties for Renters in Spring

How to Prepare Your Chicago Investment Properties for Renters in Spring

By | Property Management, Real Estate Investment

#6. Easier and faster.

Management software has become an efficient way for property managers and property owners to access powerful tools for effectively managing the rental properties for which they are responsible. Technological developments like property management software make detailed tenant and property information accessible virtually anywhere.

A modern property management company has tons of useful software products available to make managing property more efficient. With being a society always on the go, advanced property management companies, like Lofty are embracing the use of technology for their owner and tenant clients alike. Useful, web-based applications can manage everything from contact forms to live chats, listed available properties, tenant screening and applications… Lease and other agreements can even be signed online—this is helpful if you have to move out of the country for work over a weekend, and need help managing your property. In fact, there are ways to “link” these individual components together to build systems that generate feedback and manage the entire property manager workflow in harmony! Do you have goosebumps!?

Because everything can be linked through the internet, property managers can receive alerts at the same rate of transmission as a text message. Mobile connectivity ensures that clients don’t have to wait long for a response. Faster response time mean reduced friction when something unexpected happens, and allows property managers to handle situations as they happen.

#5. Reduce user error

The right property management system provides effective accounting functions and reports that will replace any double-entry errors, and the old fashioned pen and paper. By automating property management tasks, important information is archived through the redundancy of computer processes. Also, utilizing live error-checking features ensures less mistakes are made, and there will be more time to focus on other projects. Come tax season, accountants love those who can effectively take advantage of quality accounting software.

#4. Added value for tenants

Whether it is a request for maintenance work when the washing machine breaks down, a rent payment is due or to simply review their lease, property management software offers online portals as a means of communication between the tenants and the property management company. This communication hub is accessible anywhere, 24/7, and can give owners a place to get a high-level overview of their property status at any given time. By using the property management software’s online tenant portals correctly, the situation can benefit managers, owners and tenants alike by leveling the playing field and allowing each party the advantage of clear communication.

#3. Convenient payment online

With online rent payment solutions software, property management companies, property managers and property owners no longer have to wait for rent checks to get delivered through time-expensive methods like mail, courier, or delivery services, let alone the frequently awkward and inconvenient hand-delivery! Paying online is easier for both tenants and managers when secure ACH or credit/debit card online rent payments are used. Secure online payment gives tenants the opportunity to easily make their rent payment from work, home or anywhere they have an internet connection. By making payment as convenient as possible for all parties, and as secure as an in-person meeting with a teller, quality, modern property management software solutions allow the excuses to just melt away.

#2. Marketing through Social Media

Social media has become more than just a platform for friends and family to keep in touch about life events. It creates a platform for businesses to maintain constant contact with any subsegment of the planet’s population, maximizing virtual awareness and the target audience’s ability to stay proactive. Social media management software allows a residential property management company to market to multiple engagements using campaigns that deploy in multiple social channels at once. With the ability to announce, promote, engage and share your company’s skills as well as your residential inventory to attract new potential tenants all at once, there are endless opportunities to grow brand awareness and create new business!

#1. Property Protection

Using property management software makes background tenant reports instantaneous for property managers, owners and leasing agents. Instant access to tenant screening reports allows managers and property owners review applicant backgrounds including criminal, credit, and eviction history in order for the property owner to make an educated decision about the potential financial responsibility and behavior of the person or people that seek to reside in said owner’s property. By making applicant screening accessible, property management software allows property managers and owners to select the most qualified tenant who will maintain the rental property, much like their own home, respect the agreed upon lease terms and pay their rent on time.

Developments in technology have paved the way for property managers and property owners who are seeking more efficient processes to streamline their business and boost profits. By incorporating the latest property management software applications into their daily operations, property management companies can evolve to become more efficient and effective, industry-wide. Not only have affordable property management systems been developed to make managing rental properties online easier, but today’s renters are seeking and appreciate the convenience of online services provided by their property management company or landlord.  Technology within this industry has changed and evolved to be convenient, cost-effective, and efficient for property owners and/or property managers to provide extra services to their tenants, organize their data and improve their business processes.

Here at Lofty, we pride ourselves on existing on the leading edge of property management software technology, and we use it daily to enhance our client’s experiences. The purpose of technology is to make tasks easier to perform, and there have been many advances in property management systems to the benefit of the client. By automating a lot of the tasks that can bog down personnel, Lofty is able to pay more attention to our clients’ needs and create a customer service experience unsurpassed in property management! Talk to us today, and see how we can help you live the life you deserve.

Speak with Anthony Zammitt, Lofty’s managing broker to find out how we can supercharge your investment.

where to invest in chicago

Becoming A Chicago Real Estate Investor

By | Real Estate Investment

To make buying decisions like a professional investor, it is a good idea to familiarize yourself and understand the terms and vocabulary used within this industry, as these will ultimately help you determine if a potential investment is a good one or not. Here at Lofty, we know how important it is to understand the terms as you grow your real estate knowledge and so we have compiled a list for you!

CAP Rate / Capitalization Rate

A common real estate investment term is Capitalization Rate (CAP Rate). Simply put, the CAP Rate looks at the potential return of the investment. The higher the percentage, the larger your return. So, a high CAP Rate is desirable. Real estate investors use CAP Rate similarly in which stock investors use the P/E Ratio (Price-Earnings Ratio). Both CAP Rate and P/E Ratios are formulas that allow for quick, basic calculations that help a potential investor quickly determine if a potential asset is priced at a desirable valuation. Typically, a CAP Rate of over 10% will look to be an attractive deal.

CCR / Conditions, Covenants and Restrictions
These are commitments written into leases and contracts where all parties involved agree to certain terms, which can included performing any actions or inactions regarding the property.

CCRs can occur in several situations and as an owner, CCRs can be written into a property’s purchase document. Also, your tenants, for example, could sign a lease in which they agree to specific certain conditions (i.e. no pets allowed, tenant maintains landscaping, etc).

DCR / Debt Coverage Ratio

A commonly used term by lenders in the underwriting process for loans regarding income-generating properties. DCR is calculated by dividing the NOI (Net Operating Income) by the total debt. An average ratio is 1.20 and higher.

Effective CAP Rate / Effective Capitalization Rate

The Effective CAP Rate, also known as, The “true” CAP Rate, requires more calculations to determine. Typically, if a CAP Rate looks too good to be true, it probably is. While the CAP Rate only uses gross rental income, the Effective CAP Rate takes a look at the whole picture, which is the Net Rental Income. The Net Rental Income (a.k.a. Net Operating Income) factors in all costs associated with the rental property, like HOA fees, insurance, property taxes, vacancies, etc. A key point about the Effective CAP Rate is that it omits both the principal and interest payments because it assumes the cost of the property is fully paid for.

GOI / Gross Operating Income

This is the actual income collected from the property, annually. Which also includes all sources of income, like any on-site laundry, parking, storage, etc., and takes into account any vacancies.

LTV / Loan-To-Value

If you are taking out a loan on your investment property, LTV is important. You can calculate this percentage by dividing the loan by the property’s value. For example, if the loan is $200,000 and the value of the property is $250,000, the LTV is 80%. The lower the LTV, the more equity you have in the property.

Net Cash Flow

For smart investing, any real estate property worth pursuing should generate a positive cash flow. Or at least have the potential to generate a positive cash flow. Specifically, the net income generated each month from the property must cover all monthly expenses.

In the real world, not all real estate properties create a positive cash flow. When you identify a potential investment property, it will be important to do your homework before committing to a deal so you do not find yourself in the red.

NOI / Net Operating Income

This is the income left over after paying all your monthly expenses. So, to calculate your investment’s NOI, subtract your expenses from your GOI. For example, if you take in $10,000 in rental income on a multi-unit building and spent $8,000 on maintenance, insurance, taxes, utilities, and property management fees, your NOI for the month is $2,000.

PITI / Principal, Interest, property Taxes, and Insurance

Basically this is the bottom line to calculate when considering purchasing an investment property with a loan. Typically PITI is calculated on a month-to-month basis and as an overall number.

The month-to-month calculation is the portion of PITI you have to pay each month to stay in good standing, while the overall number is what you could potentially spend on the property over the life of the loan. Both of these calculations will help give you a base in how much rent you should charge.

TCRR / Total Cash Return Rate

TCRR can be viewed as your yearly percentage yield. The TCRR formula accounts for any upfront costs while in the purchase process. TCRR is calculated as (net cash flow + principal payment) divided by the total cost due at signing (down payment), which does not typically include the closing costs. Whereas the CAP Rate assumes that full down payment is ready at the time of closing.

With the final goal of making money is easy for anyone to shoot for, it will be helpful in reaching that goal to learn how to calculate and communicate like a professional investor. When getting started with something new, there is always new terminology and acronyms to go along with it. It is no different when it comes to real estate investments. Taking time now, could be a big benefit for your future real estate portfolio.

If you are of the TL;DR segment of our audience, you may want to work with a trustworthy team of real estate professionals to help guide you down a path of investment success. Here at Lofty, we have the experience, expertise and care to help get you where you want to be and more! Talk to us today and see how we can help you live the life you deserve.

Speak with one of our experts to find out how we can help you build your dream portfolio.

Purchase Chicago Properties Like A Professional Investor

How To Purchase Chicago Properties Like A Professional Investor

By | Real Estate Investment

Many people today want to add real estate to their portfolios and call themselves a real estate investor, but they do not necessarily understand the ins and outs of real estate investing or where to start the process. Some of those people probably perceive the industry as being too complex to participate. Real estate investing is much different from investing in the market of stocks, bonds, and CDs and can seem overwhelming to brand-new and rookie investors. With that in mind, below are 9 tips to help you successfully launch and navigate your budding career in real estate investment.

Investing Is Serious Business—Map your goals and make a plan

Your investment portfolio is your business and so it should be treated like a business. Developing a good business plan is a great start, detailing the operations of starting and also running your business. Set realistic goals over one, three, five and 10 year spans. If not sure where to start with creating a business plan, there are many good examples to be found online with a quick search. If you are unfamiliar with business plans in general, it may be best to do your research before getting started.

Know Your Worth—Start out with your eyes and ears open

Determining your credit score will bring your financial situation into the light of day. This will be important to determine your ability to finance an investment property, so you do not get blind-sided by any surprises that might inhibit your purchasing. Careful as to not repeat the lending market bust in 2008, lenders today are looking for credit with a 700 or better score from investors who want to buy investment property. Unless, you plan to purchase in cash, of course—cash is king and your credit score is not relevant. Keep in mind, when going the lender financing route, it will be helpful to make sure that your total monthly debt-to-income ratio is on the low side. In order to improve debt-to-income ratios, pay down car loans, outstanding credit card debt, and reduce overall credit spending.

Invest In Education—Your brain is your most valuable asset so invest in it, too

High-level employees at any successful corporations are sent to numerous educational seminars, trainings, conferences and more, so they can stay knowledgeable and sharp in our ever-changing world. It makes sense that their superiors would encourage this behavior as it makes them a greater asset to the company. Think of your brain as your human capital, your top-performing employee, and strongest asset—invest in it. You can find loads of information on real estate investing online for free. If you do purchase a book, look for one that offers practical guides on buying, renting, flipping and selling properties. It would be best to avoid books that claim “get rich quick” or books that are 25+ years old explaining techniques that may no longer work, as market fluctuations and trends have both changed drastically over the decades. Beware to keep your research comprehensive early on, until you get the lay of the land, so to speak. Misinformation can be remembered just as easily and can be just as hard to forget.

Leverage Your Network—Seek out those who have had success and stay in touch

Putting yourself in the best position to succeed is one aspect of purchasing property for sale like an investor. To do so, model your investing decisions after what other successful real estate investors in your area have done. Seek out opportunities to learn from the best. If you don’t know the best, find them. One place to find other investors is a real estate club in your area—a quick online search should help. These clubs are great places to network with other investors, lenders, repair service providers and others apart of the real estate industry. Many times you can expect to pick up helpful advice about your local market from other attendees and even other investment opportunities.

Another place to network is to see if your community offers courses on real estate investments through local real estate brokerages. If you are having difficulty finding a real estate network or course in your area, consider checking out an online investing forum. Finally, Chambers of Commerce can be excellent for finding the movers and shakers in a very local area. There may be a fee to join, but adding the right person to your network quickly becomes invaluable.

Know Where You Want To Be—Educated research and digging can uncover diamonds in the rough

Rookie investors can easily make the mistake of limiting their property for sale search close to where they live. However, better rental areas might be located a little further away. New investors may think it’s necessary to live close to their properties in case tenants call about repairs or other issues. However, with proper preparation, the home will be in good shape before your tenants move in, and those repair calls from tenants should be few early on.

Professional Experience—Find an investment expert

Although the education is out there so anyone can learn to become successful real estate investors, not all Realtors are experienced, savvy and confident when it comes to helping investors get started or even to keep moving. To ensure you are partnering with someone who understands the real estate investment industry, make sure the chosen Realtor has a recent history of sold investment properties (the more, the merrier), like foreclosures, and also understands concepts such as debt service, return on investment (ROI), and net operating income (NOI). These are the kind of Realtors that will be understanding and mindful of your goals, and may even help you to adjust your path to reach them more quickly!

Bank Or Broker—Find someone reputable and knowledgeable

If you are planning to finance capital for your investments, Realtors may be able to introduce you to someone—or you can ask other investors for their expert recommendations. Even if you have to start cold, this is a search that might be beneficial prior to your future portfolio. If you are planning to pay upfront with cash, keep in mind, you will need to prove the liquidity of the funds, and that they are in your possession by submitting a recent bank or brokerage statement when you make an offer. Experienced mortgage brokers and bankers are invaluable partners to make and keep.

Look All Around—Make a list of all possible listing resources and keep up with them

New investors might think it is only possible to purchase homes through the widely known Multiple Listing Service (MLS), or even by knocking on doors in neighborhoods with For Sale signs. Consider your next investment opportunity property might be found on other various sites, like Auction.com or Craigslist.com. It is possible you might be able to find much better deals on these sites, and sometimes easier for buyers to make purchases outside their local area. Casting a wide, wide net will always work out in your favor if you stay diligent, vigilant and organized.

How Does It Measure Up—Identify the rate of return to determine a good deal

An old rule of thumb in real estate that still rings true today says that if a rental investment property yields one percent of the sales price per month, it is a good deal. Utilize an investment property calculator for number crunching prior to buying property. For example, if the purchase price of the investment property is $100,000, you should expect $1,000 per month in rent, or about 12 percent annually. However, in some areas of the US today, where home values have declined, investors might be able to net returns greater than one percent per month.

As you can see from the tips listed above, real estate investing does not have to be difficult or intimidating. The best philosophy behind how to invest in real estate is to maximize return while minimizing risks. When investing is done correctly, real estate is one of the safest and best long-term wealth-building tools available. As with anything that is worth your time and energy, the harder you work towards and the amount of effort you put into your real estate investment business, the greater your ultimate reward will become over time.

However, you may still not want to go it alone. That’s pretty smart of you, because here at Lofty, we feel pretty good about our ability to grow your investment portfolio for you. Whether you want a consultant to guide your decision-making and assist your education, or someone to work in your interests while you spend your time in other ways, Lofty wants to see you succeed and we have the means necessary. Talk to us today and see how we can help you to live the life you deserve.

Speak with one of our experts to find out how we can supercharge your investment strategy.

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