I've been eyeing a property that has a ton of curb appeal but for a long list of reasons has sat unsold for a while (needs moderate renovation but is very unique - historic/size - and probably not for all spreadsheet buyers/investors). Long story short - I viewed it and would love to have it as a house hack, but also with a combination of amenities I'd love for myself as a live-in-home. It's a non-conventional hack and I'm trying to get a second opinion on my perspective:

- 925k purchase price - 3 legal units, 3 beds each

- Requires 20% down (FHA or portfolio programs fall short of cost)

- Requires 50k up front for reno to make livable for myself + maximize short term rents/resale

- Comps tell me the property could fetch ~$1.2M post-reno, which I'm factoring in as ARV

- Between purchase, closing and renovation, requires 255k in cash up front. I assume the renovations also reduce variability in the mechanicals/variable expenses.

- 5% for vacancy, maintenance, capEx, 5% for management fees (live in, handling myself)

So - on the low end:

Valuing rents at $6400 (with one of them being my live-in)

Monthly cash flow is -$215/mo fully baked ($6,400 income / $6,615 expenses)

5 year annualized return at 26%

Purchase cap 4.17%

CoC: -1%

50% rule: -$277

Assuming a 4% YoY increase in value, the sale profit after 2 years and avoiding Cap gains is $338k/52% return

On the high end:

Valuing rents at $7000 (with one of them being my live-in)

Monthly cash flow is $264

5 year return: 27%

Purchase cap 4.79%

CoC: 1.25%

50% rule: $72

Assuming a 4% YoY increase in value, the sale profit after 2 years and avoiding Cap gains is $350k/54% return

What I'm struggling with:

Is there a way to look at it qualitatively and quantitatively as a space "I'd really enjoy living in"? Should I be factoring in full management fees if I were I to move out / or factor them in as 0 while living inside?

Considering the $50k is to shore up mechanicals / condition, could I assume reduced variable expenses (lower than 5%?)

The property would not be "utilitarian" after renovation by any means, and actually represents a really nice space/neighborhood/very Airbnb-able location. If a unit like it were available for me, I'd happily pay $2500 a month towards rent, as an example. The reason on the less "objective" measurement here is that I have to work remotely from home, and want a space that feels "special", rather than just "numbers alone".

What I'm struggling with however, is that the only way to get into it is with a very sizable down payment. It also does require work to make it very desirable - but I'm not afraid of that either as I've got a few folks in the industry who would do it at a nominal discount.

The alternative could be a space like a single family for around 500k/20% down and then another 150k left over to do a true investment (but I can't do that in quick succession because only one of those can be a primary residence). So that becomes at least a year out.

What do you think? I know the numbers above are far from "savvy" investor grade, but represent trying to get into an already hot area while attempting to reduce cost of living.

Chicago, Illinois

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