Chicago Realtor: Investor Client Purchase Breakdown

[Michael J Scanlon]

I wanted to help out and share a breakdown from a first time investor client of mine to show what can be done. 

3 Unit Purchase Price: $289,000. Seller Credit: $8670. Down payment: 5% or $14,450 (home possible loan.) 

Actual closing costs: $7940. Repair credit used as a price reduction: $2500 (updated 5% down $14,325). Closing date: June 1, 2020. First mortgage payment: August 1, 2020. 

Total rental income: $3500/month. 

$14325 - excess credit = $13595. $3500 rent credit at closing + $3500 deposit credit + 110% tax proration ($3001.90) = 10,001.90

Initial Earnest deposit: $5000. Cash to close: None; buyer credited $1436.90. 

Buyer put $3500 into security deposit account but received $3500 rent for July. 

Total out of pocket investment by time of first mortgage payment: $3563.1 

Monthly payment: $1951. Rental income: $3500. Reserves: 20%. Cash Flow: $849/month. 1 year reserve account: $8400

Total cash flow profit year 1: $10,188. Total investment: $3563.10. Cash on cash return: 286% 

Plus the buyer turned the basement into a legal 4th unit which should receiver $800/month when she moves out and increase cash flow to $1489 a month with monthly reserves of $860. Actual expenses are far less but buyer has been making upgrades. I would expect the property to now appraise at around $330,000 minimum with upside. All for $3563.10 plus some reinvesting into the property from the reserve account. 

[Michael J Scanlon]

@Jonathan Klemm

This was listed on the MLS and no fuss about the credits because we agreed on the net price and we were confident it would appraise. I think it was a great deal but the hidden value of knowing the basement could easily become a legal 4th unit made it a home run.