Chicago Realtor: Investor Client Purchase Breakdown

[Michael J Scanlon]

I have a unique breakdown-slightly different to my normal breakdown: 

Single family home

Asking Price: $238,000

Negotiated to $227,000 cash purchase. Tenant already lined up for the investor. Investor happens to be a lender and the tenant was his assistant who had low credit but provable income because she worked for the lender and he paid her so I suggested we set up a lease option for her of 2 years to give her time to repair her credit and my investor agreed. 

New Kitchen: $9,800

Total investment: $236,800

Closing costs: $0 (went through his own company) 

6 months of rental income at $2000/month = $12,000

Taxes for 6 months: $2476 Insurance: $500

Tenant paid all utilities

Total investment after 6 months: ($236800+$2976-$12000)= $227,776

Refinance cost: $0 (own company)

Refinance appraisal w/new kitchen and tenants having torn up carpet exposing hardwood floors: $259,000

80% LTV = $207,200 loan

Total left in property after refinance: $20,576

1.5 years of renting at $2000/month with PITI of $1426 = $574 on top of mortgage per month-expenses

Actual expenses: Vacancy: $0; Utilities: Tenant; Capex: $0; Expenses: $426.25 (oven igniter, lightbulbs, hvac servicing) Management: $0

$574x18months= $10,332-426.25

Total of own money left in house by time of option purchase: (20576-9905.75)=$10670.25

Remaining mortgage after 18 months at time of lease option execution: $200839

Sale Price to tenant: $270,000 done as a direct sale between my investor and his tenant

Net proceeds to seller: $264,049.47 - $200,839 = 63210.47

Profit of sale - total remaining initial funds = $63,210.47 - $10,670.25 = $52,540.22

2 Year profit on deal: $52,540.22 (taxed as a rental, not a flip) or $26,270.11/year.