New Potential RE Investor![Calc Review] Help me analyze this deal

OP

Member since 2022 · 5 posts · 2 votes

Thanks for the feedback @Jonathan Klemm ! So as a landlord, all utility expenses (typically) would be a pass thru to tenants, except water, which is $200/mo - is that value assuming about $50/unit, or is there a way I can identify a value to apply to all deals I run through the BRRRR tool? or is it just a blanket $200 i should be adding in.

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Jonathan KlemmBusiness Member

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Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes

Hey @Dennis Kepcha - Yes, typically in Chicago all utilities excluding water are paid by the tenants. I think I would assume somewhere between $85-105/per unit for water costs per month - which could be more or less depending on your tenant's usage and the number of plumbing fixtures.

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Tim Herman

Member since 2018 · 2k+ posts · 1k+ votes

@Dennis Kepcha Are you using cash for your rehab. That is the calculation you put in the calculator. No PMI listed on low down payment. Once you refinance you will have to bring another 67k to the closing table to pay off the first mortgage. Unlikely you will only pay 6% management. With rent up fees it will be more like 10-12%. Can't tell you if your repair and capex budgets are accurate. Percentages are okay for a rough estimate but a comprehensive budget would give more accurate numbers. You might want to up your property tax estimate. Cook county average is 2.09%. 625k*.0209=$13063.

John Warren

Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes

@Dennis Kepcha if you are thinking of doing a deal where you have a GC do all the work like a 203k, then you will need to budget way, way more for the renovation. I don't know that I can turn four units with my guys for 15k per unit on the north side if you are doing everything (in unit laundry, dishwasher, new kitchens and baths, paint, floors, trim package). If you use a GC, this will easily double since they have to float the money to pay the subs, fill out a mountain of paperwork and also have some profit in there.

Crystal SmithPro Member

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Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes

Quote from @Dennis Kepcha:

Hey BP Community!

So quick background, I'm a commercial GC, in the industry for about 10+ years now, so I understand the industry from a larger scale, not much overlap into small residential, but have been looking to get into RE investing to generate some long term wealth via the BRRRR method, get a little cashflow in the meantime, start relatively small, and scale right into a kush, early retirement. Because I'm sure it's just that easy..

But really - I've been analyzing several deals with the BP BRRRR calc tool focused in the chicago metropo market, not really burbs, and could use a little help. I don't know if I've just been ultra conservative, maybe adding expenses where not needed, (maybe missing some??..) but have basically found nothing worthwhile from Redfin, Trulia etc..

I came across the property in the report below, but eased up on a few of the expenses and was a little more liberal. I finally found a potentially good cashflowing deal, but want a second, third, fourth or as many opinions as I can get. Where am I heavy. Where am I light..

This property is in Avondale, figured I could get close to $40k down from asking price, would live in the property so assumed I may be able to get a 203k loan. I have a couple resources for private money as well, but calculated it without considering a cash deal/structure with private money - I dont see the value in that just yet, but may end up having to.

Any feedback would help. Willing to connect further with anyone looking to dump their knowledge and wisdom.

thanks BP!

View report

*This link comes directly from our calculators, based on information input by the member who posted.

My feedback: You're more than likely to have a budget of $100K or more for the renovation.

You're about 6K off on the Purchase closing costs. Use the First American Title Cost Calculator: https://facc.firstam.com/?SSID... and depending on what time of year you close you may be $16K off. The taxes on this property are almost $8K. Real Estate Taxes are prorated at closing and your lender may want to escrow your taxes upfront.

The refinance number of $440K doesn't make any sense. If you originally financed $507K at acquisition are you intending on putting in another $67K of your own cash and then refinancing $440K?

Page 2 of your worksheet is showing initial equity of $117375. Be careful because that number is wrong. With a purchase price of $525K; $18375 downpayment & 60K renovation and $625K ARV the initial equity will be $58375. ($625K ARV minus $525K Purchase minus $18375 downpayment minus $60K renovation= $58375). Considering that you're light on the renovation which is probably closer to $100K the equity is essentially your downpayment. The BP calculators are a great thing but.....

312-681-7487

OP

Member since 2022 · 5 posts · 2 votes

Quote from @Tim Herman:

@Dennis Kepcha Are you using cash for your rehab. That is the calculation you put in the calculator. No PMI listed on low down payment. Once you refinance you will have to bring another 67k to the closing table to pay off the first mortgage. Unlikely you will only pay 6% management. With rent up fees it will be more like 10-12%. Can't tell you if your repair and capex budgets are accurate. Percentages are okay for a rough estimate but a comprehensive budget would give more accurate numbers. You might want to up your property tax estimate. Cook county average is 2.09%. 625k*.0209=$13063.

Thanks @Tim Herman - I would be owner/occupying a unit and would manage property myself so I actually took that cost out. Thx for that catch on tax, didnt consider ARV assessment value.

The refinance part is where I get tripped up - estimating an accurate ARV is where I would struggle, the calculator pointed out lenders would typically lend 70% of ARV, so that was 70% of the ARV. I upped to 110k rehab costs, and an assumed $750k ARV with that amount of rehab. The issue Im seeing with the 203k loan that I would roll my rehab costs into, and the refi only at 70% of ARV, I wouldnt have enough to cover the 203k, so i think my refinance timing is off, i would have to recoup with rent for a longer period.. struggling to find a scalable approach that has a relatively quick turnaround here!

OP

Member since 2022 · 5 posts · 2 votes

Quote from @John Warren:

@Dennis Kepcha if you are thinking of doing a deal where you have a GC do all the work like a 203k, then you will need to budget way, way more for the renovation. I don't know that I can turn four units with my guys for 15k per unit on the north side if you are doing everything (in unit laundry, dishwasher, new kitchens and baths, paint, floors, trim package). If you use a GC, this will easily double since they have to float the money to pay the subs, fill out a mountain of paperwork and also have some profit in there.

Thanks @John Warren - I upped the budget to 110k and rolled it into my 'purchase price' to represent the 203k loan total $635,000 (assumed 525k purchase + 110k rehab). I am a commercial GC and would be interested in understanding more about this process - to consider running it through the company, or if it makes more sense to leave it out and outsource. I would hope to apply my relationships with subs to shortlist subs to a potential GC with hopes of driving costs & leverage down through the process, but I'm curious as to the hoops that a 203k loan would make the investor or the GC run through.

OP

Member since 2022 · 5 posts · 2 votes