Deal Diary 1st BRRRR, 2nd house hack

[Tj Floros]

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Chicago.

Purchase price: $300,000
Cash invested: $150,000

Bridgeport, Chicago off market BRRRR and house hack!

What made you interested in investing in this type of deal?

My 2nd deal, but my 1st. BRRRR.

Off-market legal 3 unit in the Bridgeport neighborhood of Chicago, comprising of a brick 2 flat with (2) 3 bed 1 bath units, and rear frame coach house with 3 bed 2 bath.

How did you find this deal and how did you negotiate it?

This was off-market deal that a family member of mine owned.

How did you finance this deal?

I used the 5% home-style loan to fund the purchase and rehab and then refinanced into a conventional loan. Would have loved to refi into a FHA loan but the building could not pass the self-efficiency test due to high property taxes, which is very common here in Chicago. Purchase price $300k with an initial bank ARV of $640k Estimated rehab budget $260K with a $30K reserve fund with an estimated 7-month rehab timeline.

How did you add value to the deal?

Each unit needed all new plumbing, electrical, duct work and HVAC, 4 new bathrooms, 1 new kitchen, paint, finishes, flooring, etc.
The coach house was a complete gut down to the studs, while the 2 front brick building units I was able to save both kitchens and reuse them.

What was the outcome?

Actual numbers: Rehab budget $320k, actual timeline of 11 months, mainly due to permitting and city issues. Final ARV $893k.

Cash-out refi i was able to pull just about 65% of my total cash invested (ie purchase price, holding cost, extra funding needed) while still cashing flowing $300 a month post-move-out with about $230k in equity.

Lessons learned? Challenges?

A ton! Especially when it comes to underwriting deals, holding cost, construction cost, permit issues, all in Chicago which can be a challenge all by itself.

I plan to refi again when rates drop further, but I think for my 2nd deal in my first 18 months and my first BRRRR in a high interest rate market, it was definitely a win in my beginners book

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

My lender and contractor who I'm happy to provide on request.

[Tj Floros]

Quote from @Jonathan Klemm:

What's up @Tj Floros!  Appreciate you sharing your Deal Diary!

Question for you - Why did you want to refinance into an FHA Loan? After you did the rehab?

ARV of $893k! Amazing!

What part of Chicago was this property in?

If I was able to refi into an FHA, I could have had a lower interest rate, higher cash out, and higher DTI limit, but the self sufficiency test is a killer here in Chicago. Over in the Bridgeport area,