Need some advice and opinions on the Chicago Multifamily Deal

[Nnabuenyi Anigbogu]

Hello everyone,

I wanted to get a little opinion on a deal that i could be closing on next month. It is a owner occupied multifamily but i will be moving out after a year and converting it to a full investment property (buying another one).

I have tried to be VERY conservative on the analysis (expenses are 50% of rent). The current renters are all friends of the previous owners so they are all paying 200-500 below market rents (i used what they are currently paying for the analysis though). I used a 10% vacancy rate although the area i am in (albany Park chicago) has about a 4% vacancy rates based on research. I used a 10% reserve fund which really eats into cash flow (and a 1K misc fund on top). I dont think i need to have all of that but i decided to take that approach.

Everything else is overestimated except for insurance (actual) and Taxes (actual). From what i can see with the extremely conservative approach i will still have positive cash flow when i move out.

There is plenty of upside if i get the rents to market price (which i plan to do over then next year or two). I can actually have cash flow while living in the 1/1 or 2/1 with market rents. Also i did not include potential parking income (5 spaces and parking is tight in the area so i can charge $50 a month).

Thank you for your input

Nnabuenyi

[Troy Fisher]

Are those the taxes that the owner is currently paying, or the taxes on your purchase? Even with all the units rented out, you are close to 1%! That's seems pretty slim on what is probably an older property. Have you checked the life on the big things, like the roof or boiler? Knowing when those occur are going to help you plan your deserve fund.

what I don't like is that you don't have move out, move in costs, or marketing costs. Also don't make the Brandon Turner® Beginner Mistake™ . Include a property management fee. Because if it doesn't support those costs, when you add additional units or grow tired of being so active with your property you know you are purchasing something that supports that decision or option.