This SFH Chicago rehab project for buy and hold turned into a flip

[Dooreuhn Cee]

I've been pretty quiet lately as I have been busy trying to turn the corner to a flip market in Chicago. My main goal is SFH cash flow, but I am also using flips to capitalize buy and holds. Portfolio rents will then fund the rehab.

This particular project started in February as a rental.  As the project developed, I became concerned that it was overbuilt for tenants.  Fortunately, the south side neighborhood is very nice with many homeowners, and thus will support a sale.

For the rental, we are looking at 1,450/mo or a conservative net of 1k/mo.  But that monthly rent is only 1.6% of the 90k project price, whereas we have typically been hitting 2-2.5% in C areas of the south side with buy and hold SFHs.  

On the other hand, the flip net is about 40k from a 90k expenditure (assuming 150k sale, 130k net).  The break even point for rental income to match the flip income is thus 3 years and 4 months (i.e., 40 months and ignoring appreciation).   Past times I was looking at flipping at a 25k net which makes a break even point of only 2 years and 6 months, so I figured that rental made more sense.  Here, the compelling analysis is that by taking the 130k cleared on a sale to a more standard rehab (i.e., not as fancy) which will allow me to hit 2%, the yield is 2,600/mo (2% of 130k) or an 80% increase in cash flow.  Icing on the cake is double appreciation.  No brainer!  (Of course I have to acquire, rehab and manage 2 more houses.)

Below are side-by-side before and after photos illustrating why this buy and hold turned into a flip...