Advice needed for deal in chicago

[Nnabuenyi Anigbogu]

Hello again everyone,

I am currently considering a deal in Chicago using the Buy, Rehab, Rent  and refinance strategy. I will be buying with hard money and refinancing into a conventional loan. Below is the high level view of the deal details.

Purchase price of the building is 260k and estimating rehab at 70k. I am using 11% interest and 4 points to factor the hard money loan. Refinance is being factored at 80% cash out and 5% long term interest rate. My goal is to be able to get all the hard money repaid from the refinance. My money can stay in if needed. So even if the ARV drops to 400K i can still refinance to pay off the hard money.

Also i included management to see its impact. I plan on managing this for at least the first 2 years till i get enough units (10+) to hire a property manager. So the number for the first two years will actually be better. And this is a long term hold in an A/B+ area with low vacancy and good chance of appreciation.

Please proceed to tear the deal apart. I want to see all that i missed or did not notice. 

Thank you

[John Casmon]

As @Crystal Smith and @Brie Schmidt mentioned, you should be careful on the HML and ensure your exit strategy is solid.

As far as the numbers, doesn't look like you accounted for all of the buying and holding costs (appraisal, inspection, closing costs, utilities, taxes) during the rehab and refi so make sure you account for those costs.

Given all the work you're putting in here, would you be satisfied with a 6.72% cap rate and $3k in cash flow? Can you buy something with equivalent returns in the area that won't need a full rehab? A flip profit of $59k is great (especially on a personal investment of 50k), but not sure if you can't find solid deals that mimic the buy & hold returns without needing as much rehab.