Closed today... and 203k rehab begins

[Eric La Pratt]

Almost 5 years ago my wife and I became landlords and we did it all on our own. No books, no blogs, no forums, no BP, no podcasts, no REIA's and certainly no team I would ever call on again to do it. Our agent was sympathetic to our newlywedness and went out of her way to make a lousy $1800 commission on a property far away from her territory. But it worked out and to this day, that was the best financial decision we have ever made by far. Since then, we moved back to Chicago, changed careers, had a kid and dealt with life in a small, one-bedroom apartment on the lake... all while being landlords on a great duplex in metro Detroit that we bought for very little.

Fastforward to 8 months ago when I stumbled across Bigger Pockets while searching for the answer I had to a question about that property. Little did I know that would be the catalyst to today: closing on a spectacular 4 flat in a class A neighborhood on Chicago's north side. I cannot remember a time in my recent past when I thought I would be able to lock in a deal close to what we closed on today. Thanks to BP - and I mean that wholeheartedly - I was able to learn and team up with a great group.

The takeaway really is that: Never in my life did I think I would be closing on a property that appraised for well over half a million dollars. I may have dreamt it, but I did not think it possible given the reality of my situation. We have a fair amount student loans, pay a massive amount to daycare, live in a tiny 1-bedroom apartment, drive a 9 year old civic and work low-level healthcare administrative jobs. But today, somehow, we did it. Actually, we freakin' nailed it! And this would not have been possible if it were not for BP and the team that came from it including @Brie Schmidtour fantastic agent! Even more so, none of this would be possible if it were not for my wife trusting me! We actually went under contract without her even seeing the property and this will be our home!

Here's where we are at today:

Price: $400k
Rehab: $185k
Down: 3.5%
HomePath Seller Credit: $12k
Down payment + closing costs: $18k + $6k to pay off *some* student loans
ARV: $655k (not including appliances or central AC condensers which will increase that)
NOI: $50k (including taxes, insurance, utilities, 3% vacancy, 5% maintenance, 5% CapEx, 7% management)
Debt Service: $33k/year
Cash Flow: $1300/month
COC ROI: 66%

Pay close attention to that COC ROI. That is way beyond my expectations. Even better, we scored a HELOC to leverage the equity we have in the metro-Detroit duplex to fund this entire deal. I am yet to spend a penny of my own money. 2 cherries on top: We should be in position to refinance and ditch PMI in 12 months, saving $375/month and will have our HELOC fully paid back in around 18 months (we will pay ourselves a drastically discounted rent to get us there).

Now on to construction...