Need advice - Comparison of 2 Duplexes, Dekalb, IL

[Len Roche]

Hi BP Community,

My wife and I are looking for buy and hold properties in DeKalb IL and the surrounding area. We are considering duplexes and are looking for both cash flow and equity buildup. We are also not opposed to doing rehab work so long as it is done profitably.

We have narrowed it down to two properties based on location, desirability, property type, cash flow, and price.

423 E Hillcrest Dr, DeKalb, Illinois 60115 (C in B/C neighborhood)

Listing

Property Photos

1505 Pebblewood Dr, Sycamore, Illinois 60178 (D/ C in B neighborhood)

Listing

Property Photos

Both are two unit duplexes with three bedrooms a side.

Both properties cash flow, but Hillcrest has less capital investment. On the flipside Pebblewood is a more desirable location and has the potential to be forced appreciated. It is a C- house in a B Neighborhood.

I have run the numbers on an attached spreadsheet. I used BP’s calculators and J. Scott’s Books to help make it. The spreadsheet has an economic analysis for both properties and a comparison of both with repair costs.

Economic Analysis Calculator

I created this spreadsheet because we wanted to understand where the numbers came from in the BP calculator. You’re welcome to use it for your own personal use, but be warned of any errors in the spreadsheet.

Disclaimer on the numbers used. Wherever possible I have tried to be conservative with my numbers. I do not intend on getting property management, but may need it down the road. Repair costs are +/- 50% estimates. I will need to bid out the work to get a better sense of the costs involved. My goal was to apply the same methodology to both properties to help with making a fair decision. I have been having a hard time getting ARVs on these properties so my estimates are could be way off.

This will be the first property we buy, so any help would be greatly appreciated in making this decision. Cassie and I are both leaning towards Pebblewood despite the added rehab costs and HOA fees because of forced appreciation and location.

How do you make these decisions?

Have we missed anything big?

What recommendations can you provide to estimate ARV for each property?

Which property would you select and why?

If you would invest in either of these properties, how would you do so (BRRRR, flip, buy and hold)?

Thank you for your time and advice.

Yours sincerely,

Len Roche

[Patrice Boenzi]

Hi @Len Roche! Good questions! It looks like you did your homework. A small bit about me before I give you my two cents. I am an investor and Realtor; was an investor first and then got my license (but that is another story). We were landlords for 8 years while our kids where finishing up high school, now we flip and buy and hold out of state. 

One of our children went to NIU and I have friends that live in Sycamore. 

A couple of more questions:

• Who is your rental target i.e. family, college students etc. 
• How close is the property to the college
• Are you willing to rent to college student (rent based on per room)?
• What is the rental history
• What is the rent rates between the two towns
• Are both properties fully rented currently
• Why did you include HOA fees?

Statements:

• Found one property on Hillcrest that closed in May for 168K (a duplex)
• 98.64 cash flow is not good - my opinion
• Personally, for us, it is all about the numbers - do I want to tie up X amount of dollars for a $98 monthly return? That margin is way too small for me
• Always include a property management fee in the numbers even if you are not using one because one day you may need to; you still want the numbers to work 
• I use 5% vac rate, 7% repair, 10% capital expenditures, 10% property management fees
• When I analyze properties my minimum is 10% CoC ROI - if it is not 10% then I see why... i.e. is it not managed properly, are the rents too low for the area etc
• Your inspection cost is way too high - it will run about 600 for inspection and radon test
• My mortgage guys gets me a loan for 20% down

I hope that helps a bit. If you need any other help, please don't hesitate to contact me! I love working with investors. Good Luck!