What do you think of this deal?

[Jay Ash]

Hello,  

I found an 8 unit building on the South Side of Chicago.  I'm in San Diego for work but i'm from Chicago I will definitely need to get property management. The first months rent fee cuts into my cash flow for the year if I have to rent up 8 units every year.  

After doing the math, the property management guy makes more money on the deal than I do ($5213.04 for fees for the year @ 7% of rents collected on 8 units.  $6,206.00  for his first month rental fee for renting the units.  That is $11419.04 for the year to the property managment guy ). I'm upside down!

I've attached the analysis for your review.  My Deal

 

I'm getting the building for $208,000.00

I'm estimating $75,000.00 of repair  

** The down side is the gas. I have to pay for heat. I Called the Gas people and they said its about 850 a month for the year. They averaged the bill out. In the winter the bill is about $1000.00

The loan is from CIC Chicago (Check Them Out.  Seems like a good deal) 

-10 Year Term

-25 Year Amortization

-3 Year ARM, 2% adjustment period cap, 5% lifetime cap, adj based on 350 bps above comparable treasury rate

-Construction/Stabilization period interest Prime + 3

-No prepayment penalty

-4.75% current initial loan rate

-Required minimum DCR 1.25:1

Hit me up with your thoughts. 

Thanks 

[Mike B.]

Hi Jay, your rehab estimate is pretty low when looking at the building violations on this property. Have you gone through them with a contractor? If so, be certain that whoever you're talking to is licensed, insured and able to pull permits. You're not going to be able to rehab this one off the books. Also, consider that your permitted rehab time to be about 9 months, but calculated at a year because nothing happens as quick as you plan when dealing with the city.