Would you hack this home? 1st house hack and we want to succeed.

[Sinnard Michael Scott]

Hi Chicago BP peeps, this is my first post here so I’m still getting my bearings straight haha. Here’s our key question; is this a purchase and rehab you’d do or are we crazy for trying to take this on?

Im attempting to purchase a legal 2 unit building two blocks from the intersection of California and North Ave. for about $500Kusing a 203K loan with a 3.5% down payment and the seller is covering the closing costs. The building has an unfinished attic and a 3rd non-conforrming garden unit. To make the unit conforming, we’d have to dig 6 inches deep and also add a stairwell to the front, and to use the 203K loan, we have to bring the property up to code. In total we’d need to pay about $90K in cost simply to have the opportunity to create the 3rd unit (digging, front stairwell, meeting code). We’d incur about another $30K to actually furnish the 3rd unit. So, $120K rehab costs in total. We would also need to change zoning on the property so a 3rd unit is allowed. 

Potential mortgage is $5K and rents in the area are $2K on average so total monthly rent for 2 units is about $4K. The rent for a garden unit is roughly $1.3K. All in all, after we move out, total rent we would collect is about $5.3K with a $5K mortgage, this doesn’t include expenses like vacancies, etc.

Given all of the above, would you do this? I feel like we could get it all done, but is this even a good deal to begin with paying $500K for that area? We’re not even sure our rent estimate is accurate. Our goal is to house hack and live-in flip 1 property every 2 years and have the properties cash flow after we move out. Should we move on from this deal and find another? Should we try to negotiate the seller down?

Thanks so much for any help and advice for the newbie here. Really hoping to become a great member of the BP community since we’re so new to all of this!