This was a $60k profit at these numbers even though he blew through an unexpected $40k extra.

That way, I can at least afford on my own to cover the mortgage payment if the property is vacant for an unexpectedly long time.

Will the rent cover all your costs (mortgage, taxes, insurance) plus extra for unexpected things (repairs, vacancies).You will probably get a lot of different answers on here because there are so many different types of investors.

If you are using hard money you need to budget for the points and fees as well as traditional third party closing fees.Repairs: The money it is going to take you to rehab the property plus an extra 10% of estimated repair costs to account for unexpected repairs.Holdings Costs: Here is where a lot of investors get tripped up.

That's right-that unexpected turn in leverage.

It was quite unexpected, but from what I’ve read, not unheard of in Chicago.

If you don't know these terms, look them up, it's the best way to learn.Know too that financial ratios do not always apply to real estate because real estate is not a liquid market like stocks, you also have unexpected and unknown carrying costs that don't apply to say stocks or bonds.

But what I thought they said is to figure out the cash flow and then divide it by two because history has tended to show that unexpected expenses (new water heater in yr 1, roof repair yr 2, etc) tend to eat up about half of your earned cash flow.  

This way, our interest rate is a tad bit higher, but the properties will still cash flow well and we had enough money left over to have a good sized emergency fund in place, in case of any big unexpected expenses.

I hope to start expanding to include multi family units in the new year and would be delighted to hear of any advice, meet potential investment partners and share stories with others with the same interest.