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PJ Kolnik
  • Chicago, IL
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Logan Square / Hermosa - 3 Flat Buy and Hold Under Contract

PJ Kolnik
  • Chicago, IL
Posted Dec 2 2017, 06:08

Hi Bigger Pockets Members in Chicago,

Its been a long two months but I'm cautiously optimistic that I just locked down a 3 flat over in Logan Square Hermosa with a FHA 3.5% loan.

FHA can be really tough to secure properties in the area since there is so much on the appraisal side that is just out of your control, which is probably an overall good development since 2008. The self sufficiency test (75% of rents to cover the PITI) was the toughest since the rents are still all over the board in this part of Logan Square, but the comps finally won out and we were able to make the self sufficiency work out. Big props to Zack Redden with Berdan Real Estate and Aaron Gosser, my lender, for working tirelessly to research comps in the area.

This is my first deal and I'm excited to get started on some updates and also a bit in that - "what have I just done?" phase.

What I was hoping to find out from Bigger Pockets was some advice on updating the units to maximize the rents. I am pretty new at rehab / remodels and I am trying to build the overall budget and not overspend on updates which I think most new people do.

Any good contractors or overall recommendations are welcome!

Here's the deal:

https://www.redfin.com/IL/Chicago/2441-N-Avers-Ave...

Overall cost: 506,000

3.5% down+closing costs: Approximately $26,000

Monthly Payment (PITI): $3760/month

Cash on Cash Return: 23.5%

Estimated total updates: $55,000

Estimated Cash flow: $4200 / month

Estimated CAP Rate: 6.8%

Rents:

Unit G (2 bd / 1 ba): Current 900 - Raise to 1100

- updates include: 

-Adding in-unit washer dryer

-update kitchen, pretty much need a new kitchen and new appliances.

-update bathroom

- paint

- add third bedroom after moving the water heaters and electrical to the other side of the basement in the back.

- estimated budget: $25,000

Unit 1 (2 bd / 1 ba): Currently unoccupied - Rent for 1400. Because this is FHA, this will be the one that my wife and I will live in. I plan on projecting this rent and pay this into the overall cashflow of the building as if I am renting from myself.

- updates include:

- replace a broken window

- add in-unit washer dryer

- remodel kitchen

- update bathroom

- estimated budget: $20,000

Unit 2 (3 bd/ 1 ba): Currently Owner Occupied - Rent for 1700

- updates include:

- update bathroom

- re paint to match the unit below - unifying paint colors across all units seems to be a good idea

- new door and closet in the third bedroom, currently configured as more of an open office

-estimated budget: $10,000

I

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