Chicago Real Estate Forum
Market News & Data
General Info
Real Estate Strategies

Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal



Real Estate Classifieds
Reviews & Feedback
Updated over 8 years ago on . Most recent reply

Chicago BRRRR
I have been doing some research on BRRRR (Buy, Rehab, Rent, ReFi, Repeat) and looking to speak with any experienced investors who use the BRRRR method in Chicago. I am mostly focused on the north side of the city. Also looking to connect with any hard money lenders/agents/wholesalers willing to work with a relatively new investor.
Any advice/help is always appreciated
Most Popular Reply

Sonny, from your example here is how I see the process working for you.
Purchase house $220K
20% down $44K
Rehab $90K
Payment on $176 for 30 yrs @ 5% = $945
(Add in your taxes and insurance, plus other holding costs like utilities or HOA fees)
For this example lets say your total holding costs are $1500/mth and your rehab and seasoning time is 6 months
6 x $1500 = $9000
Total investment = $90k + $44K + $9K = $143K
Refi and get a new loan at the new appraised value of $450K, ($450K x .75 = New loan $337,500) that pays off your old loan of $176K leaving you with $161,500.
So you get back all of your inital investment $161,500 - $143K = $18,500 profit.
Now you new loan payment would be about (30 yr at 5% on $337,500) $1812, plus taxes, insurance, etc.
Hopefully you can now rent the property for enough to cashflow ($2200/mth +) and you have a nice stabilized rental property that you have no money invested in (in fact you have already taken $18,500 in profit out of it). Essentially, you got paid to do all this and own a property with 25% equity (loan to value of 75%).
You can now take your original investment of $44K + your profit of $18,500 and go buy another property and do it all over again.
If you can pull this off it would a home run!!
If you add a hard money loan in for the rehab the cost would go up dramatically
$90K @10% interest only makes a payment of $700 + 3 points (3% x $176K) = $5280 (typical hard money terms)
So total hard money costs would be 700 x 6 + 5280 = $9480
This approach would eat up some of your profit but and add some risk but the numbers still work.
Sounds like a good deal to me. Just work hard to hit those numbers!