BRRRR Accounting for tax increases after rehab

[Michael Downs]

I'm new to REI. I jumped into my first BRRR deal and closed a couple months ago. Rehab is pretty much on schedule and on budget but as I'm getting to the rental phase I'm getting a little nervous about my cash flow after rehab.

I bought a distressed property in the Chicago suburbs for $135k and am on budget for $40k rehab with ARV of $230-$250. Planning on taking $175k cash out on refi and the numbers will work at rent of $2200/mo estimating $150/mo cash flow.

My concern is that taxes in this town are ridiculous. It’s an 1100 sqft 2/1 that will be a 3/2 after rehab. Taxes before rehab are $6500 a year. If the rehab causes the taxes to increase dramatically that could deplete my cash flow significantly.

To my question: Does anyone have a way that they evaluate for tax increases after rehab to plan ahead for the increase when its re-evaluated? I’m sure it’s cause it’s my first deal that I’m getting a little nervous but I’m wondering if I may just be better flipping although that doesn’t fit into my financial planning as well.

Any advice would be appreciated

Mike