Chicago, IL · Member since 2015 · 72 posts · 12 votes
Hello all,
I'm looking to purchase my first personal BRRRR deal in Chicago and I'm a real estate agent. Here are the specifics:
Property Type: 2-flat sold via HUD. (First Floor: 2bd/1bath & Second Floor: 3bd/1bath)
Listing Price: $299,900 - very good/competitive price
Closing costs: $7200
Commission as "buyer's agent": $5800
Taxes: $4,582 with no exemptions for the moment
Repair Cost: $15K
Rental Income for 3bd/1bath: $1300-1500 (Chicago's rental market is skyrocketing)
Insurance: $3000/yr
Mortgage: $2000 including insurance/taxes
The basement can be finished and the rentable 3bd/1bath could duplex up into the massive unfinished attic. These are both expenses that I have not put together or factored in yet, however they're a possibility in the long run. What other things do I need to factor into my calculations at this point or how/which calculator do I use on BP to analyze this deal?
If the repair costs is estimated by HUD then you probably should consider having someone else do the estimate. We've found that HUD estimates tend to be low for repairs especially when considering what kind of quality you really want in the property.
You need to factor in any potential CAPEX, maintenance, common area utilities, water & potential reserves (Reserves are really there to cover CAPEX items)
What area is this 2 flat located? Insurance appears to be too high at $3000/yr. I believe you should be able to get good coverage for approximately $1000/yr on a 2 flat. Also, take into consideration utilities you will have to pay and routine maintenance costs too.
When using the Rental Calculator should I adjust my prices so that they reflect only one flow/unit of income and keep all my vacancy rates, cap ex, maintenance repairs, water, etc... all the same?
If the repair costs is estimated by HUD then you probably should consider having someone else do the estimate. We've found that HUD estimates tend to be low for repairs especially when considering what kind of quality you really want in the property.
You need to factor in any potential CAPEX, maintenance, common area utilities, water & potential reserves (Reserves are really there to cover CAPEX items)
When you use the calculator I would do both. Factor in the cash low from just one unit, and you will get your cost to live there. That number could/should be lower than your current cost of living. Secondly, run the numbers as if both units were rented. This is the big one, if it doesn't make sense then it'd be no deal