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Bora Yalcin
  • Rental Property Investor
  • Chicago, IL
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Guidance for What’s Next

Bora Yalcin
  • Rental Property Investor
  • Chicago, IL
Posted Oct 4 2017, 10:46

Hi everyone,

I recently bought my first rental property (closed on it about 2 months ago) and the rehab is coming to an end. After researching the rental prices in the neighborhood and consulting with a local agent (same agent that sold me the house) we are expecting to get between $1,200 and $1,400 per month for the property. 

Here are the details on the deal:

Purchase price: $26,000

Rehab cost: $22,000

ARV: $80,000

I bought the home as a foreclosure, a 2br 1ba 1,200 sq. ft single family with one car detached garage in a C level neighborhood (I converted it to a 3br, as there was a closed porch that we turned into a bedroom). I purchased the home cash, and paid for the rehab cash...so there is no debt on the house at this point. The property is in Park Forest, IL, which is a South suburb of Chicago (about 1 hour from the downtown area of Chicago).

I’m looking for guidance when it comes to the next step on my path to becoming a full time real estate investor.

I’m working with my wife and brother on these projects, and we’re saving the money as a team. We can put aside $15,000 to $20,000 every month to invest in real estate. So, more or less, we can purchase and rehab a similar home every 3-4 months using all cash and not taking on any debt. This makes for great cash flow, but it’s a slower process.

I want to stay in this market, since I have a great relationship with my contractor and relator who work in the area. The value add homes are not expensive enough to qualify for conventional financing from banks, so that option is out. I have looked into hard money lending, as well as deferred mortgages to pull out the purchase price as cash. I have also thought about using a HELOC which would be for $80,000 to fund my next project(s).

My original goal was to purchase three properties in total over time and then pull the equity from them at the same time, so I can work on larger multi-family deals with the cash. But, after spending extensive time on the blog I now feel like I should be leveraging this asset and other options in order to accumulate more doors at a quicker pace.

What would you do?

-Keep saving the cash and purchase rental properties without any debt. Monthly cash flow after taxes, insurance, vacancy, and repairs will be around $600 (closer to $850 if no vacancy or repairs) at a $1,250 monthly rental rate.

-Leverage the first rental property right away using a deferred mortgage to purchase a second, similar, property.

-Find a deal and attain a hard money loan to finance the next property (buy and hold property) then use a refinance deal to pay the lender as soon as possible.

-HELOC on my primary residence of $80,000 to fund the next few deals and use financing after they rented to pay off the debt acquired by using this method.

Background

I am 28 years old, my wife is 26, and my brother is 24...so, we have time on our side. We all work commission based jobs, but have been with the same company doing the same work for four years now, so we can predict our income every month and be quite spot on. All three of us dislike what we do, and want to be in real estate full time sooner rather than later.

Any advice or guidance will be greatly appreciated! I know this was a long post, so thank you for taking the time to read it and provide me with feedback.

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