The Deal Was Good. The Fit Was Bad. Here's Why I Advised a Pass.
By Kelly Boulton | Kell Sells FL | Investment Consulting
A good deal and the right deal are not the same thing.
That distinction is most of what I do. This is a Chicago SFR that penciled out cleanly, showed a real profit, and I still told my client to walk. Here is the full breakdown and the reasoning behind it.
The Property
Ellis Ave, Chicago, IL
Built 1913 | 986 sq ft
Complete gut rehab Listed at: $85,000
The photos say more than I need to. Walls stripped to studs. Plumbing exposed. Electrical gone. This is not a cosmetic flip or a light rehab. It is a full rebuild inside an existing shell that has been standing since 1913.
The Comps
I pulled five comparables within a tight radius to establish ARV:
Address | Status | Price | Notes |
9011 S Dauphin Ave | Active | $285,000 | 330 sq ft larger, built 1898 |
9101 S Dobson Ave | Sold July 2024 | $250,000 | Similar lot, 234 sq ft larger, built 1956 |
450 E 89th Place | Sold June 2024 | $339,000 | 3 bed / 1 bath, one fewer bath |
822 E 87th Place | Sold Feb 2024 | $320,000 | 3 bed / 1 bath, one fewer bath |
600 E 88th St | Sold March 2024 | $262,000 | Built 1963 |
Two-bath comps were selling at $250K to $285K. The one-bath comps ranged $262K to $339K, but those are not apples to apples. Given the age, size, and scope of work, I landed at a conservative ARV of $265,000. That is the floor, not the ceiling, and that is intentional. I run ARV conservatively because the market does not owe you top dollar just because the rehab went well.
The Rehab Budget
I run two numbers: what the line items say, and what I actually recommend budgeting.
That 10% on top of raw costs is not fluff. A 1913 gut job will find things. Budget for them before they find you.
The Numbers
Recommended offer: $65,000 Max allowable at 75% ARV: $125,985
There was room to go higher. I recommended lower because of the scope risk.
Purchase closing costs (4%): $2,600 Total all-in: $140,364
One note on the profit figure below: the model runs the sale price at $250,000, not the full $265,000 ARV. That is another layer of conservatism built into the analysis. I would rather show a client what they make at a discount to ARV and have them be pleasantly surprised than promise the ceiling and miss it.
Cash profit (at $250K sale): $84,778 ROI: 59% Estimated project duration: 4 months
Property taxes were $933 per year, which is genuinely low for Chicago. Total holding costs over four months came in under $900. Those are real positives.
A 62% ROI on a 4-month project is a REALLY strong deal.
So Why Did I Advise a Pass?
My client's profile:
Timeline: flip within 4 to 6 months
Experience: zero prior full-gut rehabs
Capital: adequate but not deep
A 1913 Chicago shell with every system demolished is not where you learn to manage a rehab. It is where you find out what you did not know, usually at the worst possible time. Take it from me when I say you can look back after the project and marvel at how much you learned, but there should be a balance of learning and suffering.
First-time gut rehabbers consistently underestimate four things: scope creep, contractor scheduling, Chicago permit timelines, and the cascade of surprises inside century-old structures. Any one of those extends your hold. Chicago permitting alone has added months to projects run by experienced teams. Add a contractor who gets behind, one structural issue, or one sub who walks, and the 4-month timeline becomes 7 to 9.
What does that do to the deal?
At 8 months with cost overruns, that 62% ROI starts looking closer to 35% to 40%. That is still not a disaster, but it is a materially different outcome on a project that cost significant stress and locked up capital that could have gone toward a better-fit deal.
The deal was good. The fit was bad. Those are two separate problems, and conflating them is how investors get hurt on properties that looked great on paper.
Recommendation
Pass. Find a project with one or two system replacements and a realistic scope. Get one rehab done. Then come back to this class of deal in 12 to 18 months with real experience and a contractor relationship already in place.
Chicago's south side has inventory. This deal exists again. In fact, the right deal did exist for this investor. Just down the road in the same neighborhood. Patience here is not leaving money on the table. It is protecting capital until you are positioned to actually execute.
What This Case Study Is Really About
Deal analysis is not just running numbers. It is matching the deal to the investor.
A transactional investor looks at this deal and sees a 62% ROI. A strategic investor looks at the same deal and asks a different set of questions. Is this the right project for where I am right now? Do I have the team, the systems, and the experience to actually execute it? That is not pessimism. That is strategy.
Curiosity works the same way. Not just curiosity about the numbers, but curiosity about yourself as an investor. What are your actual skill gaps? What does your timeline really look like? Where does this deal fit inside a bigger plan? And then you have to answer those questions honestly.
The investors who get hurt are not always the ones who ran bad numbers. They are the ones who stopped asking questions too soon.
If you want someone to run your numbers, pressure-test your offers, and be straight with you about fit, that is what I do.
Kelly Boulton is a licensed Florida Realtor with Worth Clark Realty and founder of Kell Sells FL, an investment consulting practice based in Central Florida. She works with investors on deal analysis, creative finance, and acquisition strategy.
Kelly@kellconsults.com | (407) 906-8348
