Updated
Scenario assumptions
| Location | Bridgeport, Chicago, Illinois |
|---|---|
| Property type | Illustrative Bridgeport brick two-flat |
| Loan type | Modeled hard money bridge → DSCR refinance |
| Loan amount | $326,700 hypothetical request (90% LTC on purchase plus rehab) |
What this Bridgeport example tests
This is an illustrative underwriting scenario, not a verified funded transaction. All prices, financing terms, rents, costs, and timing below are modeling assumptions. No borrower testimonial, actual closing date, or property address is represented. The purpose is to test whether a two-flat renovation can move from short-term hard money into rental financing without an unexpected cash requirement.
The scenario assumes a $268,000 acquisition, a $95,000 renovation budget, and a possible $385,000 value after renovation. Those figures leave little room between project cost and value. The crucial question is how much permanent debt the property can support after the bridge has financed both the purchase and rehab.
Origination limit: The hypothetical $326,700 request is 84.86% of the $385,000 assumed after-repair value. Jaken Finance Group’s published leverage policy sizes financing to the lower of eligible LTC and 75% of value, which caps this example at $288,750 before other conditions. The larger bridge balance below is retained to demonstrate an adverse payoff scenario; it is not available Jaken Finance Group financing on these inputs. An eligible lower bridge would require a different acquisition equity and carry calculation.
Start with the Chicago hard money lending guide for program information and the Chicago DSCR guide for rental financing. The rates and leverage below are calculation inputs, not current offers.
Acquisition and renovation sources and uses
| Project item | Assumed amount |
|---|---|
| Purchase price | $268,000 |
| Renovation budget | $95,000 |
| Purchase plus renovation | $363,000 |
| Total bridge commitment: 90% × $363,000 | $326,700 |
| Rehab funds held for later draws | $95,000 |
| Bridge advance toward purchase | $231,700 |
| Investor acquisition equity | $36,300 |
Here, LTC means loan-to-cost on purchase plus renovation only. Closing costs, interest, and carrying costs are outside that denominator. The rehab reserve is part of the $326,700 commitment; adding it again would overstate total financing. Reserving the full rehab budget also means the acquisition advance is less than 90% of the purchase price.
The hypothetical loan has a 12-month term. This example budgets eight months through renovation and refinance. A term sheet would need to confirm the draw conditions, interest basis, extension options, and eligibility of each budget item.
A scope that can be priced before an offer
| Renovation allowance | Amount |
|---|---|
| Lower-unit kitchen, bath, and flooring | $38,500 |
| Electrical and plumbing work | $22,000 |
| Basement sump and waterproofing | $14,500 |
| Tuckpointing and rear porch work | $12,000 |
| Professional fees, permits, and contingency | $8,000 |
| Total | $95,000 |
A contractor must replace these allowances with an address-specific scope. Inspect moisture conditions, masonry, shared systems, and access to both units before deciding which work is cosmetic. The contingency is already inside the $95,000 budget and is assumed fully used for this model. Unexpected work above that amount requires additional capital.
The City of Chicago building records portal is a starting point for permit and inspection history. Public records do not establish a property’s present condition. Confirm the actual permitted use, renovation requirements, existing leases, and tenant obligations with the relevant professionals before relying on a two-unit rent roll. This example makes no legal determination about a property’s tenancy or ordinance coverage.
Cash required during the eight-month bridge
Interest is conservatively calculated on the full $326,700 commitment for all eight months at an assumed 10.25% annual rate: $326,700 × 10.25% × 8 ÷ 12 = $22,324.50. A loan that charges only on disbursed principal would produce a different result. Interest is paid from investor cash, not added to the payoff balance.
| Cash use | Assumed amount |
|---|---|
| Acquisition equity | $36,300.00 |
| Origination allowance: 2% of commitment | $6,534.00 |
| Purchase closing and draw-fee allowance | $5,500.00 |
| Eight months of bridge interest | $22,324.50 |
| Eight months of taxes: $620/month | $4,960.00 |
| Eight months of insurance: $155/month | $1,240.00 |
| Eight months of utilities and upkeep: $150/month | $1,200.00 |
| Investor cash used before refinance | $78,058.50 |
The $48,334 acquisition equity, origination, and closing subtotal is not the full liquidity requirement. Interest and property bills continue during construction. Temporary contractor payments before reimbursement can require additional working cash. The table assumes no rental income during the bridge and no unused rehab funds. Lender-required reserves and unexpected repairs would be additional; refundable reserves are not treated as spent capital here.
Refinance proceeds and the payoff gap
| Refinance calculation | Amount |
|---|---|
| Assumed completed value | $385,000 |
| Modeled loan at 75% LTV | $288,750 |
| Fully drawn bridge principal to repay | ($326,700) |
| Cash shortfall before refinance costs | ($37,950) |
| Assumed refinance closing costs | ($6,000) |
| Additional investor cash needed | $43,950 |
Even if the refinance were approved at this amount, it would not return acquisition or renovation equity. The investor would have contributed $122,008.50 in total: $78,058.50 before refinance plus $43,950 at refinance. That is capital used and still unrecovered under these assumptions, not a tax-basis calculation. No accrued payoff interest, prepayment charge, or lender reserve is included beyond the stated allowances.
Rental coverage is a second constraint
Assume a fully amortizing 30-year refinance at 8.35%. Principal and interest on $288,750 are approximately $2,189.62 per month. Add $620 of taxes and $155 of insurance, with no association dues assumed, and monthly PITIA is $2,964.62. Rent of $2,650 divided by that payment gives approximately 0.89 coverage.
This example defines coverage as gross rent divided by principal, interest, taxes, insurance, and association dues. Lenders may apply other qualification adjustments. A 75% LTV calculation alone does not establish refinance eligibility. At a hypothetical 1.15 minimum coverage target, the same rent, rate, taxes, and insurance support only about $201,679 of principal, before other constraints.
The property also runs approximately $315 short each month before vacancy, maintenance, or management. A separate 15% rent allowance for those operating costs increases the modeled deficit to about $712 monthly. Loan qualification and investment cash flow are different calculations; neither supports a claim that this scenario successfully recycles capital.
What would need to change
A lower acquisition basis, a different verified rent roll, more investor equity, or a different exit could change the result. Each needs its own support. A higher appraisal alone would not solve the rent shortfall at the assumed payment. Faster completion would reduce carry but would not eliminate the $37,950 principal gap at 75% LTV.
Use CookViewer to identify the parcel and property records, then obtain actual tax bills and an insurance quote. Replace the model’s value with comparable renovated sales and its rent with comparable leases. Do not carry over a seller’s tax expense or a neighborhood-wide rent estimate without checking the subject property.
Before increasing the renovation scope, request a written bridge estimate and a separately reviewed refinance scenario showing the anticipated payoff, costs, reserve requirements, valuation basis, and seasoning rules. Submit your Chicago scenario or use the DSCR calculator to vary the payment inputs.