First Time Home Buyer (One Bedroom Condo)

Chicago, Illinois
Buying & Selling Real Estate
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First Time Home Buyer (One Bedroom Condo)

Zakir Pasha
Member since 2022 · 3 posts · 1 vote

Hello!

Looking to get into my first investment property (will probably live in it a year or two beforehand):
3950 N Lake Shore Dr APT 1304, Chicago, IL 60613 | MLS #11344676 | Zillow

I'm worried that Chicago's taxes and HOA's will eventually outrun the cost of the mortgage (10% down, aiming for 110k price range).

Has anyone ever bought a one bedroom condo in Chicago to rent out? What was your experience?

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Jonathan KlemmBusiness Member
Moderator
Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
4y

@Zakir Pasha - The odds of taxing and HOA dues out running your mortgage seems unlikely when you are locked into a 30 year fixed. If you have a strong concern I'd be checking to see what the association has in reserves. Seems like a great little place for a decent price. If are living in it I am sure @Andy Smith or @Michael Facchini can get you a 5% down lown....

If you have an option to get a 2 unit instead of a condo that'd probably be the better bet for faster growth of your real estate portfolio.

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  • Jonn Vidal
    Bel Air, CA · Member since 2017 · 165 posts · 47 votes
    4y

    What's the monthly HOA?

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    4y

    @Zakir Pasha - The odds of taxing and HOA dues out running your mortgage seems unlikely when you are locked into a 30 year fixed. If you have a strong concern I'd be checking to see what the association has in reserves. Seems like a great little place for a decent price. If are living in it I am sure @Andy Smith or @Michael Facchini can get you a 5% down lown....

    If you have an option to get a 2 unit instead of a condo that'd probably be the better bet for faster growth of your real estate portfolio.

    [email protected]
    Quality Builders4.966 Reviews
    WebsiteView Page
    3Reply
  • Michael Dumler
    Real Estate Agent · Atlanta, GA · Member since 2020 · 1k+ posts · 1k+ votes
    4y

    @Zakir Pasha, I can't speak on behalf of the Chicago market, but you need to confirm that the association does not have rental restrictions. Many HOAs are usually capped with rentals and will require the new owner to apply for a permit and be put on a waiting list which could be anywhere from a couple of months to a couple of years. If you plan to live in the unit for a year or two then your odds are a bit more favorable, but you need to check the HOA bylaws and covenants to confirm. Hope this helps!

    3Reply
  • Zakir Pasha
    OP
    Member since 2022 · 3 posts · 1 vote
    4y
    Quote from @Jonn Vidal:

    What's the monthly HOA?


    $650

    0Reply
  • Zakir Pasha
    OP
    Member since 2022 · 3 posts · 1 vote
    4y
    Quote from @Jonathan Klemm:

    @Zakir Pasha - The odds of taxing and HOA dues out running your mortgage seems unlikely when you are locked into a 30 year fixed. If you have a strong concern I'd be checking to see what the association has in reserves. Seems like a great little place for a decent price. If are living in it I am sure @Andy Smith or @Michael Facchini can get you a 5% down lown....

    If you have an option to get a 2 unit instead of a condo that'd probably be the better bet for faster growth of your real estate portfolio.

    Good to know! I was already pre-approved but the interest rate on the mortgage was quoted at 5.25….I know stuff is high right now but I didn’t expect it to be this high! 
    0Reply
  • Paul De Luca
    Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
    4y

    @Zakir Pasha

    Finding good condo investment properties can be tough especially if you're putting relatively little down (less than 20%). Also high HOAs (usually in high-rise and high unit count buildings) make a lot of them unappealing as investment properties in my experience. I also strongly agree with @Jonathan Klemm's recommendation of pursuing a 2-unit instead of a condo.

    Interest rates on investment properties are going to be high than the rates owner occupants get. Plus, you can put less money down as an owner occupant.

    2Reply
  • Andy Smith
    Lender · Chicago · Member since 2020 · 29 posts · 26 votes
    4y

    Thanks for the mention @Jonathan Klemm!

    @Zakir Pasha let's look at low down payment options for 2 units as well as condos so you have the full picture. Also responding to your email now.

    2Reply
  • Eudith VacioPro Member
    Real Estate Agent · Chicago & NWI · Member since 2015 · 860 posts · 521 votes
    4y

    Hey @Zakir Pasha - you have some real great advice here so far. 

    I just wanted to chime in and say I agree on leaning towards a 2-unit versus a 1 bedroom condo. 

    While I don't think anything is wrong with condos because I found my first house hack which then became an investment property with a 2 bedroom condo. BUT I wouldn't advise a 1 bedroom condo AND in a high-rise because the HOA dues will eat into your pockets. AND in a lot of cases, they have special assessments every so often.

    1Reply
  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    4y

    @Zakir Pasha look at the Hoà rules regarding renting. See what restriction there may be .Included utilities are good as an owner but less so when you Are a landlorď. You cant pass on increases easily.. I would look at how well the sound insulation is. You will be hearing from the HOA on any noise issues.

    1Reply
  • John Hu
    Member since 2022 · 12 posts · 16 votes
    4y

    @Zakir Pasha I own 4 condo's as investment property and I can tell you that HOA + tax can easily out run the rent growth. I got into a cash neg situation at the start of the pandemic and on top of that I was hit with a heft special by the HOA. I did these condos because at the time I need to be a hands off landlord and the building took care of most issues for me; but I can tell you dollar for dollar I would not do condo investment again and would put all my money into the 2 or 3 units in Chicago. a 2 unit with a legal ADU zoning is probably the perfect return right now

    0Reply
  • Victor SoBusiness Member
    Real Estate Agent · Chicago, IL · Member since 2017 · 324 posts · 193 votes
    4y

    Hey @Zakir Pasha , not to be negative, but I'd be cautious about high rise condos along Lake shore drive. Most of them have high HOA fees and climb exponentially. It really depends on how old the building is, what kind of high rise building it is, and what amenities it provides.

    I speak from experience. I used to live in a high rise building right off lake shore dr in edge water in 2017. The building was super old and a couple special assessments were slapped on to fix things around the building like windows and balconies. We also had a pool, management in-house, doormen, maintenance people in-house, etc. Because of all of these things, I started off paying 850 a month and within a year climbed to almost 1000 a month. I heard it is much higher now. And usually they have strict HOA rules so if you were to do simple maintenance or rehab in the unit, you'd have to go through many hurdles.

    I’m not trying to discourage you entirely for making the move but I’d do my due diligence thoroughly. Hope this helps! 

    Victor So Real Estate LLC517 Reviews
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    0Reply
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