Sell 2nd Lot and Lose Parking? 3 unit in West Chicago

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Sell 2nd Lot and Lose Parking? 3 unit in West Chicago

Kevin Danikowski
Rental Property Investor · Chicago (suburbs), IL · Member since 2019 · 29 posts · 4 votes

I have a building that has 2 lots. I'm considering selling it, and the land is worth about $50,000-60k (located in forest park).

Currently, there are 5 spots lined next to eachother on the short end of the property which crosses the two 25' x 125' lots. So If I broke this off and sold it, I would lose 2.5 spots (so 3), but try to get them back by extending my parking lot which would now be 40' x 25' instead of its current 20' x 25'. One of my tenants would lose a spot in the process and now the cars would be stacked potentially causing an issue with entering and exiting. This would likely lower the value of my building as a result as well. 

Is it worth it? 

Other option to use this 25'x125' lot... Lay down asphalt or concrete for $3,000-13k (depending on material) and have 3 new spots I could potentially find people to sell it to. I would guess I could get $50-100/mo for it (so return is low). It's in a residential district so not sure if I could do much else.

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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
6y

@Kevin Danikowski make sure you still meet the parking requirements in Forest Park. The village is pretty strict on parking, and you could make it so your subject property loses its zoning status, etc. I recently sold a two unit that had been a legal three unit in the past. The only reason Forest Park didn't allow it to remain a three unit was that it didn't have six parking spaces (2 per apartment). It had two entrances, good ceiling heights, etc. 

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  • Jonathan KlemmBusiness Member
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    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    6y

    @Kevin Danikowski - I am not a big land guy, but sounds to me like your best bet is to just sell the land and use those proceeds for your next deal which if done right should yield better returns than your proposed parking lot.

    Also, are the lots not buildable?  If you have enough room and have proper zoning, why don't you build new multifamily?

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  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    6y

    @Kevin Danikowski make sure you still meet the parking requirements in Forest Park. The village is pretty strict on parking, and you could make it so your subject property loses its zoning status, etc. I recently sold a two unit that had been a legal three unit in the past. The only reason Forest Park didn't allow it to remain a three unit was that it didn't have six parking spaces (2 per apartment). It had two entrances, good ceiling heights, etc. 

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  • Kevin Danikowski
    OP
    Rental Property Investor · Chicago (suburbs), IL · Member since 2019 · 29 posts · 4 votes
    6y

    Thanks for the reply @Jonathan Klemm and @John Warren .

    The lot is buildable, but it's currently a grandfathered 3 unit on a single family zoning. So the best I can do is what i'm considering doing, expanding the 3 unit to have a walk way to a standalone extension which is essentially a mirror of that unit. I would then AirBnB both of them, and when I go to sell it, it can be a two tenant dwelling or a single large unit of 4 bedroom 2 bath. 

    I got a rough estimation of ~100k to build a 1,000sf unit (if I keep costs slim). At 2k/mo in airbnb profitable income (could be more if it was on north side of forest park), that's a 24% return. That return, to me, is not attractive enough for me to consider unless I can get a loan on it. The IRR doesn't get much greater either considering it's resale value for the 100k extension I would guess is 1.2-1.3x the cost I put into it (assuming market doesn't crash). If I can get a loan for this 100k renovation I would be very interested since it could put my return at 30-40%, but i'm maxing my personal loans and personal line of credits to do other purchases, any recommendations on options for this?

    John I appreciate that note, I didn't know that. If I decide to do this extension above, I would add another 2 parking spots and probably a nice patio for an extra 5k. 

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  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    6y

    @Kevin Danikowski I am glad I could help. I would be very careful of over thinking this particular opportunity. I am a value add guy, and all of us are constantly seeking to maximize the value of each of our properties. The issue I see with some of the ideas here is that these ideas may not increase resale value. Also, you may build out this grand scheme based on Airbnb, and then the regulations could change (it has happened before). Forest Park is currently a great place to do Airbnb, but that could change in a hurry. 

    I always like to invest in a "sure thing" and not try to reinvent the wheel. 

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  • Kevin Danikowski
    OP
    Rental Property Investor · Chicago (suburbs), IL · Member since 2019 · 29 posts · 4 votes
    6y

    @John Warren I am considering the same thing and for this reason it may not be worth it. However, I could see this renting for an extra 800 per month should I do this and the AirBnB aspect goes away, and I think it would be more attractive to potential buyers. But there is limited guarantee on the resale value which is why I don't know if it's worth it unless I can build this cheaply. Typically I want to add a unit at 30-50k, but this addition would likely require much more than that so I'm still not sold on it yet. 

    Maybe there is a different value add I'm not thinking of that would be highly beneficial for the tenants? Such as some patio set up or something ? It's not commercially zoned so I don't think I could do storage. 

    Or maybe it's possible to do a parking spot share relationship with a new SFH that would be built?

    It's a large piece of land in a decent area so I know there is some potential.

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