What would you do with this Chicago condo rental?

4 Replies

I am brand new to BP and this is my first discussion question, as I am new to real estate investing as well. I have a two bedroom two bath condo that is a mile and a half west of Wrigley Field in Chicago that I currently rent to my one and only tenant. With principal interest taxes and assessments, my total expenditures is $1700. I have a tenant for one year that is also paying $1700. The reason why I kept the property is that I have a 2.8% interest rate, so my principal decreases by $1,000 per month, but I essentially have no cash flow and am banking on at the equity and hopefully an increase in property value with time. I have about $50,000 worth of equity in the property. I would like to expand my real estate portfolio, but I don't know if I should sell it and use the profits to invest in a multi-family or keep renting the property and save for a multi-family. I'm looking for some advice as to what other real estate professionals would do in this situation, as I don't have enough cash for the down payment on a multi-family in Chicago. Any and all feedback is welcome. Thank you BP community!

@Bryan Rome You have a pretty good scenario here.  You are break even on cash and maybe a little out of pocket for maintenance but you are socking away $1000 in equity a month.  You didn't mention the depreciation value the property has as well.  This is something you should ask your CPA.  Your deprecation write off will go against your overall income totals adding more benefits.  You should ask your tax professional "how much is the depreciation we are writing off each year helping me against income I am making elsewhere".  $50,000 in equity on a sale may not go far in buying more units especially if you stay on the north-side where lack of supply and additional demand is pushing pricing.  Now $1700 in rent seems pretty good to so maybe in a year you can raise rents a little to create a little cash flow.

@Mark Ainley @Mark Ainley Thank you Mark for the excellent advice. I will ask that question during tax time. I think I am going to hang onto the property and work towards a multi-family. Do you know any good CPAs? I will also keep you in mind if and when I need a property manager. Hopefully I can expand to a point where I can benefit from property management services.

@Bryan Rome I do have a great CPA but she is between firms right now so she will be up and running in a couple months. 

Reach out anytime if there is ever anything I can advise you on or if you have any PM questions. Happy to help.  

@Bryan Rome

I would personally sell the property.
You are only factoring in a couple of the cash-outflow(principal, interest, taxes and assessment).

What if there is a major repair that needs to be made?
What happens if the tenant stops paying, you will need to hire an attorney and evict him.
etc.

I think there is a lot that can go wrong and you are not cash-flowing on the deal.

Normally, it is harder to cashflow on a condo because of the assessments/maintenance.