Chicago Condo Investment

13 Replies

Hello! New here on BP forum. I was just hoping to get some advice regarding buying a Chicago condo as a buy-and-hold investment and a future rental property. I’ve been renting for a while now, and I want to start paying for my own mortgage as opposed to my someone else’s. Unfortunately, I don’t have the means and time to do multi-family units at this time. I plan to live in the condo for a few years and then rent it out afterwards. Looking into West Town, Univ Village, and South Loop. I have too many questions, so I guess any advice on how the search, what to ask my realtor, and the analysis process is greatly appreciated! Thank you in advance!

Originally posted by @Vence Malicdem :

Hello! New here on BP forum. I was just hoping to get some advice regarding buying a Chicago condo as a buy-and-hold investment and a future rental property. I’ve been renting for a while now, and I want to start paying for my own mortgage as opposed to my someone else’s. Unfortunately, I don’t have the means and time to do multi-family units at this time. I plan to live in the condo for a few years and then rent it out afterwards. Looking into West Town, Univ Village, and South Loop. I have too many questions, so I guess any advice on how the search, what to ask my realtor, and the analysis process is greatly appreciated! Thank you in advance!

Things to consider as part of your condo search for a rental property:

  • Rental Restrictions- Many buildings have restrictions on the number of rentals in a building. Sometimes the restrictions are identified as part of the advertisement for a condo. Often times it's only seen in the private broker notes
  • HoA fees- Often times a condo deal looks good as a rental until you include the HOA fees.
  • Increasing HoA fees- Check the financial strength of the building. If there are new assessments coming up it may kill the profitability of a condo rental

West Town is a great area for condo investments (and for 2-4 unit buys). The condos are still relatively cheap while the rents very high. I see a ton of upside in that area for appreciation/rent growth. South Loop is going to be lower cashflow but can still work actually just sold a condo there to someone from out of state. 

As mentioned above you need to make sure no rental restrictions with association it will usually mention it in the MLS agent notes. I have not had this be an issue though as there are more then enough investor friendly condo buildings to look at. Majority of buildings in Chicago do allow rentals.

@Vence Malicdem welcome to the forums! You are actually pursuing a very interesting strategy right now as the condo market is slow in a lot of the best areas. I recently had a listing in River North and it was insane how much inventory we had to compete with. We got it sold, but it is definitely a buyer's market in the A class neighborhoods for nicer condos. 

I would focus in on an area that makes sense for you to live, and try to find a solid opportunity where you can snag some equity. There will be a few owners who need to sell who will get desperate as inventory rises. 

I just offered this morning on a condo for myself in Albany Park purely as a rental. As @John Warren mentioned the condo market is oddly slower then the multi unit and single family market right now. If you compare the price of Chicago condos to the other top 3 largest US cities our condo prices are crazy cheap. 

Albany Park is also somewhere to check out. You can get 2br 2ba or 3br 1ba condos that cashflow in turnkey condition. From my experience doing some leasing in this area, if the units are nice you can get 680+ credit tenants. It's a very different tenant for rehabbed nice units in the area vs the working class general population. 

@Vence Malicdem   Some good advice here so far.  Since the 2-4 unit space continues to be very competitive its makes sense for a lot of entry level buyers to start with a condo.  A few notes to add:

- If you buy in a smaller building (under 10 units) make sure the reserves are healthy. A lot of smaller self managed HOA's can be tough to navigate and spend their $$ poorly.

- If you have friends that would rent out rooms it could be a solid strategy to look for 2-3 bedroom condos where you can charge $500-700/mo per room.  

Good luck!!

@John Warren Thanks for you response, John! I was wondering, what do you mean by A class neighborhoods? Would you classify South Loop and University Village as A class as well? I feel like these neighborhoods are desirable and I would want to live in, but I'm afraid that I won't get as much back in equity - mainly due to expensive prices and high HOA fees.

@Henry Lazerow Thanks for the response, Henry! Congrats on your sale of the South Loop condo and Albany Park. I was wondering if you can give me some insight into your rental analysis for the South Loop condo. I’ve been interested in some condos there, but I feel like I’ve been resulting in negative cashflow when I do the analysis. I was thinking that maybe my projected rent was too low? Any suggestions in how I can effectively look-up rent comparisons? I feel like the comps I see right now in sites like Zillow for the South Loop area are too under-value because of the pandemic. I’m looking into 2b/1-2 baths.

@Crystal Smith Thank you for your response, Crystal! I was wondering if you have a recommended threshold for HOA fees for a condo investment? I feel like they vary depending on the building and the amenities, so I was wondering if there is a general good-rule-of-thumb limit that investors go by when purchasing a condo to rent out?