Hi there, I'm new to BP.
I'm a property investor from Melbourne Australia and I'm looking to buy foreclosure property in Chicago. Can anyone please give me some advice as to roughly what rental return I could expect to receive from a 3 Bedroom, 2 Bathroom Condo I am looking at buying in Michigan Ave, Chicago IL?
Any advice would be greatly appreciated.
a good site to use to estime rent is www.rentometer.com
As Brie stated rentomenter is a good gauge as to what rental rates are pretty much anywhere in Chicago. i would caution though that for Michigan avenue, your ROI there might not be that high. Buying on Michigan ave (unless you are talking about way south) is sometimes akin to buying in NY in regards to prices. And the HOA fees really add up due to all the amenities offered in a lot of those buildings.
Please ensure that all your costs are taken into account because it is very easy to get burned buying essentially in the heart of downtown Chicago if you are not careful.
If you use rentometer don't assume every property on Michigan Avenue will give you the same results for rent. Michigan avenue runs for miles & there's a vast difference in rent from one district to the next.
@Peter Appla I think rentometer is a good starting point but I like using padmapper.com to see what is currently available. You can set the filters to 3 bed/2 bath and then look at each individual unit. That way you can see what amenities are offered as well compared to your place. This helped me a lot when I needed to know how to price my unit. If I had just gone off what rentometer gave me I would be getting $300-400 a month less than what I got for the place.
From my experience, buying a condo in Chicago as a buy and hold will not yield a large cash return monthly. It's possible upon disposition you'll make some money in appreciation, but not likely on the cash flow due to high taxes and high assessments and/or special assessments. If you buy a condo that needs a rehab and are willing to put the money in to update it, then you may see some cash flow. Good luck!
Don't forget that you'll likely require a property manager if you're managing long distance. I recommend finding one specializing in the area and type of property(ies) that you're interested in and form a relationship with him/her. They should be happy to give you an estimate of what rents will be in the area and it will likely be more realistic than rentometer, etc. (or at least a good check).
Might want to check the Condo Board prior to any condo purchase. Does the Board have involvement, or just the few people that were willing, albeit begrudgingly, to be on the board. Meaning, they have no idea how to run a building. They decide, "The lobby needs new furniture" before fixing a back-up water pump, so one day the main pump goes and boom, no water pressure. Then, an emergency fix, massive labor costs, leads to a huge special assessment, and you have to pay in all the cashflow you may have received over the prior few years.
Windows, they love to replace them.
Let's also not forget, the city is about to raise property taxes.
I like rentometer because it is conservative! It is a good place to start when running your initial numbers
and just to throw my 2 cents in @Peter Appla I am 1000% against condo investing. The HOA's have a million restrictions, they can change their bylaws at any time to forbid rentals, and the lack of control is not something I am not comfortable with.
Chicago is a fantastic city with many neighborhoods and great areas to invest in.
@Peter Appla What hundred block of Michigan Ave? We manage a hand full up and down Michigan Ave and maybe it is a building we are familiar with. Most people on this site are not fans of condo investing but the out of the country investors we deal with and manage for love them and have long term plans to hold them.
@Peter Appla If you have an agent you can have them pull average rentals as well. However, as @Brie Schmidt stated, be cautious of HOA fees and limits on the number of rentals that a building will allow. This can also change down the road so it's something to be concerned with. Also, special assessments can hurt your cash flow as well.
Thank you all for your helpful advice, I'm loving BP!
Thanks Brie, I'll check out rentometer.com and thanks Tim I'll also check out padmapper.com.
I appreciate everyone's advice regarding the HOA fees and limits, I'll check them out too.
I just want to make sure my 1st deal is a good one, with no nasty surprises. I might need to connect with some of you to help me find some good deals, I need 20 in the next 12 months.
if sfr prices rise so do prices of condos! condos need more love. In Hawaii everything went up in value. including the little grass shacks.
PS. hoa fees do get high-elavators are expensive.
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Our problem with condos is during the boom there were SO many built and when the crash happened we got up to a 17 month supply of condos. It took a little longer than the rest of the city, but it recovered. Since the crash we have those new apartment towers in the loop were built as apartments because nobody would touch a condo development with a 10 foot pole. (3000 units added in 2015 and 5000 units slated for 2016)
Well, when they were built, they were built as condos and can easily be converted now that the housing stock is back to a reasonable level. If that happens, we will have a influx of inventory again.
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