Home Buying in Chicago>Question Details

gg2004, Home Buyer in Chicago, IL

Rental properties

Asked by gg2004, Chicago, IL Mon Jul 29, 2013

I am looking to buy 1-2 rental properties in Chicago - am debating whether to buy a multi unit property or buy separate condos. Any opinions on the risk/reward for each option?

Also, any thoughts on what neighborhoods are sweet spots for renters?

Help the community by answering this question:

Answers

11
If you do not live here, then a condo in a well-managed building might be a better bet for you. Rental prices are so high in some areas that buying a short sale or foreclosure in a good location could be the way to go. Onsite maintenance would be key for an out-of-town landlord. Otherwise you're paying a monthly management fee when you may not need that much support. One of my clients has done very well with buying small condos in popular buildings that rent quickly to good tenants who pay their rent promptly. If you'd like to discuss more, please contact me directly. Good luck!
0 votes Thank Flag Link Mon Jul 29, 2013
How will you purchase? ...CASH or Financing
What are your financial goals/expected ROI?

With a Multi Unit YOU are the King of the Castle.
With a condo you have t deal with the association.

As per neighborhoods, it truly depends on your budget.

Feel free to contact me should you have any questions.
0 votes Thank Flag Link Mon Jul 29, 2013
Thanks for all your answers. My assumption is that the multiunit will provide better cashflow, but the condos will appreciate more over the longer term, maybe a higher risk/higher reward than multiunits - is that a logical way to look at it?

I do not live in the city, so will likely be an absentee landlord and outsource to a management company - does this change how you would look at multiunit vs. condos?

Thanks
0 votes Thank Flag Link Mon Jul 29, 2013
This is something we deal with all the time, HOA's can be a nightmare to deal with and the monthly dues run down your yield. Therefore if you appoint a good mgmt company and buy in the right area a multi unit will always win in my opinion. A lot of our clients are based overseas and for them they want something that provides a good return with the minimum of fuss.
Flag Tue Aug 6, 2013
Anything close to public transportation is a sweet spot for rentals.

As to mutli unit or condo, it depends on what your budget is.
Web Reference: http://Americorpre.com
0 votes Thank Flag Link Mon Jul 29, 2013
I personally would find several units in one well run condo building. Less liability to deal with common area maintenance then a multi unit building that you own entirely and having a good percentage gets your voice heard with the condos association. Some buildings just do well on the rental market and resale market.
0 votes Thank Flag Link Mon Jul 29, 2013
Its hard saying what would work best for you - I like Multi Units. You dont have to deal with an association and you only have to close once for several units. However a condo is easier to manage and can still be a great investment. You will want to run the numbers and see what will work for you.
IF you are planning on financing the property then talk to your lender and see what works best from a cash flow perspective.
If you havent spoken with a lender yet then I would be happy to help
Good luck
Sam Sharp
Senior VP of Mortgage Lending
Guaranteed Rate
773 290 0455
sam.sharp@guaranteedrate.com
0 votes Thank Flag Link Mon Jul 29, 2013
Aside from what was mentioned below I would advise that you think of what your exit plan would be?

If you buy a multi-unit building- Would you sell it later as a multi-unit building with renters? Would you fix it up hoping to get much more for it? Would you convert it to a larger single family home and aim to get much more for it in the future? - Does the local market near the subject property support any of the above?

If you are buying a condo- do you feel that the unit will appreciate at an acceptable level to you in the future? Does the unit you are looking at need work? If so, will fixing it up increase the value at an amount you feel appropriate? Is the unit currently finance-able and will it be in the future?

Unrelated to the exit plan- do you feel the HOA of a condo is healthy financially? If you were to get hit with a special assessment would you be able to afford it? Are the monthly assessments at an amount you can easily pay if/when the unit is empty or has a delinquent renter?

There's a million and one factors you should consider, working with a knowledgeable realtor will help you gather useful information to help you make an informed decision.
0 votes Thank Flag Link Mon Jul 29, 2013
Dear Investment Property Searcher,

Depending on you return on investment that you are looking for right now East Rogers Park can offer an investor a lot. I am currently putting in a bid for one of my investor in a building by transportation and the lake. It is a two bedroom/Two Bathroom ready to move into for under 100K, and I will be able to get a rent of $1600 a month.

As one of the other brokers had stated it also depends on what you are looking for. Find a broker that can run the numbers for you so you can best determine your investment strategy.
0 votes Thank Flag Link Mon Jul 29, 2013
In my opinion I stopped buying condos for investments because of the HOA's. I also like multi units and there are plenty of them in Chicago. I'd rather drive to one location for my units than deal with multi HOAs and driving to multiple condo units. Again that is just my opinion.
0 votes Thank Flag Link Mon Jul 29, 2013
There are lots of differences and not sure I can go over them all. Condos tend to be less labor intensive than a multi unit so if you are new to being a landlord perhaps that is where to start yet the return on investment tend to be less although depends on the price you get it at. Condos have rules and fees etc on rentals which some find a pain to deal with. You should keep whatever you buy for 5+ yrs to get more bang for your buck.
The higher risk neighborhoods tend to give you the best ROI yet you need to be able to deal with not so great tenant qualifications. The higher rent neighborhoods tend to have the more stable tenant pool yet the return on investment is probably not as great. It has a lot to do with your risk/reward personality.
0 votes Thank Flag Link Mon Jul 29, 2013
the neighborhoods closest to transportation and if your not sure about condo or multi unit you need to think about what your trying to accomplish..they are 100% different..one is taken careof by youand the other is taken care of by an assoiiation.. how big is your tool box will answere that question also are youready to spend 500K ?
0 votes Thank Flag Link Mon Jul 29, 2013
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer