Buying A Two Flat Or Two Bedroom Condo For $150k-$200k In A Decent Neighborhood? (Chicago: real estate market)

[Chicago87]

Hi,

My friends and I were discussing what is the best option for someone in their mid to late twenties in terms of purchasing real estate.

These are the main points we are trying to determine:

• Should we keep renting until we are about 30 or buy a place given the urbanization & gentrification trend which should result in increased housing prices and costs.
• Which decent neighborhood in Chicago can you buy a decent two bedroom condo or house for $150k-$200k?
• Is it wise to take out a 30 year mortgage given the new employment mantra where layoffs are common and job security is basically nil?

The main reason why each of us wants to buy either a two bedroom condo or house is because we plan on renting out the empty room(s) to give us another source of income and help pay our mortgages.

[M_Life]

I'm currently a renter, but will be looking to buy soon as well. I'm a lender in my day job - commercial loans and real estate so understand a fair amount about RE in general. What I've learned about Chicago's residential real estate market is that prices can vary significantly block to block, and I wouldn't recommend buying in a specific neighborhood just because you think the price will hold simply having that zip code. That's to your first point which you imply speculating on the right areas to buy. There's people out there much smarter than you with insights into the development pipeline of other residential properties, new transportation hubs, other stuff gentrifying that area. I certainly wouldn't buy a house with 200k and finding a 2br condo at that price in a decent area will be unlikely. To your third point, if your asking because you're uncertain of your future employment prospects yourself, then I wouldn't be looking to buy anytime soon, unless you are very liquid. In sum, I think buying a 2br place solely to rent out the other room to subsidize a mortgage is a bad idea. Good luck!

[chet everett]

Originally Posted by M_Life

I'm currently a renter, but will be looking to buy soon as well. I'm a lender in my day job - commercial loans and real estate so understand a fair amount about RE in general. What I've learned about Chicago's residential real estate market is that prices can vary significantly block to block, and I wouldn't recommend buying in a specific neighborhood just because you think the price will hold simply having that zip code. That's to your first point which you imply speculating on the right areas to buy. There's people out there much smarter than you with insights into the development pipeline of other residential properties, new transportation hubs, other stuff gentrifying that area. I certainly wouldn't buy a house with 200k and finding a 2br condo at that price in a decent area will be unlikely. To your third point, if your asking because you're uncertain of your future employment prospects yourself, then I wouldn't be looking to buy anytime soon, unless you are very liquid. In sum, I think buying a 2br place solely to rent out the other room to subsidize a mortgage is a bad idea. Good luck!

Watching some of the TV shows on the "home improvement" channels makes it seem like being a landlord is some easy task and turning a profit is a given. Neither is at all true. Even in "hot" neighborhoods finding high quality tenants that take their responsibility to pay on time is much harder than it would seem -- many renters have very poor ability to manage their personal finances. Especially in the significantly dicey category of folks looking "for a room" things like petty theft and lack of basic sanitation can make for a nightmare of problems...

[Anne C M]

Originally Posted by chet everett

Watching some of the TV shows on the "home improvement" channels makes it seem like being a landlord is some easy task and turning a profit is a given. Neither is at all true. Even in "hot" neighborhoods finding high quality tenants that take their responsibility to pay on time is much harder than it would seem -- many renters have very poor ability to manage their personal finances. Especially in the significantly dicey category of folks looking "for a room" things like petty theft and lack of basic sanitation can make for a nightmare of problems...

I agree with Chet. Taking on the responsibility of homeownership for the first time is typically enough. Simultaneously becoming a homeowner AND a landlord is likely too much. Your first step should be to speak to a mortgage lender for a pre-approval without any supplemental rental income. See what you can afford on your own. If you happen to have a buddy who wants to rent your second bedroom once you own, that's great, but I wouldn't suggest relying on that supplemental income. Also, I don't know what neighborhoods you're interested in, but some of the more popular areas (Lincoln Park, River North) won't have any 2-bedrooms for under $200,000.

[Pantless1]

I wouldn't live in Lincoln Park or River North if you paid me.

I got a 2BR in Edgewater for just a shade over $160k. If you can float the full mortgage payment without a renter its probably do-able. There are lots of other parts of the city where you can find 2BR condos for under $200k... unless you insist on living in Chadville.