Property Insurance (Chicago, Bridgeport, Oakland: real estate, foreclosure, rental)

[jp47]

Does anyone have a ballpark idea as to how much it would cost to insure a $150,000-$250,000 2-4 unit multi-family home in Chicago? I would need dwelling for the entire building as well as homeowner's for the unit I would live in. Thanks!

[Chicago76]

Couldn't help you on a ballpark estimate given there are so many variables at play besides value: age/condition of place (roof, electric wiring, etc.), location (bad area subject to increased likelihood of vandalism or arson > than elsewhere), type of construction (wood frame vs. brick), etc.

You were looking around the United Center before, right? That should run more than a 2-4 unit building in an area like Albany Park, Edgewater, etc if the underlying appraised value is the same.

You're better off talking to a few insurers to get a ball park.

[shineinthewoodpile]

There are all kinds of insurance calculators online. Try to find one.

[jp47]

Chicago76,

Thanks for the input! I've shifted away from the UC area and to the many suggestions have been looking in Bridgeport and Avondale. The biggest struggle is finding something that makes sense from a cash flow perspective. The taxes on the north side are outrageous, which is why I've mainly shifted my focus to Bridgeport. However, I still think it's pretty expensive. My goal is to live 100% for free when factoring in mortgage, taxes, insurance, utilities, etc. Granted I've just run my Excel model off of list prices, even the "best deals" would need to come 30% for me to capture my goal completely.

Do you have any other suggestions on neighborhoods I should be looking at?

[Chicago76]

I'm not an owner, nor am I a real estate professional, although I put a ton of research into buying multi unit over the last several years, so take what I'm about to say for what you think it's worth:

-taxes: taxes aren't any higher on the north side vs. south side. It's just that similar properties are generally worth more. The city is slated to be reassessed in 2012 as part of Cook County's reassessment triennial, so expect things to come down a bit to reflect depreciation of the underlying property. As a percent of your rental income potential, what you pay out in property tax shouldn't vary dramatically across the city.

-it's going to be very difficult to live 100% free right out of the gate, especially given your budget, and what you're saying about the 30% discount needed seems to indicate parity between rental and ownership. For example: a 3-flat appears to generate enough cash flow from two rental units to cover roughly 2/3 of your costs. It seems obvious, but I would scour CL and the Reader rental ads to get an idea of rental income for a 1 or 2 bedroom units in 8-10 neighborhoods within your multi-unit budget. Then I'd compute the multiple of price/per rental income, with the lowest multiples being the best deals. Example: a 3-unit may go for 300K in some areas. If you can get $800 per month per unit, the price to annual rental income multiple is 300K/ (800/mo x 3 units x 12mo/year) = 10.4 Some areas will have lower (read: more favorable) multiples than others.

-one area you might want to check out is Albany Park. The reason I mention this area is that it is relatively inexpensive, with good proximity to transit via the brown line in a stable and safe area. There are bargains to be had here, and my hunch is that this will be the next neighborhood to "pop" that doesn't have as many of the tenant issues you might expect around the UC. It's not a multi-unit building, but this gives you an idea of what you can get on the foreclosure market in AP. $55K for a condo in this condition seems like a good deal to me:

3105 W Lawrence Ave # 3, Chicago, IL 60625 - Zillow}

The neighborhood is very popular among working/middle class immigrants, who may have the funds to buy/pay rents, but lack the credit history to take advantage of the market to buy a place. Multi-units may be tough to find, but I'm sure a few of them are around somewhere.

-I personally would stay out of areas that are most likely to give you the most upside in a 10-yr period. Everbody would like to make the money off this, but IMHO, the tenant issues aren't worth the risk: Oakland, Douglas, UC area, Humboldt Park W of the Park especially. I'd look instead in the next tier: Bridgeport, Humboldt near Western, Uptown, Edgewater, Albany Park, Avondale, and certain areas of Logan Square where you haven't been priced out.

Nothing earth shattering here, just my 2 cents. Good luck.