Chicago (high rise) condo market (sales, renter, HOA fees)

[chicagoyp2013]

Hello, I posted last week regarding two flats as investment properties. As usual with a first time home buyer, I am swinging back and forth between purchasing a two flat or a condo.

I am wondering what the "ins and outs" of the Chicago condo market is? I am eyeing a very popular, well kept and very large high rise along the lake in lincoln park. The building is very attractive to me, as someone who doesn't necessairly know where they'll be in 5 years, in that it has no rental cap, in addition to having very strong reserves and tons of amenities.

The Hoa is a little high but includes most utilities and amenities (pool, fitness center, etc). My main concern is renting it out if I needed/wanted to move. I don't want to sell (I would not need the equity out of it), I'd rather have this be a long term investment.
Assuming there is no cap placed on rentals, how hard is it to rent out these units in these types of buildings? I've done research and it seems like a 1 bedroom rents out from anywhere to 1500 and up which would cover my monthy payments. Another concern I have is that the building charges a $400 move in/out fee....which I would prefer not to eat an additional 800 each year with a new tenant. Is it legal or reasonable for me to assume I can have the tenant pay this as long as its in the lease?

Thanks for your advice. Oh and the building currently only has like 25 to 30% of units rented out which I think says only good things.

[chicagoyp2013]

Oh and if I did move away from Chicago, I think it would be manageable from far away since the building has an onsite engineer. Does anyone know what these engineers service as far as repairs and maintenance is concerned? I would probably just need to find a handyman who could take care of little things should the tenant ever call with problems.

Or am I delusional in thinking that I could be a landlord living in a different city without using a property manager?

[snoylekim]

Depends on the building ..mine is a high rise with a full time engineer and maintenance man .. They will perform work on units, and even help out with owner projects ( for a little extra negotiated fee). Repairs that don't involve common or limited common elements , or involve obvious negligence are billed to the unit owner . it is a policy to clear non-emergency repairs with the owners when renters call in ( we're about 30% rental) ..some renters don't understand this .

The biggest issue is some owners forget that they are 'the landlord' when it comes to rent collection, complying with the Chicago Landlord Tenant ordinance and the like . Our Building Manager has had requests to try to collect rent, lock renters out, etc from unit owners and had non-payment of rent used as a defense from owners that want a forbearance on Monthly assessments; in a well-managed building, that doesn't fly . It might be worth the money to use a property manager to enforce rent collection and generally manage the relationship between you and your tenant , unless you're in a position where you know your renter well, especially if you're away from Chicago .

[chicagoyp2013]

Thanks. I wouldn't be hesitant to use a property manager if the numbers worked.

What do you think of the future stability / price appreciation of these high rises? The buildings I'm targeting were built in the 70s (most were...). The specific building I'm targeting I believe has made substantial renovations over the years to "keep up" with the times. Do you think this will be the case 30 years into the future? At that point, the buildings will be about 70 years old....

A lot of people have told me to stay away from trying to rent out condo units. But with no rental cap, a solid Hoa and a solid building, it seems that renting out a condo in a huge high rise would be better than a smaller 5 to 30 unit building because of the "economies of scale" you get with the assessment dollar base, not to mention the "invisibility" you would likely have in a building with a thousand or so people.


That being said, I've never lived in a huge high rise like that. I question whether it is something I (or anyone) would want to do for any long period of time. Again, if it were a short term thing for me, that would be fine as long as I could sustain renting it out until it makes sense to sell.

If you could put yourselves in my shoes, does it make sense to buy with the assumption to rent out.... If only 2-4 years later? Or is this the way of thinking that has (potentially) damaged many HOA boards and thus caused the need for rental caps?

Just trying to cover my bases!

[koctail]

Condos in general are not good investments. I own a few units downtown, but I paid around $100/sf. If you are paying more than that AND have a mortgage, then forget about it.

[rparz]

Are you sure that your 1500/month rental will cover the mortgage/interest costs, the HOA fees and the property taxes? Plus a little cushion for profit/incidentals/maintenance? Stuff is going to break.

[chicagoyp2013]

Based on a probable sales price on a unit I'm eyeing, the price per square foot would be about $330 a square foot. But that isn't really a measure of return on your investment. 1500 would be a very low end rent, I'd probably hope for 1800 to 1900 as I see nicer units are renting for that much in the building. At that price I would probably have 300 a month in positive cash flow, depending on the financing terms.

[chicagoyp2013]

300 wouldn't be much a month, but that is in today's dollars so if I rented it out 5 years from now I assume I'd get more. Regardless, there wouldn't be a ton of maintenance. The big ticket items would be the refrigerator and oven - and perhaps any steep increases in HOA. I was advised, however, that the HOA has consistently voted to take out a loan against the reserves to fund any special/one time assessments.

[koctail]

Keep in mind those higher rents you see are often charged by management companies with huge overhead to cover. When people rent from individual owners, they expect lower rent because they know they can bargain . With larger companies, it is take it or leave it. It's actually a good thing because you can be more picky and give the lower price to the best candidate.

But $330/sf sounds really high. There are still tons of buildings with far cheaper prices , see redfin.com

[knitgirl]

I would have to look it up (I'm a mortgage loan processor) but 25 - 30% rentals in a building will probably cause you problems getting a loan to buy it and would cause issues when you go to sell it.