Buying Condo Thoughts (if living for 1-2 yrs) (Chicago, Mark: real estate, apartments)

[dadave]

I am considering a short term move to Chicago which could be about 1-2 yrs long. I noticed there have been (old high rise) condos along lakeview that are selling $130-170K. Some of the HOA aren't crazy at $350-475. I don't know too much about Chicago real estate but am surprised that it is cheaper than I thought. Wanted to see if any had any plus/minus thoughts about purchasing a condo like this if i plan to stay only 1-2 yrs. This would be the equivalent if i rented. Are high rise apartments difficult to get permission to rent out if i ever moved out?

[Gaylord_Focker]

Ttt. I’m in the same boat. Prices are pretty low which is honestly scary but I know the property taxes and hoa offset that

[BOBNCHI]

For 1-2 years I would never buy, especially a older condo.

[ChiGuy2.5]

I bought a condo at 25 and still own it 8 years later. I've been renting it out for around 5 years.

Here are my thoughts since you asked:

1) Yes, you do need to ensure the condo HOA will allow you to rent it out after you move. Typically you need to live in a unit for a period of time, or some don't allow renters at all. This all depends on the building you buy in.
2) Condos are largely hands off properties for renting, they have maintenance on site and most of the expensive parts of maintaining a home are covered by the HOA, but that comes with some pretty big drawbacks too.
3) Drawbacks include the hidden fees. For example, each time I get a new renter we have to pay a $300 transfer fee to the building. This sucks big time when you have a renter there for only 6 months. Make sure you add a fee to your lease to cover this.

Other drawbacks could include a special assessments, increases in HOA dues, property tax hikes, and of course the overall building rules you need to learn to navigate when finding new renters.
4) FWIW, I barely cover my costs on my unit. It's not a great cash flow unit but at least it's pretty hands off equity for me.

Best of luck, shoot me over any questions you have.

[dtcbnd03]

Never buy a condo if you plan to own it for 1-2 years. Renting is way better with all the transaction costs involved with buying/selling.

[BRU67]

I'm not trying to be a smarty pants or anything but do they still teach economics in high school, and make you take economics classes for a bachelor's degree?

[dadave]

Originally Posted by BRU67

I'm not trying to be a smarty pants or anything but do they still teach economics in high school, and make you take economics classes for a bachelor's degree?

To give you a breakdown on my analytics cost if you would like to see (For purchase i'm just considering like title and fees that are one-time not part of mortgage (my company has a partnership with lenders so most fees are waived). Escrow goes into tax and insurance so that's already a re-occurring cost). I assumed 3% interest. I also assumed part of HOA helps cover some basic utilities so i'm taking like 70% of the HOA monthly. I'm also not factoring in any tax deduction because i don't really know what rule of thumb to use there:

I think the numbers for 2 yr is not unreasonable without factoring specific influences on Chicago real estate.

[BRU67]

Originally Posted by dadave

To give you a breakdown on my analytics cost if you would like to see (For purchase i'm just considering like title and fees that are one-time not part of mortgage (my company has a partnership with lenders so most fees are waived). Escrow goes into tax and insurance so that's already a re-occurring cost). I assumed 3% interest. I also assumed part of HOA helps cover some basic utilities so i'm taking like 70% of the HOA monthly. I'm also not factoring in any tax deduction because i don't really know what rule of thumb to use there:

I think the numbers for 2 yr is not unreasonable without factoring specific influences on Chicago real estate.

Your numbers do not include the costs when you buy, including mortgage closing cost. Maybe those won't be as much as when you go to sell but you will still have cost when you buy.

[BRU67]

You say you are one of the lucky people who can get all of these fee waivers on a special deal, and a 1.5% lower interest rate than the current average. But if I had a dime every time I heard that, well, I wouldn't be sitting here posting on this site. Sorry folks.

But let's just say that you can get away with 0 cost on the buy and get that unheard of interest rate. You're not taking into account several things. First, the market. Condos have not appreciated around here very much in the last 20 years. As I've said in another post, I can buy a South Loop condo today at nearly the exact same price as in 2000. Not the price adjusted up for inflation. The same price. So that means condos have declined in real value in that area over the last 20 years, significantly. Some of that is due to rapid building. Some of that is due to other factors.

Market times are ridiculously long on condos in many neighborhoods, even in this insane market. What if there's a real estate downturn? What if a lot of Loop office space goes residential (which i predict it will)? You could end up stuck with it, or in a negative equity situation that takes your rent versus buy numbers and makes a mockery out of them.

Second, to answer one of your earlier questions, condo associations can prohibit or limit rentals. Many, if not most, do. Even if the current bylaws allow it, the board can change that in a snap of a finger.

Third, don't forget about special assessments. My friend has a condo and he just got whacked with a $5,000 special assessment for a roof. Your numbers are so tight that one big expensive repair will toss you right into the red

Your numbers are strictly an "absolute best case scenario," which almost never happens IRL. So I would say renting definitely makes most sense on your two year window. But if you feel you want to roll the dice, go for it. But it's got the potential, dare I say likelihood, to go south.

[Gaylord_Focker]

Originally Posted by BRU67

You say you are one of the lucky people who can get all of these fee waivers on a special deal, and a 1.5% lower interest rate than the current average. But if I had a dime every time I heard that, well, I wouldn't be sitting here posting on this site. Sorry folks.

But let's just say that you can get away with 0 cost on the buy and get that unheard of interest rate. You're not taking into account several things. First, the market. Condos have not appreciated around here very much in the last 20 years. As I've said in another post, I can buy a South Loop condo today at nearly the exact same price as in 2000. Not the price adjusted up for inflation. The same price. So that means condos have declined in real value in that area over the last 20 years, significantly. Some of that is due to rapid building. Some of that is due to other factors.

Market times are ridiculously long on condos in many neighborhoods, even in this insane market. What if there's a real estate downturn? What if a lot of Loop office space goes residential (which i predict it will)? You could end up stuck with it, or in a negative equity situation that takes your rent versus buy numbers and makes a mockery out of them.

Second, to answer one of your earlier questions, condo associations can prohibit or limit rentals. Many, if not most, do. Even if the current bylaws allow it, the board can change that in a snap of a finger.

Third, don't forget about special assessments. My friend has a condo and he just got whacked with a $5,000 special assessment for a roof. Your numbers are so tight that one big expensive repair will toss you right into the red

Your numbers are strictly an "absolute best case scenario," which almost never happens IRL. So I would say renting definitely makes most sense on your two year window. But if you feel you want to roll the dice, go for it. But it's got the potential, dare I say likelihood, to go south.

This is what I’m worried about. Why isn’t the market appreciating in arguably the second best downtown in the US?