Market Conditions: Is It a Sign of the Bottom That Investors Are Gobbling Up Chicago Area Foreclosures?
Some of you that have been trying to buy bank owned properties have said that you’ve seen an uptick in interested buyers compared with a few years ago.
The Tribune reports on the new “foreclosure gold rush.”
Pulling up to a distressed home for sale in Oak Lawn last month, Carl Courtright saw that two other potential buyers were looking at the property. He returned a while later to find a third competitor.
After getting 10 minutes to look at it himself, he saw a fourth would-be buyer waiting for his own quick showing of the home.
“There’s a ton of competition,” Courtright said later. “If you’re careful with your money, it lends itself to being a very solid opportunity.”
Home prices are falling, and homeowners are nervous. But in this one corner of the real estate market — the market for distressed properties — local and out-of-town investors are bumping into each other at the doorstep as they snap up homes for rehab, resale or, increasingly, to convert them into rental properties.
It’s a noteworthy development. Despite low mortgage rates and a variety of government-fueled incentives, the residential real estate market has been stalled for several years. A newfound interest by investors could signal that the market is at, or near, its bottom.
The trends are attracting all sorts of players. Chicagoans Dzevad and Zumreta Hadzic are on the hunt for at least two more foreclosed condos in Chicago to add to their growing base of rental properties: They have four in Chicago and five in Daytona Beach, Fla. On a recent morning, the couple set out to visit four distressed condos on the North Side that, on paper, seemed to fit their criteria as cash buyers.
At the first property, the entry key was missing from the lockbox, sometimes a sign that a realty agent is trying to save the listing for his own client. At the second condo, listed for $35,000, Dzevad liked the unit’s financials, while Zumreta noted that it was near public transportation. The unit, they quickly concluded, would need $5,000 to $7,000 of work. A garden unit in another building, also selling for near $35,000, had some water damage and a few inches of mold along a baseboard that worried Zumreta Hadzic.
At the final unit, Zumreta figured it would take $2,000 to replace the windows. Sizing up the large living room, Dzevad concluded they turn half of it into a third bedroom and charge more rent.
The couple was in and out of each of the units in 10 minutes.
“There’s so much temptation out there,” said Dzevad Hadzic, a machinist. “We have to be careful not to extend ourselves. You have to be careful not to jump too far. Where else can you get 25 percent return on your investment?”
The real estate agent working with them, Laura Meier of @properties, said not every potential client is as savvy and patient as the Hadzics.
“It’s one of those markets where it’s still a buyer-beware market,” she said. “There are a lot of properties out there that are in trouble financially. It’s extremely important for these homeowners to do their homework before they go out.”
But the mom and pop investors aren’t just competing with other small time investors. They are also competing against big funds that are buying foreclosures by the thousands.
Waypoint Real Estate Group, an Oakland, Calif.-based company, has purchased almost 1,000 foreclosures since 2008 in California and turned them into rentals. With a substantial private equity infusion in January, Waypoint is launching an aggressive national expansion this year, and that may include Chicago.
Sergey Bitelman already has come to Chicago. The 36-year-old rents an apartment in Brooklyn and had never been to Chicago until October. Now he owns two homes in the south suburbs and receives rent checks every month.
Why the Chicago market? “There’s obviously a million homes in the five boroughs of New York City, but there haven’t been so many foreclosed homes to be able to capture below-market prices,” Bitelman said. “This is pure capital preservation.”
But is becoming a real estate mogul really that easy?
As investors watch their competition grow, they worry about the long-term supply of quality properties. They also warn newcomers that the strategy isn’t as easy to execute as it may look.
Courtright, for example, is part of two investor groups that have been purchased 25 properties with cash in the past two years. They prefer to resell the homes within 120 days once rehabbed to generate cash for additional purchases, and they’ve netted as much as $25,000 in some deals. But Courtright also acts as landlord for several properties.
“I have some wonderful renters and I love them dearly, and I have some that are a monthly headache,” Courtright said. “I’d rather deal with (flipping houses) three times a year than deal with someone who doesn’t know how to plunge a toilet.”
Is all the investor activity a sign of the bottom (as the article indicates)?
All the examples given seemed to be outside the GreenZone. Are investors as active IN the GreenZone?
Investors scouring Chicago for foreclosures [Chicago Tribune, Mary Ellen Podmolik, May 13, 2012]
In the most desirable areas of the city I haven’t found true foreclosures to be a bargain. However, short sales often are if you can deal with the hassles. The rental market has heated up quite a bit, with rents rising 10% YOY, and renting is quite often more expensive than buying so if you can deal with the tenant hassles there should be good investment opportunities. I’ve been meaning to do a formal analysis but I suspect that the downtown buildings that are cheap on a per SF basis would make the best investments.
“As investors watch their competition grow, they worry about the long-term supply of quality properties. They also warn newcomers that the strategy isn’t as easy to execute as it may look.”
It’s easier than it looks! They just say this b/c they don’t want any competition. I don’t blame ’em. Glad you guys are leaving all the cherry McHenry Co. places for me!
Downtown buildings are risky b/c many are instituting rental restrictions b/c they don’t want the rentals to get to high and disqualify the building from FHA mortgages etc…. They are easier b/c there is often onsite maintenance so the landlord doesn’t have to do basic repairs, but if you buy in a large downtown building you could be subject to a rental cap at some point in the future.
“The rental market has heated up quite a bit, with rents rising 10% YOY, and renting is quite often more expensive than buying so if you can deal with the tenant hassles there should be good investment opportunities.”
This is still constrained by incomes- of which they aren’t exactly rising. So why does everyone believe rents can just keep going up, up, up when it’s clear they cannot?
Also- why is everyone in the GZ betting on those 22 year olds even having decent enough jobs to afford the 2-bedroom at $3000 a month? I don’t get it.
I walked around the north side most of this weekend. I saw “for rent” signs all over the place (all in GZ neighborhoods). They ranged everywhere from $1495 to $4400. Most were for July 1st rental. Some were condos (some were in multi-unit apartment buildings.) Maybe the decent ones are renting super fast- I don’t know. But it didn’t seem like there was a shortage or anything.
“if you buy in a large downtown building you could be subject to a rental cap at some point in the future.”
True, but the ones I’m thinking of currently don’t have caps in place and are already at like 50% rentals so I don’t see these caps getting passed. But it is possible I guess.
“Also- why is everyone in the GZ betting on those 22 year olds even having decent enough jobs to afford the 2-bedroom at $3000 a month? I don’t get it.”
Especially with the potential student loan problem. Not only presents a problem for high rent, also presents problem for getting people to buy houses at the same rate as previous generations.
I’ve heard stories of nice 2 bedrooms in lakeview renting for over $2,000 a month. I’ve spoken with a few people lately who’ve been looking in Logan and the days of the $1,000 two bedroom are few and far between; $1,200 seems to be the bottom for a vintage 2 bedroom and it only goes up from there for updated units.
“This is still constrained by incomes- of which they aren’t exactly rising. So why does everyone believe rents can just keep going up, up, up when it’s clear they cannot?”
Chicagoans spend a far smaller percentage of their income on housing than many other cities, so there is probably room for that to grow. I agree there is a limit, but it might be higher than you are thinking.
If the building doesn’t already have a cap- it’s pretty unlikely they’re going to put one into place (as far as the larger high rises go.)
“So why does everyone believe rents can just keep going up, up, up when it’s clear they cannot?”
Same reason that all the “investors” were still hot to buy in ’06.
Wasn’t continued investor interest in resi RE a sign of the top, too? Wasn’t “is becoming a real estate mogul really that easy?” a fair question in ’06, too?
I’ve seen run down vintage 3 bedroom rentals in lakeview for well over 2000 a month, both of them under 1500 sq ft. Rents are definitely on the upswing, but who knows how long that will last.
Rent now or forever be priced out of the market!
“Rent now or forever be priced out of the market!”
Had I been able to lock in my rental rate 5 years ago, I would probably still be renting.
RE: 3 bedroom rentals in lakeview for well over 2000. It’s true. And, that’s actually pretty darn cheap for 3 people. What’s expensive about $667 per roomate (x3)? That’s cheap to live in a desireable area in a major city. One could cover that nut working at Starbucks.
“RE: 3 bedroom rentals in lakeview for well over 2000. It’s true. And, that’s actually pretty darn cheap for 3 people. What’s expensive about $667 per roomate (x3)? That’s cheap to live in a desireable area in a major city. One could cover that nut working at Starbucks.”
First, not all people seeking 3 bedrooms have two roomates or are in/just out of college. Second, you haven’t seen the units I’m referring to. Their size, quality and amenities didn’t make them seem like 2000+ properties to me.
“I walked around the north side most of this weekend. I saw “for rent” signs all over the place (all in GZ neighborhoods). They ranged everywhere from $1495 to $4400. Most were for July 1st rental. Some were condos (some were in multi-unit apartment buildings.) Maybe the decent ones are renting super fast- I don’t know. But it didn’t seem like there was a shortage or anything.”
Vacany in Lake View is 3.5%. In Lincoln Park is under 3%. Listings for July now is a sign that the market is very tight. I’ve seen signs up for one week and then down the next, non-GZ (I think, not sure what the boundaries are).
TftInChi –
I’ve seen plenty of crap rentals, so I get it. My point is that, even at $2k/month there is a strong market for rentals in good areas. A ‘decent’ 2BR Lakeview rental at $1650 is easily within reach for a couple or 2 roomates. It’s not expensive.
“Also- why is everyone in the GZ betting on those 22 year olds even having decent enough jobs to afford the 2-bedroom at $3000 a month? I don’t get it.”
Investors don’t need rents to go up – just stay where they are. Its something of a win-win for investors. In a bullish case either a) rents increase (good) or b) prices increase as people buy instead of rent (also good). Of course prices could go lower and rents could decrease but I think current high rents (and high cap rates) justify the risk (talking about 8+% cap rates going to 6%+ isn’t the end of the world). And to some extent landlords are taking advantage of a captive rental audience – they can’t get mortgages so they are forced to rent.
“So why does everyone believe rents can just keep going up, up, up when it’s clear they cannot?”
“Same reason that all the “investors” were still hot to buy in ’06.
Wasn’t continued investor interest in resi RE a sign of the top, too? Wasn’t “is becoming a real estate mogul really that easy?” a fair question in ’06, too?”
There are certainly signs of rental bubble, I just can’t figure out what happens if it bursts. I can’t see rents plummeting. My guess is that these investment groups with multiple properties will stop realizing large profits and be forced to sell prolonging the poor market.
“So why does everyone believe rents can just keep going up, up, up when it’s clear they cannot?”
I don’t think many people believe that. What the data supports is that it was up a lot last year and is probably going to be a lot over the next 12 months. In my opinion the cap on rentals will come from developers building apartment buildings to soak up demand.
rents fell in the early 2000s, maybe 02- 03ish. up to then it was a scramble getting a place. then all of a sudden it was easy peasy and you could get them to discount the rent no problem. would be interesting to read a study on what drove that market up and down.
front page of the the journal’s site today (warning: the sophisticated analysis you’ve come to expect from high-quality american journalism):
http://online.wsj.com/article/SB10001424052702304299304577348083297932466.html?mod=WSJ_hp_LEFTTopStories
“All the examples given seemed to be outside the GreenZone. Are investors as active IN the GreenZone?”
Probably not. Like any investment, cash flow out has to exceed costs and it’s been established on CC that unless you’re making 4-6% return, it’s not worth it for the savvy, experienced investors.* It’s also been established that GZ properties have either retained their values better than non-GZ properties so the numbers usually don’t add up even with rising rent costs.
**It’s also been established that CPS products like me don’t know a thing about real estate, psychology or the airspeed of an African Swallow so we should stay out of risky endeavors like investment properties.
“But it didn’t seem like there was a shortage or anything.”
As I’ve expressed dozens of times over the past few years, it’s very hard to find (i) a pretty nice place, (ii) in a really nice location, (iii) to rent. The challenge increases based upon the number of bedrooms desired.
In general, it’s cheaper (on a monthly basis) to purchase the typical decent 2/2 in LP, OT or a nice part of LV (assuming 10% down). Four years ago, we looked at over a dozen 2/2s for rent in the $2,000 – $2,500 range, and all left something to be desired. We saw nice, big places in so-so locations, cramped, little places in great locations, etc. In the 11th hour, we scored a huge, beautiful 2/2 on the park, for right around $2,400 (no central air; no in-unit w/d; no parking – we rented a block away). I’d estimate that (assuming 10% down) the owner of that unit was paying between $3 – $3,200/mo to carry the place (and it’s my understanding that the fees just jumped another couple hundred, putting them in the neighborhood of $1,000/mo). *That* place made a textbook case for why/when to rent – it cost much less to rent it than to buy it, it was a high quality unit (in a building in which we were the only renters), we could call the unit owner to handle in-unit repairs, and we could simply walk away with two-month’s notice. But it was an extraordinary find, one which made all the other places we had seen look pathetic. And I’m pretty sure the unit owner wants at least $2,500/mo these days (great investment, right?).
When I look, I can’t find a 2/2.5 for rent that’s a comp for the place we purchased (for the same monthly amount). Therein lies the misunderstanding of the Unicorn Criteria: they weren’t a list of pie-in-sky dream criteria, without which we’d never pull the trigger and buy. Rather, once we found a place for sale that had all of the Unicorn Criteria, the challenge was issued: find a place for rent that has all of the Unicorn Criteria, at the same approximate price as the place we were considering buying, and we *would not* pull the trigger to buy.
I could find a perfectly desirable one bedroom to rent in a matter of hours. If given a few weeks to really pound the pavement, I think I could find a decent two bed to rent, though it likely wouldn’t have the complete current Unicorn Criteria (i.e., 2.5 bath minimum; on or within a block or so of the park along Lakeview Ave, LPW or North Ave (east of Dearborn); kitchen not open to living room; garage space; in-unit w/d; central or through-wall air; all wood floors; private outdoor space; no ground floor/dup downs; and no one overhead if vintage). Within the next year or so, we aim to find a 3 bed that meets the Unicorn Criteria – with a monthly total cost of no more than $3,500 (assuming 10% down) (preferably more like $3,200). Find me a rental that foots that bill, and we won’t buy our next place. I’ll be pleasantly surprised if anyone can direct me to such a rental listing.
A hefty part of the rental market in GZ consists of two-income couples with children, who want the kids to be in a “good” school district but for whatever reason can’t afford to buy a home in said districts. So they’ll take a high-end rental and maybe keep saving up for a down payment.
“Within the next year or so, we aim to find a 3 bed that meets the Unicorn Criteria – with a monthly total cost of no more than $3,500 (assuming 10% down) (preferably more like $3,200). ”
And that’s exactly what drove me to finally buy after 12 years of renting. It’s very hard and I was able to buy a much nicer place, in not quite as nice a location, for a bit less than renting and with no risk of rental increases over the next few years.
“the airspeed of an African Swallow ”
laden or unladen?
“This (rental increase) is still constrained by incomes- of which they aren’t exactly rising. So why does everyone believe rents can just keep going up, up, up when it’s clear they cannot?”
Sabrina, you are taking broad data (income data) and trying to apply it to a very narrow market (rentals int he green zone). That is and always has been your mistake (same as looking at the broad data CSI numbers which factor is all of the foreclosures in Englewood and trying to apply that to the housing prices in the gold coast). The bottom line is that there are PLENTY of people with money out there to ensure that rental and property values in the best areas of the chicagoland area will remain high. Remember, not everyone who is included in your income data is looking for apartments in the green zone – only those who are at the very highest end of that data spread.
From Crains: Rents rise again in sizzling downtown apartment market
http://www.chicagorealestatedaily.com/article/20120514/CRED02/120519948/rents-rise-again-in-sizzling-downtown-apartment-market
You buy when everyone is renting, and you rent when everyone is buying.
Vlajos (May 14, 2012, 11:50 am)
From Crains: Rents rise again in sizzling downtown apartment market
http://www.chicagorealestatedaily.com/article/20120514/CRED02/120519948/rents-rise-again-in-sizzling-downtown-apartment-market
“with rents rising 10% YOY”
Gary, Any data to support this claim?
Any renters here seeing 10% increases this year (or last?)
HD, you are correct. And congrats again on that new home!
I was looking at a 15% increase in LV, but decided to move on.
“You buy when everyone is renting, and you rent when everyone is buying.”
Only works perfectly in a perfectly working system. Govt control of the mortgage market, ongoing high foreclosure numbers and the high number of units with no occupants can’t be ignored.
TftInChi, how long were you there and when was the last increase?
“Gary, Any data to support this claim?”
Actually, the article link that was posted just prior to your comment references a 9.2% increase. As for personal experiences…there’s that condo we put up for rent that I mentioned last week and the landlord raised the rent by 5% and we were inundated with calls. Could have easily raised it by 10%. Over the weekend I got a voicemail on it from some real estate agent who told me that he wanted to see it even though we took it off the market because his clients were losing every unit they were interested in.
Gary, a 9.2% increase is not 10%……
Just signed a lease for a third year. From years one to two, no rent increase. For the third year, the landlord increased our rent by $25/month. Our rent isn’t cheap, so $25 is an insignificant increase. While it’s a duplex down, we have a really great large space with 3BR/2BA, quality finishes, a deck, and a large vegetable garden (it was formerly the landlord’s unit before schools pulled him out into the burbs, so nothing screams “rental.”). I don’t think we could buy something similar in the neighborhood for a similar monthly outlay, especially considering property taxes. We’d have to go into Albany Park, or north away from easy-ish public transportation options. And we’d probably have to remodel.
As far as I know, our two flat is the landlord’s only rental property and I think he’s really interested in keeping tenants that don’t cause him headaches. So, that may be why our rent’s been stable.
“Only works perfectly in a perfectly working system. Govt control of the mortgage market, ongoing high foreclosure numbers and the high number of units with no occupants can’t be ignored.”
somebody must have hacked G’s account bc that looks like analysis
http://www.chicagotribune.com/business/ct-biz-0513-reo-investors-20120512,0,42567.story?page=1%5DHomebuying in Chicago area – chicagotribune.com
from the article: Rents in the Chicago area have risen by 9 percent during the past year, according to Zillow.
The Tribune reports that: “In the short term, the rush of investors looking for bargains will continue to act as a weight on home prices.”
What? I’d have guessed the effect of investors would be the complete opposite, that competitive bidding for foreclosures would support/benefit home prices. How can “investors looking for bargains . . . continue to act as a weight on home prices”?
“TftInChi, how long were you there and when was the last increase?”
Moved in in 2003. Last increase was 7% in 2007-2008. Rent was under market on a vintage 3 bed 1 bath.
“Actually, the article link that was posted just prior to your comment references a 9.2% increase. ”
Yes, Gary, an average rent for Class A downtown apartments. That’s not the same as a like unit increase. Do you suppose the following quote from the article affected the average?
“Nor surprisingly, the newest apartment buildings charge some of the highest rents. At the top of the list is Aqua near Millennium Park, where effective rents are $3.02 a square foot. Other expensive buildings include the recently developed Parc Huron and Flair Tower, both in River North, and One East Delaware, an older Gold Coast building owned by Waterton.”
Likewise, I’d also be curious to know what buildings have been added to Class B, especially any former Class As. A critical look at the article might lead to a conclusion that it serves some other purpose than the “rents increased 10%” that you claim.
who are you and why are you offering the analysis miu so craved after she has left for good..
I bought because it made sense for me financially and for my family. Most of the work i did to the house wouldn’t get any cheaper because of foreclosures. Granite is granite, wood floors the same. I may have been able to get a larger house in a better location for the smae price in the future; but that’s life.
G – Class A signifies close to “like unit” ie. similar high end places. Its about as good as you can get for rental analysis as there is no (to my knowledge) Case Shiller like index for the rental market.
I could care less if the rest of the world is renting or buying, you know I hate those stupid little idioms – which you’re a goof if you use them when investing. Buying or investing in anything takes a piece of paper, a pencil, and some simply calculations and a basic understand of macroeconomics. LIke I said, I understand that even if my house were to lose another quarter (50/50 chance going forward, it’s already 50% off the 2007 price), it’s nothing I can’t handle. Sure, I would like bigger room sizes, or a few more rooms, or an extra 10′ or 15′ on the back of my lot, or in a slightly quieter area … etc? But those are all tradeoffs I took, and there price seemed great at the time. I still see plenty of crap out there listed high – not too high – but high for me. Especially if it’s next to the metra tracks or in a flight path (Which extend all throughout teh burbs these days)…
“who are you and why”
Could it be G’s analysis?
Unusual also amiss
No its likely a trick
Truly he is a dick
So simple: he’s taking the piss
The 10% increase in rents is not apples to apples and does not apply to buildings other than class A, which is very few buildings in the city. In addition, when you back out new buildings and only compare the same unit YOY, rent increases for class A are closer to 6%.
The Appraisal Research Counselors is not exactly an impartial source. It is in their best interest to tout rent increases, which in turn increase valuations. The same thing happens when the IAR touts their supposed stats, which it turns out aren’t completely legitimate either.
“who are you”
I’ve got to say that the G-man is much more civil today in his responses. I don’t think the D word would apply today. I might even be able to grow to like G 2.0
How about zillow? They said rents are up 9%. And ARC said Class B rents are up over 8% in the downtown area. Not 10%….
“How about zillow? They said rents are up 9%.”
They also say Chicago house prices are down 13.5%. I have no idea what they are reporting and what it represents.
“And ARC said Class B rents are up over 8% in the downtown area.”
To connect the dots of my previous comment about this, it would be nice to know what ARC classifies as Class B and what impact adding former Class A properties might have had on the average.
It would be helpful to the public if ARC reported same unit rental changes, or at least same building. One could assume they have this data in order to report the market averages. What purpose does it serve to report the market average based on changing sets of buildings? Can anyone make a case that it is useful to the public?
Someone should call Ron DeVries or Gail Lissner for details on Class A & B classifications and methodology. Please report back.
It would be nice to have a Case-Schiller-like rental index that tracks it on a unit by unit basis. This ARC data is pretty much useless when you are looking at market averages. Also, it excludes condo units being rented too.
“What? I’d have guessed the effect of investors would be the complete opposite, that competitive bidding for foreclosures would support/benefit home prices. How can “investors looking for bargains . . . continue to act as a weight on home prices”?”
Foreclosures sell for much less than “normal” properties. So the more foreclosures that sell- the more the average home price declines. Also- if you have a bunch of condos sell in foreclosure in your building- good luck selling the other units for much higher (so those sales will also be a drag on any “normal” sales.)
Homedelete, you used the word macroeconomics in a way that shows you don’t even know what it means. Everything else you write shows you aren’t so great with microeconomics either. No wonder you could hardly afford your own education. Congratulations on buying into one of the biggest bubbles of all time, just like every other fool. “…there price seemed great at the time.” haha. Spoken like a true sucker.
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homedelete (May 14, 2012, 2:35 pm)
I could care less if the rest of the world is renting or buying, you know I hate those stupid little idioms – which you’re a goof if you use them when investing. Buying or investing in anything takes a piece of paper, a pencil, and some simply calculations and a basic understand of macroeconomics. LIke I said, I understand that even if my house were to lose another quarter (50/50 chance going forward, it’s already 50% off the 2007 price), it’s nothing I can’t handle. Sure, I would like bigger room sizes, or a few more rooms, or an extra 10? or 15? on the back of my lot, or in a slightly quieter area … etc? But those are all tradeoffs I took, and there price seemed great at the time. I still see plenty of crap out there listed high – not too high – but high for me. Especially if it’s next to the metra tracks or in a flight path (Which extend all throughout teh burbs these days)…
“you used the word macroeconomics in a way that shows you don’t even know what it means.”
Brad, you read HD’s comment through your biased filter. Try again–remembering it’s a comment on the intertubez, and not even an ungraded daily homework assignment–and maybe you’ll see that it can be read so macro is used properly.
The rental bubble is in full swing – you heard it here first folks.
All around me, new rental buildings are being built. Crazy corporate-owned rental buildings think they’re going to get $2000/mo for a smallish 1 bedroom apartment. Within another year or two, I see rents declining as supply dramatically increases.
Point taken anon. I realize it’s not a homework assignment. But speaking of usage, the difference between “there” and “their” doesn’t even come naturally to this person, much less the nuances of macroeconomics. Anyway, someone such as HD who is in both educational debt and now real estate debt should hardly be attempting to expound on such a topic.
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anon (tfo)
Brad, you read HD’s comment through your biased filter. Try again–remembering it’s a comment on the intertubez, and not even an ungraded daily homework assignment–and maybe you’ll see that it can be read so macro is used properly.
Brad F. (May 14, 2012, 9:59 pm)
Homedelete, you used the word macroeconomics in a way that shows you don’t even know what it means. Everything else you write shows you aren’t so great with microeconomics either. No wonder you could hardly afford your own education. Congratulations on buying into one of the biggest bubbles of all time, just like every other fool. “…there price seemed great at the time.” haha. Spoken like a true sucker.
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homedelete (May 14, 2012, 2:35 pm)
I could care less if the rest of the world is renting or buying, you know I hate those stupid little idioms – which you’re a goof if you use them when investing. Buying or investing in anything takes a piece of paper, a pencil, and some simply calculations and a basic understand of macroeconomics. LIke I said, I understand that even if my house were to lose another quarter (50/50 chance going forward, it’s already 50% off the 2007 price), it’s nothing I can’t handle. Sure, I would like bigger room sizes, or a few more rooms, or an extra 10? or 15? on the back of my lot, or in a slightly quieter area … etc? But those are all tradeoffs I took, and there price seemed great at the time. I still see plenty of crap out there listed high – not too high – but high for me. Especially if it’s next to the metra tracks or in a flight path (Which extend all throughout teh burbs these days)…
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Im sure he did just fine. I’ve been on and off here for a few years and one thing I can bet on is HD got a price that would have been considered cheap in the 70’s or 80’s on his recent purchase in Mount Prospect
REB (May 14, 2012, 1:07 pm)
Just signed a lease for a third year. From years one to two, no rent increase. For the third year, the landlord increased our rent by $25/month. Our rent isn’t cheap, so $25 is an insignificant increase. While it’s a duplex down, we have a really great large space with 3BR/2BA, quality finishes, a deck, and a large vegetable garden (it was formerly the landlord’s unit before schools pulled him out into the burbs, so nothing screams “rental.”). I don’t think we could buy something similar in the neighborhood for a similar monthly outlay, especially considering property taxes. We’d have to go into Albany Park, or north away from easy-ish public transportation options. And we’d probably have to remodel.
As far as I know, our two flat is the landlord’s only rental property and I think he’s really interested in keeping tenants that don’t cause him headaches. So, that may be why our rent’s been stable.
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Exactly. We don’t like turning units over if the tenants pay the rent. Its not worth the risk if the unit would be vacant for more than a month which usually happens because you need to paint and clean and turning it quickly is tough.
“(Crain’s) — Chicago developer Golub & Co. plans a South Loop 35-story, 392-unit apartment tower. The $111-million project is located at the southeast corner of Ninth and State streets.”
Here the incredible part, the rents psf, can they really be getting over $2.50 psf?
The top buildings in the South Loop had a combined occupancy rate of 93.0% in the second quarter, compared with 95.8% for the entire downtown market, and an average effective rent of $2.17 a square foot, vs. $2.43 overall, according to Appraisal Research Counselors.
“But Golub expects to charge rents in the building based on an estimated 2011 rent of $2.70 a square foot, increasing 3% annually after that, according to the CDC report. The most expensive building in the South Loop, the former Terrazio condo tower at 1935 S. Wabash Ave., charges $2.55 a square foot, according to Appraisal Research.”
Key words being “developer” and “expects”
Golub & Co are developers – so what do they do? they develop – it’s their business – it’s what they know.
I can also expect to take a bike ride in the fall, but between now and then change my mind half a dozen times.
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Right now that article is just news filler.
If/When Golub & Co breaks ground and the building starts going up is when the data quality goes up.
“I could care less if the rest of the world is renting or buying, you know I hate those stupid little idioms – ”
you just need to pick the right phrase at the right time… they always work.
Thanks for posting that article about Golub. It is truly insane for anyone to think they’re going to get premium rents in the still-oversupplied South Loop.
10 units per floor approximately. Cram those 700 or 800 sq ft 2 beds, cram as many as you can. Its like gold, if you build it they will rent it.
Sabrina, I don’t disagree with your point (how could I?) that “Foreclosures sell for much less than “normal” properties.”
fwiw, Roma’s WSJ link quotes Gary Shilling stating “the National Association of Realtors says foreclosed houses sell at a 19% discount to other listings…” — which sounds entirely plausible.
I disagreed with the Trib reporter’s insinuation that the “weight” depressing home prices was attributable to “investors.”
“At the final unit, Zumreta figured it would take $2,000 to replace the windows. Sizing up the large living room, Dzevad concluded they turn half of it into a third bedroom and charge more rent.”
I hate this type of investor who’ll slap up a wall anywhere to generate more profits, character of the building and code be damned. It’s solely about the bottom line with no pride and zero care for architecture or history or the quality of their tenants. My pre-war 1BR is a generous size and I could easily convert it to a 2/1 and rent it out, but it would ruin the flow of the rooms. I spent money on restoring period details and used high quality paint from Benjamin Moore’s historical collection. Yes, I realize that cuts into my bottom line, but it makes me happy and I hope I can attract the type of tenant who appreciates a beautiful home and wants to take care of it.
As an extra data point, my rent is increasing 17% this year.