Now’s The Time To Be A Landlord: Get A 3-Flat At 1832 W. Addison In Lakeview
This 3-flat at 1832 W. Addison in Lakeview came on the market in June 2012.
It is located just four buildings to the west of the Addison Brown line stop.
The 3 units have the following:
- Unit #1: 2/1, rented for $800 a month
- Unit #2: 2/1, rented for $1200 a month
- Unit #3: 4/2 duplex up rented for $1400 a month
The 3-flat is on a standard 25×125 lot and has a 2-car garage.
Each of the tenants pays their own utilities. The listing doesn’t say if there is a washer/dryer somewhere in the building.
There is no central air.
The listing says the apartments have “newer kitchens” and that the plumbing and electrical has been updated.
Some of the units have original features such as hardwood floors and wood trim. The fireplaces also look original.
With rents at “record highs” is it a no-brainer to become a landlord by buying this property?
Justin Francek at Dream Town has the listing. See the pictures here.
1832 W. Addison: 3-flat, 8 bedrooms, 4 baths, 2 car garage
- Last sold before 1988
- Originally listed in June 2012 for $529,900
- Currently still listed at $529,900
- Taxes of $7102
- No central air
- Rents total: $3400 a month
Those are fairly realistic rents, and a reasonable ask based on them. Assuming that there is no major maintenance issue, of course.
If the garden is renting at $800 and first floor at $1200, isn’t $1400 pretty low for the duplexed up 4 bedroom?
Rents all look low but it’s pretty “vintage” in the “old” sense. No central air hurts rental prospects but is workable. Assuming the non-cosmetic stuff is in good shape, I could see spending $20k on cosmetic work and maybe appliances, with the plan to redo some kitchens and baths as tenants move out. In a few years the rents could probably be double if you’re willing to put in the work to update it. It’s not where I would want to put $100 – $200k of cash and a lot of energy, though. Maybe a fair price is just under $500k?
3,400/month in total rent with a price over 500k? Unless there’s room to push rent on the 4 bed, you lease this up yourself come renewal and manage it you’re making around a 4% cash on cash return. There are better options out there. Not a ton, market is thin and this isn’t way overpriced as you have to consider land value too but your cap rate and and cash on cash return are way too low to make this a ‘no brainer’ you’re completely right owning rental property is, just probably not this one
Seems like a better option to get started as a landlord than buying a single condo is a huge building. I would be inclined to live in the top unit and then rent out the bottom two. If all went well, the buyer could move out in a couple years and rent out the top unit too.
This is technically North Center, not Lake View.
“a 4% cash on cash return”
539 * .04 = 21,560
3400*12 – 7500(t) – 2000 (I) – 1000 (h2o) = 30,300
??
“This is technically North Center, not Lake View.”
But she said Lakeview, which can mean anything.
so sad that is true. the whole north side should just secede and rename itself Lakeview.
“But she said Lakeview, which can mean anything.”
another good option is buy it and and take the top floors. lack of pix on the “garden unit” would be my concern, it may be of dubious legality (meeting code but not zoned properly to allow it as a non-inlaw).
need coffee. yes, what Jenny said. might be better in the long run to just take the equity and buy a SFH though, the layout is prob not to great as is.
“Seems like a better option to get started as a landlord than buying a single condo is a huge building. I would be inclined to live in the top unit and then rent out the bottom two. If all went well, the buyer could move out in a couple years and rent out the top unit too.”
Anon –
‘???’
Yep you’ve got the equation going, but you’re missing a few more pieces : debt service, annual maintenance budget which should be at least $1,000 a unit conservatively, 5% vacancy rate and you’re saying you’re going to manage it and lease it personally.
Jenny – you are dead on with your thinking, that’s always the safest and easiest way to invest in these if its a viable option for the owner to live there of course. An FHA 203k loan would be perfect here as you’re well below the loan max, you could pull 100k to do an all out renovation on it and still be within guidelines. Just as loan as its a legal 3 flat. You could burn through 50k easily in there, for starters by putting HVAC in each unit
“3400*12 – 7500(t) – 2000 (I) – 1000 (h2o) = 30,300”
Where is maintenance? I have used .007*purchase price as rule of thumb or $3709/yr for this building.
“you’re saying you’re going to manage it and lease it personally”
YOU said that.
“You could burn through 50k easily in there, for starters by putting HVAC in each unit”
And another 50 putting in three kitchens that are above CHA standards.
Also, john, is it safe to believe you are in the “6-8% returns for stuck owners of 2/2s are the exception not the rule”?
Dreamy Town listing sez “2 flat with finished basement”. . .
May require brains, as well as other resources.
“Yep you’ve got the equation going, but you’re missing a few more pieces : debt service, annual maintenance budget which should be at least $1,000 a unit conservatively, 5% vacancy rate and you’re saying you’re going to manage it and lease it personally.”
Lets say you can buy this for $500,000 and obtain 75% financing at a conservative rate of 4% for 30 years.
Initial Investment: $125,000 ($500K*0.25)
Annual Expenses:
-Annual Debt Service: $21,500
-RE Taxes: $7,500
-Insurance: $2,000
-Water: $1,000
-Maintenance Reserve: $1,500 ($500/unit/yr should be plenty with updated plumbing/electrical and no HVAC units)
Total Annual Costs: $33,500
Annual In-Place Rents: $40,800
Year-1 Cash on Cash Return: $7,300/$125,000 = 5.84%
Not sure a 5% vacancy is warranted when running yr-1 cash-on-cash as you likely have below market rents here. If you cant lease/manage a 3-unit you probably should not be investing in this type of property, unless this is part of a bigger portfolio where you already have a manager.
Not too bad of a deal but not great, especially at the list price.
Or put the money into the 4/2 top unit as owners unit and get $2000/mo toward your mortgage from your tenants… I’d be interested in an arrangement like that, though I don’t think I could sell my wife on the idea of playing landlord.
Is “2 flat with finished basement” code for non-legal basement apt?
Oh God, Not talking about returns again……. hope yoss doesn’t join in.
“is it a no-brainer to become a landlord”
I would say it is a “no brainier” to become a landlord when you are guaranteed to be cash flow positive forever, never have to do any work on the units and you have tenants who never complain… so basically never.
County Assessor website says it’s 2 units, two bathrooms.
Yep JPS exactly. The listing actually should say ‘broker and owner do not represent legality of garden unit’ It’s completely normal in Chicago, it just should be disclosed there to cover the broker/owner. Its a fantastic rental location with the proximity to el. I wouldn’t event bother with HVAC for awhile on it, the real potential is in that 4 bed. I have clients that own in the area and pull $1,500 for their 1 beds and they don’t have w/d in unit grantie/ss etc. just normal 1 beds. These rents are under, especially in this market and at that location specifically. If you can bump the 4 bed to the 2000 marker and the legal 2 bed to 1600 its a nice buy and hold, safe investment as long as there’s no major maintenance issues ie roof, windows, plumbing in the future but seems to be fairly updated and well kept.
are those taxes realistic at $7500? I’d guess they’re going up considerably in the first re-assessment post-sale…
My friend just closed on a three flat in Berwyn… it was about $100k with 2 units already rented out. I’ll be curious to see how she does with it. She is going to live in one of the units and get a feel for whether landlording is right for her. I’m not sure if I have the stomach for dealing with tenants, but I think she is going to do well.
This place seems like it would be a good option for a young couple who isn’t quite ready to have kids yet, but has two salaries to make the mortgage do-able.
“are those taxes realistic at $7500?”
Means the AV for 2011 was about 47,500. Should stay about the same, post sale (even if the sale directly affected AV). So, only going up to the extent everyone’s taxes go up.
“This place seems like it would be a good option for a young couple who isn’t quite ready to have kids yet, but has two salaries to make the mortgage do-able.”
And the way to do it would be to live in the main floor, fixing it up as you go (maybe duplexing into the lower at some point), then moving into the upper, also fixing it up, and the moving out, and keeping (or selling) a much improved all-rental building.
If tenants actually pay their own utilities I would assume gas forced air so adding AC is not that big of a deal if you have proper vents.
It’s definitely forced air, you can see ceiling registers in several of the pictures.
“If tenants actually pay their own utilities I would assume gas forced air so adding AC is not that big of a deal if you have proper vents.”
“My friend just closed on a three flat in Berwyn… it was about $100k with 2 units already rented out. ”
I wonder what would be the better investment, 4 Berwyn buildings versus the subject property?
4 buildings in Berwyn. Figure $1600-$1800 per building. Less transient tenants. Lower taxes too.
“4 buildings in Berwyn. Figure $1600-$1800 per building. Less transient tenants. Lower taxes too.”
Does that include the tenants that threaten to kill you if you ask for rent?
“Does that include the tenants that threaten to kill you if you ask for rent?”
Even with that, 4 buildings in Berwyn are the better deal.
Berwyn isn’t humbolt park, not by a long shot. City vs suburbs. Berwyn is cheap these days lots of foreclosures and cheap rents for lower middle class workers who want to live in the burbs.
” City vs suburbs”
Ford Heights is also the suburbs, HD. I’d sooner hang out in Humboldt Park than Ford Heights.
But Berwyn ain’t Ford Heights either. After all, its the center of it all.
“Berwyn isn’t humbolt park, not by a long shot. City vs suburbs.”
Berwyn has great historic houses (bungalows and some Victorians and others stuck in there.) You can be downtown in like 8 minutes via Metra. It’s a great deal.
Seems like a good deal. The rents are definitely low. Especially the duplex. If I had the money i’d look into it. It could become a good investment. BTW – Berwyn can’t be compared to the City. Sorry. Only suburbs nearby that would consider that give you a city-feel are Evanston and Oak Park. they have history, class, and a good mix of people. These are like the “Hooboken’s of Chicago.”
“Berwyn can’t be compared to the City”
Berwyn can certainly be compared to the parts of the city that the GZ-snobs don’t really consider part of the city (ie, those parts that cause anonny to ask “is that part of Chicago”). It isn’t a Lincoln Park, or even Rogers Park, alternative, but it is fair to compare it to Gage Park and perhaps McKinley Park.
“Berwyn can certainly be compared to the parts of the city that the GZ-snobs don’t really consider part of the city (ie, those parts that cause anonny to ask “is that part of Chicago”). It isn’t a Lincoln Park, or even Rogers Park, alternative, but it is fair to compare it to Gage Park and perhaps McKinley Park.”
I would compare Berwyn to Albany Park or the area north of Lincoln Square (i.e. Bowmanville.) Maybe parts of Edgewater too.
There are some good restaurants opening in Berwyn now (which should be the start of even greater things.)
http://articles.chicagotribune.com/2011-08-11/features/ct-dining-0811-vettel-autre-monde-20110811_1_berwyn-tuttaposto-dining