Flippers in Pain: 1620 S. Michigan
CMK has two buildings in the south loop nearly next door to each other. Both are modern with concrete and glass.
1620 S. Michigan was the first of the buildings to close (the other being 1720 S. Michigan.) Closings began in 1620 last summer.
CMK has been building fairly affordable buildings in the last few years- especially in the south loop. Flippers have been investing in the hope that the south loop, what Chicago Magazine dubbed “the country’s hottest neighborhood” would keep appreciating at the rate it did in the last 10 years. Some agents are hoping that the Olympics will inject a sense of urgency into the south loop. This listing on Craigslist says to “buy before the Olympic rush.”
But some flippers haven’t had the greatest luck in the building. Many of the units closed over a year ago and some are still holding on – waiting for a buyer and losing money with every month that goes by.
Unit #406: 2 bedroom/2 bath, 1148 square feet
- Sold for $331,000 in August 2006
- Currently listed for $329,900 with parking extra for $35,000
Unit #803: 2 bedroom, 2 bath, 1100 square feet
- Sold for $333,000 in September 2006
- Currently listed for $335,000 with parking included
- Listing says “never lived in”
Unit #1001: 2 bedroom, 2 bath, 1085 square feet
- Sold for $337,500 in September 2006
- Currently listed for $349,000 plus $35,000 for parking
- Listing says “never lived in”
It seems that these investors are going to take quite a big hit on these units.
I’ve been in both buildings and I have to say I’m not impressed. They are very affordable but extremely basic. There are better buys out there.
1620 is a nice development for my tastes (modern design, minimalistic) but at the entry level they want $169k for a studio currently. Thats over $300/sf…no thanks. There is now a listing nearby for jr-1-bdrm at 1503 S state at a reasonable $200/sf, if this doesn’t sell quickly then I see serious trouble in the south loop.
The $139K jr 1 bed unit at 1503 S State is temporarily off the market. Not sure why. MLS says it is a foreclosed property.
However, a quick sale will not mean a lack of trouble in the south loop. There will be knife-catchers all the way to the bottom.
One thing is certain, a large price reduction this early in the market correction will serve to speed up the decline by becoming the new comparable, and the developer will lead the way to the bottom. No doubt that 1620 and 1720 S. Michigan will begin to see numberous foreclosures by the end of the year.
FYI after many months on the market unit 913 has been reduced 5k from 169 to 163k. It is the smallest floorplan in the building with barely over 500 square feet. Unit 813 is also listed for sale at $190k. Guess that additional floor up is worth (37k) in ask price 😀
So I went to an open house this Sunday, and one flipper was showing a Penthouse Unit 3312. Nice unit indeed, awesome view from the 15′ high ceiling, floor-to-ceiling glass window, North West East exposure, so you have all downtown, west burbs, and lake. Although there’s no window on the east, but really you get the lake view still from all the windows, thanks to the floor-to-ceiling window that’s about 15′ high!!
So here is the asking price … $669,000 for 1200+ sqft, with an long winded hallway, which takes up your space.. The flipper has 2 parking spaces, but each costs an additional $30+k or something like that.
Available for rent too for $2,995/month, which includes heat, 1 parking space, gas, water, etc.
Someone wrote earlier that the finishes are so basic.. I agree, it’s not like Snaidero, or Miele, everything is Frigidaire and cheap carpet in both bedrooms!
Who knows how much did the unit 3312 sell for originally? When did it close?
I am talking about 1720 South Michigan Unit #3312, not 1620 South Michigan. They are owned by the same developer I think, but different assocation (?)
So many renters in the uilding let me tell you… Mostly younger kids, college age people, etc., because I went there to the open house tons of renter-look people moved in and out…
Not good for your future value when a building originally intended to be 100% sold to home-owners now became mostly rental properties…..
Little Boi,
Now is not the right time to buy in the South Loop. I think the correction there over the next 24 months is going to be much greater than other neighborhoods due to overbuilding. Any flipper that bought in 06 or 07 that can get out without losing their shirt now should count their lucky stars.
Also the deep south loop (1500-2500s) isn’t nearly as convenient to downtown as the close south loop (500-1000), so why would someone think they should go for the same $/sf?
Thanks Bob. I actually feel the same about the ‘deep’ South Loop as you eluded. There’s nothing there as far as Streeterville-like amenities (e.g. shopping, people walking by, gym, etc.), there are a few but not at the caliber of Streeterville of course, and the price point there is about the same as that of Streeterville! I was in that penthouse units with a few other buyers, and we all walked out of the penthouse unit thinking the same way, so I guess the flipper just had another unsucessful open house day….
With this money, if one is ready to buy now (which is probably not the case for most of the chatters here), then one would absolutely buy in Streeterville which is in a much better location, more developed, etc.
But for those who have not been up there, go up there and enjoy the beautiful North East West view from the 15′ ceiling-to-floor window. It was truly a jaw-dropping view. You’ve got everything in your face!
I came close to purchasing a 1 bedroom in 1720 S. Michigan. I liked the unit, but I got the sneaking suspicion that if I want to sell in a few years and move to a bigger place, it might be difficult. I like 1720 S. Michigan. They have a dog run, so you don’t have to leave the property late at night to walk your dog. If the price for a one bedroom drops below $200,000 including parking, I would reconsidering purchasing.
One more note, I actually like the location since it’s close to downtown and not chaotic. Streeterville is just too chaotic. I feel frazzled being around so many people.
It looks like the penthouse 12 at 1720 originally sold for $558,500.00. The date of the deed is 3/31/08. At least that is what I see. I live in the building – we bought back in October. We originally had wanted to look in Lakeview or Lincoln Park but we could actually afford a brand new two bedroom here as opposed to up there – and we really wanted central air and all the rehabbed units we looked at still had window units for the most part. Plus we really liked the fact that we could drive comfortably down here and have a parking spot. Our unit actually has pretty nice finishes – I agree about the carpeting though – I would have preferred hardwood throughout. But really we got a great deal on a two bedroom so I’m content. For our first home it’s nice and you really can’t beat the views and all glass walls. But I am totally disappointed that this building is turning into a rental haven. Renters do not respect nor take care of the units or building. Additionally we enjoyed the fact that the south loop has an older crowd but we seem to have some young kids here that think screaming at people from the balcony is a good idea, which is unfortunate.
Do you know about any potential assessment in 1620 S. Michigan?
I meant potential special ssessment.
I went to an showing at 1720 S. Michigan and the building was full of 18 yr. renters. More importantly, when I was being shown the balcony on one of the units someone was smoking pot on their balcony below us !! The relator just smiled and tried to ignore it. What a low class building !!
It’s unfair to judge the entire building based on what you see one time in – I hate that we have renters in our building but we have little control over that aspect. The best thing we can do is take care of our units and call in complaints on renters every opportunity they give us. It is insulting for someone on here to call it a “low class building.” It is insulting and there are quite a few professionals in the building. We have doctors, lawyers, pilots etc. Do we have some idiot renters? Sure. But I’m doing everything in my power to make it an uncomfortable stay for them (by complaining about them when they are doing something improper). again it is personally insulting to refer to my home as “low class.” When a young couple has law school loans for miles it is a bit difficult to purchase our own single family home for a few million. 1720 offers brand new, nice & affordable units.
Ellen: Has the association been turned over to the condo board yet or is it still controlled by the developer?
Any initiative to try and limit the number of renters in the building or do investors control such a large number of units that such a change to the condo regulations wouldn’t get passed anyway?
1620 now has satellite and internet service included in the assesments. There are no plans to raise assesments in the next few years; the building is financially fit.
1720 was turned over to the association from the developer in late May.
Sabrina – yes the association has been turned over. I haven’t been able to attend any meetings due to scheduling conflicts so I’m unaware of any such initiatives. It sounds appealing but at the same time if we are still in a slump when the time comes for me to sell, I would probably want the option to rent as well. It’s hard to blame the people who thought they could flip for renting when the real estate market is so terrible. I wish there was a way to limit the renters but the thing I just do not understand is that renters are people too. I’ve rented before and I’ve never had the mentality to go in and trash a place and act like an idiot just because I don’t own it.
Ellen-
Why are renters bad ? Because if a building is more than 30% rental, a bank will not finance your purchase with a convential mortgage.
Since you live in the building Ellen how is the cooling and heating ? The windows look really cheap, and it would appear that they would do a bad job keeping the place warm in Chicago winters. Are you concerned that may affect the amount you pay in assessments a year or two from now ? Or are you just hoping to flip that problem away ?
Not intending to flip. My husband and I plan on staying here until we have children in a few years. I understand all the reasons renters are bad. I was expressing my frustration with the fact that both owners and renters should care about not trashing a place and that I have never personally felt the need to trash a place simply because I didn’t own it.
Our heating & cooling is just fine. During the winter we really do not even turn our heat on – honestly. We dont really need it. I do notice that if you put your hand on the metal parts it is cold to the touch but I don’t sit around with my hand on the metal and it doesn’t give off any cold air either. And during the summer our A/C works fine as well. We do have the custom shades that we leave down during the day given the amount of sunlight we get in our unit.
And honestly though I’ve heard complaints the only things that I have personally noticed about the renters in the building is that they tend to be young, sometimes loud, and have their friends over and park in spaces that are not theirs. I had someone towed from my space within about 15-20 minutes of arriving home to find someone in my spot. Otherwise I just see signs telling them to not put big things in the trash chute or let their dogs pee on the sidewalk. Not so sure you can blame only renters for that.
The rental problem is two-fold.
There is the loan problem that John S stated. Non-conforming status means very few qualified buyers and coupled with the overall shift to higher lending standards this will be devastating for would-be sellers.
Then there is the problem with accidental landlords. They are bleeding money and the combo of inexperience and desperation will result in poor decisions about potential tenants.
These two issues will feed each other in a long downward spiral.
Right. But aren’t a lot of high rise buildings experiencing this? I think there are quite a few rentals in 1255 S. State right?
Absolutely. The problems won’t be isolated to a few buildings in the South Loop. Hence, the term ‘market collapse.’
1620 is the type of building that sets off alarm bells for me. If you go to the Tribune’s property record sales there are a handful of specvestors (at least 5) whose names are on 5 or more properties.
Some have been successful flipping some of their units even as late as last year, but they are mostly still holding them, and likely taking the monthly hit on the difference between the rent cost and owning. I worry what happens when they finally throw in the towel and all of their remaining properties go REO at once. I wouldn’t want to compete with selling my unit with a bunch of foreclosures in my building.
THE 3312 UNIT IS NOT WORTH MORE THAN WHAT THE OWNER PAID FOR IT AND THAT WAS 569,900 AND HE PAID TOO MUCH TO BEGIN WITH!
THERE ARE NO UPGRADES – NONE!
Yes he asked 2900 for rent and got 2500 and that is so not realistic for the size unit it is very small. The building lacks everything – NO AMENITIES!! NOTHING! for 2,500 you can get a nicer place closer to the loop with a pool! In fact this renter probably pays more than anyone else in the building. I saw three units – bad lay outs no room – no neighborhood.
AS FOR FLIPPING – THOSE DAYS ARE GONE……………………..
MOST SMART SAVY BUYERS DO NOT BUY AT THE ASKING PRICE – NOW THEY GO 100,000 LESS OR MORE!Do not be a “sucker”buyer.
I don’t know who you are, Ellen, but if you don’t like people insulting you or your building, I suggest you keep the “idiot renter” comments to yourself. As one who is renting at the moment (after buying and selling two Mich. ave. units B4 the bottom started falling out of this market) and pocketing some excellent profits, it makes one wonder who the real “idiots” are – those who are currently renting, or those who bought – and overpaid – in the last 2 years. Good luck with that. Being in a position to buy the same or better units you lucky law grads did at 20-30% LESS, would suggest someone made a BAD deal, and the “idiots” are going to end up looking awfully smart.
The whole concept of buying a “first home” for a “few years” until “we have kids” will become absolutely ridiculous. Real estate does not always go up, and rent is not always throwing money away.
It’s too bad the developers built so many 2bd condos as starter homes for the starter home crowd. What will happen to these units?
“G on November 24th, 2008 at 6:37 am
The whole concept of buying a “first home” for a “few years” until “we have kids” will become absolutely ridiculous. Real estate does not always go up, and rent is not always throwing money away.”
They will eventually stabilize at rental value after declining rents and higher cap rates result in an over-correction.
It will take a surprising number of years for stabilization to occur.
That’s a scary thought, very scary. Lot of bankrupties, short sales and REOs as more and more FBs go underwater. It took years to get us into this mess and it will take years to get out.
“It will take a surprising number of years for stabilization to occur.”
G said: “The whole concept of buying a “first home” for a “few years” until “we have kids” will become absolutely ridiculous. Real estate does not always go up, and rent is not always throwing money away.”
G: This is SO true. I still know people who are buying 1 and 2-bedroom 1000 square foot apartments right now with the sole intention of staying in them only 2 or 3 years (maximum.)
They all believe that the market will “rebound” by this spring or next and that price increases will be the norm again and they’ll be fine.
For those who are admitting that maybe the market won’t rebound – they argue that they’ll simply “rent it out” and move on to the next property. As if being a landlord (and covering your costs) is that easy.
Many, many people are in for a rude awakening.
I still don’t understand who is buying the $300k-$400k one-bedroom condo but they continue to sell in River North and Streeterville.
“It’s too bad the developers built so many 2bd condos as starter homes for the starter home crowd. What will happen to these units?”
Us old folks with pensions and second careers looking for weekend places in the big city will be snapping them up at low prices this winter when desperation time hits.
I still don’t understand the idea of buying a place in the city just to have somewhere to stay on weekends. It only made sense when real estate prices were skyrocketing. Hotels are far cheaper in every other case.
I think Steve’s A baby boomer generation is in for the biggest economic shock of all in this downturn.
They say a fool and his money are soon parted. Anyone buying an ‘in towner’ is a complete fool who deserves to lose his money.
They are a luxury status symbol for some I suppose, sort of like hotel condos.
Pete:
A fair question.
We are doing it for a number of reasons.
1. Tax benefits.
2. It’s a better place in the long run to put our money (both for tax benefits and appreciation) than putting it in pre-tax voluntary contributions to the pension plans for our current retirement jobs, which are earning very little. Regardless of how much we add we will not make a lot on these retirement plans since we do not intend to stay at these jobs for more than five years. We have a combined 57 years in the Federal government, which provides us with our primary pensions. We will also be receiving social security, fairly minimal because we were Feds, and we have extensive IRA holdings, as well as lots of cash from our house sale in NoVA, that we haven’t yet touched. I believe that we stand a better chance, we are planning to hold on to the unit for five years, of making some money (or at least getting our investment back) on the unit than putting it into the stable income funds available to us for our pensions.
3. We might move to Chicago when we retire from our current retirement jobs, and we could live in the unit.
4. My wife grew up poor, and to be able to have two homes tells her she’s been successful. It’s important to her; it’s important to me. Besides she works very, very hard and needs something tangible as a reward for her hard work.
5. It would be fun.
If you have the money and want a place in the city, all the power to you. But if you believe that a good investment awaits at “low prices this winter when desperation time hits,” you are a knife-catcher.
In the end, it won’t be the depth of the collapse that is most shocking, it will be the duration.
Bob:
We are not interested in a luxury unit; just 2 bedrooms, in a nice building, with an urban view, and places we can walk to,
Yes we are Boomers. We raised a kid through 17 years of private school, and had to work for the Feds for too long. We have money now; much of it guaranteed. Now it’s our time to enjoy.
Steve A,
Good points. Also my critique was restricted to the financial aspects of your decision, however the intangibles you listed are things that can’t easily be quantified but still weigh into the purchasing decision. I hope there are a lot like you out there that can help offset the severity of the sales decline to make it a smoother cycle.
On five years out I think its impossible to say at this point where the real estate market will be. Thats too much time with too many variables to make an accurate guess.
Bob
Thanks for noting the intagibles something that I think that often gets lost on this board. Too much cynicsm. We lived well but carefully over the years. Now we want to have some fun.
I do recognize that my wife and I are at a much different stage in our lives than other contributors here. Frankly, money isn’t an issue as long as to keep on living carefully and don’t confuse ourselves with rich people.
Steve A – Just rent for a few years instead…you will be much better off. The mistake is to invest for “tax reasons”…that should be a SECONDARY concern. You first invest for the actual investment potential and then consider tax issues….I am concerned that you listed “Tax benefits” first. BEFORE you buy, rethink this for a longer happier retirement. Besides tax laws change all the time and owning probably had all the benefits it could have and will probably have fewer tax benefits going forward. There will always be places to rent without the burden of owning a costly and illiquid asset. Ultimately, do what makes you happy, but do a hard look at your financials first since losing a lot of money will make you unhappy quickly. Money doesn’t buy happiness, but losing money or having little can make life miserable. Good luck….there is no rush, none whatsoever.
P.S. With renting, you can sample different parts of the city every year or every couple of years….it could be a fun adventure without the commitment.
John:
Thanks for the advice.
Something to think about.
“Frankly, money isn’t an issue…”
– And as long as the fed govt doesn’t default… I know that is pessimistic but these are very uncertain times financially esp. with the Citi stuff today…..where does it end?
If the Feds default not much will matter anymore.
Let me try to explain my thinking better on the financials.
We are seriously into AMT, which I hate so we try to lower our income with pre-tax contributions, and a fairly large mortgage on our condo. The pre-tax goes into retirement funds offered by the State of Wisconsin. Because we cannot wait out the current market our money goes into stable investments that are essentially money market funds. They’re not earning very much, but they are pretty safe. It’s money we don’t see and get no enjoyment from, and it is not adding a whole bunch to those pensions.
OK. So we take part of the money, and a 20% down payment (we are looking at places in the $300,000-400,000 range) and buy a place where we can see the actual fruits of our money, and we get tax benefits. Understand that we don’t care to use the money to buy fancy cars or clothes and our vacations are taken care of with (and I know you all are going to hate this) with four weeks of Marriott timeshares, which we have had for over 5 years.
So, for us buying makes sense (at least to me obviously not to most of you), although I need to consider the renting. However, at $2,000 a month rent, that’s $24,000 a year that I can’t deduct and isn’t equity in anything.
BTW, we are contributing the maximum in pre-tax contributions that old people are allowed. For us that will be a combined $40,000 a year plus.
Someone mentioned “renter looking” people. Im curious, what does “renter looking” mean? As someone who lives in 1620 S. Michigan, I have had my share of problems with renters, but I have also had my share of problems with uptight, judgemental jerk owners / board members.
Im an IT professional who makes well into 6 figures, and I own my unit. When I moved in, the building manager greeted me at the loading entrance and asked If I was there to move in Lee. I replied that I WAS Lee, and he said “really? oh, ok”. I guess I have that “renter look”, or even worse, the “mover look”. Oh no, I had better get over to Banana Republic ASAP.
My point is, owning property doesnt make you special, or immune from scumbag behavior. A $300k condo isnt a difficult item to obtain, and certainly doesnt make you a member of the elite, so maybe you would get along better with your “renter looking” neighbors if you didnt look down on them so much.
I have seen owners letting their dogs piss all over the signs posted out back which read “please dont walk your dog here”.
As for the “renter-looking” people. I’m in my 20’s, non-white, and own a condo. Outside work, I prefer to wear my “crap” clothes (old jeans, punk rock t-shirt, cap). One day I was in my building’s elevator with some takeout and a neighbor, whom I haven’t met yet, thought I was delivering food for his roommate. I had to correct this renter. I didn’t mind, since I knew my appearance would automatically lead to that judgment by anyone. That’s why when I’m at work or doing anything where I know I can take advantage of people’s stupidity when it comes to appearance, I dress like I own the place. It’s mind boggling how based on appearance, people either call me “SIR” or assume I’m just a “Delivery Guy”. People are stupid, take advantage of it. As for renters, the only ones I have problems with (renters or owners) are the obnoxious ones who don’t follow condo rules and think they’re cool just because they live downtown.
I had a similar experience this w/e when my dad and I were moving some things to my new place from a rented one. one condo owner asked other if we were her movers.. my dad just laughed and said, uh.. no bud. i dont mind though, i know my new pad is 100x’s better then anything where I rented. 😉 i dont mind renters (as i was one for many years!), personally I couldnt tell you who rents and who doesn’t.
People who look down on those who rent in their condo building just because they rent are usually the “owners” who drastically overpaid and are in debt up to their eyeballs and trying to make themselves feel better about their situation. Even though they made a terrible financial choice, they can reconcile it by telling themselves that at least they’re not one of those filthy renters. If that’s what it takes to make them feel better about themselves…
some renters are better then owners. i know i always treated my unit and common areas with respect. My old neighbor who was an owner let her dog bark all damn night b/c she was too busy being out getting bombed. not to mention her dog pissing all over in the hallway. an owner at the end of the hall always tried to blame the barking on my dog as well as the pissing. my dog doesnt bark much – to my pleasure!… and to this day will only relieve herself on grass. i felt bad for my puppy getting a bad rap (not that she knows the difference). I guess they just assume the renter on the floor had a bad renter puppy lol When I went back last w/e i saw 3 new piss spots and my pup hasnt been in that building for about 2weeks! My pup has been vindicated! She is no longer a patsie!
does anyone know what’s going on with the potential developer lawsuit? I’ve been traveling extensively and haven’t had a chance to keep up. thanks.
What is going on with 1620 S. Michigan. I have seen some really good deals on MLS, is this builgin wirth buying into? Can the moderator post something in regards to this building?
Andy,
I’d be very cautious about the financial aspects of buying in a building with so many renters (nearly 50%) these days. Not that I’m bashing renters, its just that a high percentage of renters can tend to stigmatize a building. Look further north. 1600 is a trek from the Loop and you can certainly find other comparably-priced units in the area that are better-located.
Happy Hunting.