Million Dollar Homes Everywhere: 2435 W. Erie

We’ve chattered about how there seems to be million dollar homes in every corner of the city. It has become almost commonplace.

2435-w-erie.jpg

Take this new construction home at 2435 W. Erie in West Town near Smith Park.

It’s been on the market a little over 2 months and has had one price reduction.

How long will it take to sell all of these very expensive properties?

Here’s the listing:

SMITH PARK! CREATIVELY DESIGNED & METICULOUSLY CONSTRUCTED! EXTRA WIDE, INCREDIBLE CUSTOM 5500 SQ FT SINGLE FAMILY HOME. 5 BEDROOMS, 4.3BATHS, 3 FIREPLACES.

 COLONIAL WOODWORK THRU-OUT, SAUNA, STUNNING MOSAIC TILE WORK, CUSTOM CABINETRY ,RADIANT HEAT ON 2 FLOORS, GARAGE ROOFTOP DECK. ONE OF A KIND. ADDITIONAL 222 PHOTOS OF THIS HOME AVAILABLE ON WEBSITE, PLEASE ASK FOR LINK.

 2435-w-erie-bedroom.jpg

2435-w-erie-bathroom.jpg

Roman Mazunok has the listing. See more pictures here.

2435 W. Erie: 5 bedrooms, 4 full baths, 3 half baths, 3 car garage, 5600 square feet

  • Originally listed in July 2008 for $1.499 million
  • Reduced
  • Currently listed for $1.475 million
  • Taxes of $8516 (for the prior property before teardown perhaps?)

34 Responses to “Million Dollar Homes Everywhere: 2435 W. Erie”

  1. 30 yr fixed jumbo gettin damn close to 10% right now. Ugly and gunna be gettin uglier…
    Got that song “slip slidin away” stuck in my head and can’t make it go away.

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  2. Pardon my ignornance, but what in the world is the attraction of living at Erie & Western? I haven’t had any real reason to travel in that area there in quite some time but I didn’t know that neighborhood supported million dollar homes. Secondly, what is the big industrial space directly to the west?

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  3. The only attraction I can think of would be getting a home for a million bucks that would probably cost two million if it were in LP.

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  4. Wow, this house looks like a mausoleum from the outside !

    If this were located in LP it could go for $450,000. But considering its located in West Town, $200,000 is fair value.

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  5. Skatty_Ska_Ska on October 9th, 2008 at 9:23 pm

    A broker friend who works for one of the top joints in town said recently that “hundreds” of deals have fallen through in that past couple of months because of lenders yanking financing at the last minute. The the only ones who can afford million + homes now are those putting down substantial down payments. If you are able to do so, why in the hell would you do so out there when there’s plenty to choose from in more desirable areas?

    At what point do these fringe “up and coming” neighborhoods stop being up or coming and start to revert back to what they were 10-15yrs ago.

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  6. David (the first one) on October 9th, 2008 at 10:53 pm

    John S,

    Even if we’re pessimistic and assume interest rates spike to clamp down on future inflation, and assume lending standards return to absolutely require 20% down…. your $200K valuation would imply that the market rent for this behemoth is somewhere around $1100-1200/month.

    If so, sign me up. I’ll sublet 4 bedrooms and live for free.

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  7. This would probably go for $1.4MM in the current climate, in LP. It WOULD have sold for $2.1MM easy in LP at peak.

    It’s a beautiful house, but it’s really in the wrong area, and there is a large oversupply of new mansions in LP and west town both. There never was a big enough supply of high income people to buy all the luxury homes being developed, and places like this are going to take a big hit.

    But I still can’t see it selling for less than $900,000.

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  8. David wrote ” your $200K valuation would imply that the market rent for this behemoth is somewhere around $1100-1200/month.”

    A rent multiplier of 165-180? Those are so 2005, even if you don’t “assume interest rates spike to clamp down on future inflation.”

    This is another reason why the collapse is in slo-mo. Shills (and their marks) are still neglecting to price the risk going forward into their cap rates/multipliers.

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  9. A precursory search of 3br+ rentals in “west town” on craigslist produces 93 entries in the last seven days. There are a couple of houses for rent and they’re in the $3,000 a month plus range. However none of them were as far west as Western. Ashland maybe, but not Western. I don’t know who in their right mind would spend $3,000 a month to rent this house at Western/Erie. Maybe I’m the one that’s out of my mind. maybe I need to spend a few early morning hours in IB’s apartment. The whole world has been flipped upside down lately so who knows.

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  10. HD… you are always welcome!!
    I made that comment cause I never forgot a broker on this site complaining about those damn kids smoking while showing an apt. Now for the funny one, I of all people have a meeting to see a proposal for my kitchen renovation. Nice timing, huh :-)

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  11. “A rent multiplier of 165-180? Those are so 2005, even if you don’t “assume interest rates spike to clamp down on future inflation.””

    Okay, so a rent multiplier of 100–his point still stands. It’s worth, as a rental–hell as a rooming house–more than $200k in its current location.

    And the $450k in LP is an absurdity. Laura’s certainly right that if in LP and listed at $1.4mm it would promptly be under contract. Indeed, if this exact house were in LP, with the 30′ wide lot, it would *still* probably go to contract for more than $1.4mm–but who knows about financing.

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  12. And I just figured out the appeal of Smith Park–There’s a WWII-era tank! Very prestigious!

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  13. Of course $450k is absurbity – but that’s what makes his posts so entertaining and funny. I don’t think John S’s valuations have any rational basis at all but they’re funny as hell. Then again, the some of the ridiculously high asking prices, including $1.475 million for this POS, probably the highest priced SFH in all of the barrio.

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  14. (I hit submit without proofreading, let’s try this again).

    Of course $450k is absurbity – but that’s what makes his posts so entertaining and funny. I don’t think John S’s valuations have any rational basis at all but they’re funny as hell. Then again, the some of the ridiculously high asking prices we see on this sight are equally as hilarious and entertaining. Including this $1.475 million POS McCrapbox, probably the highest priced SFH in all of the barrio.

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  15. “Okay, so a rent multiplier of 100–his point still stands. It’s worth, as a rental–hell as a rooming house–more than $200k in its current location.”

    anon, My point had nothing to do with the value, but how it was derived.

    Is your point really that it is worth more than $200K here and $450K in LP? Are you sure you want to go out on a limb like that?

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  16. G, you don’t think that this house would be worth $450k in LP?

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  17. “anon, My point had nothing to do with the value, but how it was derived.”

    Hell, G, HD says the going rent for a SFH in the ‘hood (broadly) is about $3k. I’ll go out on a limb and say this place is worth **at least** 180 times that rental price. I might even go to 200, without flinching.

    My point wasn’t that you were wrong in general, but that this property is a *bad* example, based on the numbers presented.

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  18. Craigslist showed rentals were being offered for about $3,000k; I have no way of knowing whether they actually rent for $3k. $3,000 a month for a rental in the near west ‘hood is a hell of a lot of money. They might be $3,000 properties in the owner’s eyes but not necessarily in the eyes of renters. I say this because craiglist shows the same dozen or so houses in my zipcodes over and over again for months on end with no price reductions. $349k in January of ’08; $349k in October of ’08. Same properties over and over again, hardly anything new. That might be the case here. Maybe houses rent for $2,500 that far west? I don’t know, its all specuation.

    And one last thing…..I don’t know about the 180 or 200 multiplier, that’s quite aggressive. I’d say 120-150 max. IIRC the point is to pay off the mortgage with the rental income on a 15 year basis and then the property cash flows quite nicely after that. Real estate ownership from a landlord’s perspective is supposed to be a long term investment with a positive cash flow from day one. A multiplier for a mcmansion SFH at 180x is way too aggressive for my tastes.

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  19. So, HD, you ARE saying that you think this place is worth –maybe– $450k? And that $300k isn’t an insanely low number for it? OKAY!

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  20. David (the first one) on October 10th, 2008 at 10:43 am

    Ok G. Let’s say, hypothetically, market rent is only $2k/month. Let’s say, hypohetically, that an appropriately pessimistic rent multiplier is 150 (which is very low considering how low interests rate are and considering that even as an investment property, this is an SFH and not a multi-unit building and all that entails in terms of overhead).

    We’re -still- at $300k, a full 50% higher than John S’s absurd valuation.

    I’m not gonna argue that this property is currently dramatically overpriced. But $200k is a ridiculous assessment. The speculative land value alone is not drastically below that, to say nothing of the improvements upon it.

    Figure a $2500/month market rent, and a plausibly pessimistic rent multiplier of 160 and we’re at $400K. Dramatically lower than the current price. 100% higher than John S’s estimate.

    Again, I’d love to rent this $200k property for $1100/month and sublet my way to free rent and added income, but I suspect the market won’t give me such an opportunity.

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  21. I’ll say that $450k for this place is absurbly for LP. $200k is probably low for this particular unit. I don’t know the real price for this place. Its so unique and so honestly quite out of place that its valuation remains to be seen. Furthermore, I’ll say that it’s tough to value this place based upon rent because it’s not really a rental. It’s a luxury SFH on the fringes of habitable chicago and the rental market for the same isn’t very large or comparable to anywhere else. If I had to guess I’d say that $200k is too low; $1.4 mil is too high, and the real price is somewhere in the lower middle of that range. The problem is that there isn’t much of a market for this house and there is no market for this house in the $1 mil range. This house really makes me scratch my head and think – “what were they thinking?” (of course the answer is greed)

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  22. I have to laugh about how far we have come when people really took John S’ “$200K” estimate seriously.

    That wouldn’t have happened a couple of months ago.

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  23. If we had to pick an inflection point I would say Fall 2008 is that point. All the up and coming ‘gentrifying’ areas are going to revert back to their gritty former selves once this severe recession gets underway.

    And don’t expect the hipsters to hold their ground when the S really hits the economic fan–although hipsters like to act like urban pioneers when the hood gets bad enough they are among the first to flee to the burbs or better ‘hoods. A few neighborhoods might be spared: my guess is Bucktown may hold onto its gains.

    “Skatty_Ska_Ska: At what point do these fringe “up and coming” neighborhoods stop being up or coming and start to revert back to what they were 10-15yrs ago.”

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  24. David explains, “An appropriately pessimistic rent multiplier is 150 (which is very low considering how low interests rate are and considering that even as an investment property, this is an SFH and not a multi-unit building and all that entails in terms of overhead)?”

    What about the risks going forward? Or, will RE always go up?

    This is an example of the continuation of the speculative bubble mentality and helps to explain why there will be knife-catchers all the way through the market correction. Any speculators today buying at these multipliers will be slaughtered. But they will make it fun to watch.

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  25. Another thing, it has always been my experience that those utilizing “gross rent multipliers” are realtors and speculators, and not income investors. GRM might sound impressive to a novice but it tells you little because expenses vary widely between properties. Investors discuss cap rates (or the inverse, net rent multiplier) because they relate to the bottom line.

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  26. David (the first one) on October 10th, 2008 at 12:25 pm

    I didn’t bring up rent multipliers. You did. I guess I made the mistake of responding to your argument against one I didn’t make and lending credence to the straw man by which you established authority. Whatever.

    Indeed, rent multipliers/rent parity are pretty poor metrics on their own to evaluate an investment property. Cap rate is better. Discounted ROI based on defensible projections of where market rents are going and what maintenance costs are gonna be would capture it all from the income investor’s standpoint, but such analysis usually depends on either imperfect information or some level of risk inherent to the assumptions made.

    Risky investments in questionable areas became way too ‘valuable’ in this boom/bubble in will indeed fall very hard. But $200K for this? Someone could scrap all the material from the improvement and sell the cleared lot for profit at that price.

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  27. “I didn’t bring up rent multipliers. You did.”

    Are you sure about that? Your comment that “$200K valuation would imply that the market rent for this behemoth is somewhere around $1100-1200/month” doesn’t represent a GRM? Please, educate us how you reached that conclusion otherwise.

    I’m still chuckling that you thought John S’ comment was serious. Or was that an attempt on your part to “establish authority?”

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  28. I would buy that place for $200K anyday of the week. I can be on the doorsteps in 15 minutes with a check. Lets not be asinine you couldn’t by the lot in Lincoln Park to put this house on for $450K. Lets get real. Yes the sky is falling but lets not think so short term.

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  29. Let’s just try thinking and leave it at that.

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  30. G on October 10th, 2008 at 11:27 am
    “I have to laugh about how far we have come when people really took John S’ “$200K” estimate seriously.”

    This comment along with others further reinforces the point that the real estate market is still operating in the state of denial. The bursting of the real estate bubble still further to go my friends, these clowns will be jumping out of windows next spring.

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  31. My guess is 600k. Although I admit I am not that familiar with that neighborhood.

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  32. The amateur investors on this site continue to believe that operating at negative cash flow is ok, but they fail to recognize that prior to the real estate bubble investors required at a minimum an 8% rental yield. Why? Because being a landlord involves risk and opportunity cost. Running a business with negative cash flows is not an investment but pure speculation!

    As Warren Buffet said, if you can’t understand your investment using simple math than you shouldn’t undertake it. Simple math in real estate is operating cash flow and/or rental yield. At $200,000 the owner would be purchasing an investment yielding 12%, any price above $270,000 would produce a negative rental yield.

    (I used a rental income of $2000 per month, property taxes of 1.5% of purchase price, insurance of $1500, and a yearly gas bill of $3500.)

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  33. “property taxes of 1.5% of purchase price”

    You’d never get that at $200k on this behemoth. It’s too new and too big to be assessed that low, no matter what the purchase price is, unless the neighboring, normal units are selling for ~$50k. You might be able to get away with 1.5% if the price were $600k; at $200k, more like 3.5-4%.

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  34. shows what you guys know. Smith Park is home to the Sicilian American Social Club. check the sales stats in around the park

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