How Low Will Rents Go in Trump Tower Chicago?
An interesting phenomena is happening in Trump Tower Chicago, at 401 N. Wabash in River North.
And I’m not talking about The Donald’s financing problems.
It’s the prices that flippers are asking for rental units on the one bedroom condos in the building.
Here’s the stats on the building (out of 758 units):
- 116 units for sale
- 28 units for rent
Some units can be both for sale AND for rent.
Take- for instance- this Craigslist ad for a 938 square foot 1/1.5 for $2350. Parking is extra- but I’m sure it’s negotiable.
Why rent in, say, 600 N. Fairbanks or any of the other new towers when you can have the prestige of Trump (and the views) for the same price?
Maybe that Craigslist ad was not legit. Who knows?
But check out Unit #48C. It’s one of the bigger one bedrooms as 1071 square feet. It was just reduced.
Robin Miner at @Properties has the rental listing. See more pictures here and on Craigslist.
Unit #48C: 1 bedroom, 1.5 baths, 1071 square feet
- Sold in October 2008 for $534,000
- Currently listed for rent at $2500 a month (plus $285 a month for self park or $450 a month for valet)
Is Trump Tower Chicago turning into a rental “deal”?
If you’re a thousand-square-foot high roller, is there a reason in the world you wouldn’t go valet?
Valet is a real pain (from what I’ve heard from people in other buildings that have it.)
Imagine how many people are calling for their car at the same time of the day? (i.e. early in the AM)
You have to plan much more in advance, apparently, to get your car.
Do most of these buildings offer the option of self-park?
1 bed for $2,500/month? not a deal
Valet parking is a pain…. Welcome to the floplord rental hell. Miami is well into it already. So many units, so many empty, so many desperate owners, so many foreclosures which make for even fewer buyers…. Great deals for renter will only increase as inventories come on line….
Did you see the 60 Minutes report?
http://www.cbsnews.com/video/watch/?id=4668112n
John, I tried to watch it. But I was too busy looking at properties. So busy, so many properties…
Did anyone else see this article?
http://www.chicagotribune.com/classified/realestate/advice/chi-umberger-prices-col-1214dec14,0,6741078.column
“…Chicago single-family home prices hitting their overvaluation peak in the third quarter of 2006 at about $254,000, which amounted to being 13.8 percent overpriced. But at the end of the third quarter of this year, the median single-family home value was about $243,000 (which would be considered 3.4 percent undervalued…”
This means that according to their data the cost of a SFH in the 3Q of 2006 should have been about $223,000 but now should be about $251,500. An appreciation rate of 12.8 over two years.
I don’t think there is any prestige living in Trump Tower. Actually to me it is the opposite – someone who doesn’t know good architecture and only buys/rents on a mid-tier name like Trump!
I looked at the pictures on Craigs List and the appliances are not hi-end like Fairbanks. Fairbanks has Wolf ranges and Sub-Zero fridges.
I dunno about the rental market being not so hot with all these people getting kicked out of their homes.. People have to live somewhere! Look at this interesting tidbit.
100 days ago . . . 303,879 homeowners had received at least 1 foreclosure-related filing (e.g., default notices, auction sale notices and bank repossessions) in the previous month (August 2008). 259,085 homeowners received a foreclosure-filing in November 2008 (source: RealtyTrac Inc.).
Valet’s not that bad as long as you acclimate yourself to the idea of phoning someone to get your car before you go down. Plus a warm car is great in this weather.
I like the idea of living in a hotel amenity building, but I fear what my room service bills would be monthly. It would be way too convenient to simply call someone for breakfast.
“wren on December 15th, 2008 at 10:12 am
I looked at the pictures on Craigs List and the appliances are not hi-end like Fairbanks. Fairbanks has Wolf ranges and Sub-Zero fridges.”
I’m not one to defend Trump but these are in fact Wolf double ovens and Wolf cooktops as well as Sub-Zero refrigerators.
Sonies said:”I dunno about the rental market being not so hot with all these people getting kicked out of their homes..”
Anectodally the rental building in the cities are starting to see a lot of pain due to shadow rental inventory created by flippers. This is how I got my first month free 🙂
Sonies – There were a ton of investor homes/condos that were built with the buyers never intended to live in, hence the over supply. Another less talked about factor is the trend to one person households during the bubble….unreal the number of people that took on the responsibility of a home/condo by themselves instead of apartments…..and of course all the single moms out there with lower incomes that want to have the full family life which includes a SF home even without a two spouse household (many should have stayed in a managed apartment property). Even odder is single person households that intended ot live in them around 3 years….. (transaction costs people!) Now, people are going back to multi-person households…leaving more homes/condos empty and on the market. Why buy one when you can buy six more like the lady in the 60 Minutes piece…..it is unreal in Miami….the fraud, the fraud by foreigners that simply pick up and go back to their home country….crazy!
For those that missed it, the flipper who appeared in the 60 Minutes piece claimed to have no knowledge of the terms of her six mortgages. She had no time, she explained, to read paperwork, because she was too busy looking for more properties, and as an acupuncturist by trade she couldn’t be expected to understand it.
With regards to rent, I definitely see it on the decline. In my building, the 2 apartments next to me on my side are empty, and have been empty since August. They offer gift cards and a month free, yet the building is getting more and desolate. Good for me though, since it is quieter.
The big problem is that its the newest American Invesco conversion. All these “investors” (primarily from California for some reason) are buying these places under the promise of a free “upgrade” and 2 years of guaranteed rent. After those two years, these investors are going to be in for a shock. And just like every other American Invesco building, a large portion of the units will go into foreclosure.
I’m not even going to go into the special assessment that they’ll be hit with when the building is done converting and management goes “surprise, we need new elevators”.
more desolate*
Inspite of 1 month free (maybe more now, since I signed up in september),my building is 40% empty.
All I know is that its going to be really hard to get a large percentage of this building filled at $2500 a month for a 1k sq ft. rental.
You can buy a 400k place with a lot more space pretty much anywhere in the city for that kind of money a month…
kind of off-topic, but why do we always talk about foreclosures then bring up foreigners and these fraud schemes. i, no doubt, believe that occured during this housing madness, but where is the discussion about the high percentage of educated adults who started living beyond their means. i know that is just one of many groups that contributed to this mess, but to me, its the hardest to fathom. 20somethings with no foresight and raised in a culture of entitlement, sure. morally devoid banks handing out loans to low-income, high-risk applicants? lack of regulation. the educated adult with a family (and their financial responsibilities) living the suburbs who bought a new 700K house and a vacation home in FL to boot. i don’t get it. sorry to get off-topic.
and honest questions b/c i’m not totally sure of their structure, but other than fleece greedy ill-informed investors, did American Invesco actually do anything wrong legally (not morally, I think we know that answer).
sorry, the second part was supposed to be posted on the AI thread.
MTC,
I think poeple mention the foreigners not only because they were a sizeable segment of the bubble and the ensuing fraud but also because they are the segment least likely to suffer any consequences for their decisions or fraud. They just pack up and leave. They’re gone and nothing but financial catostrophe in their wage.
And given the magnitude of the scale in Chicago I do suspect there are organized crime syndicates that started to get into the RE fraud game. Wouldn’t be surprised if some of these were from overseas (where they are much more formidable and organized).
err “wage” should’ve read “wake”.
MTC, I don’t think “people” here mention “the foreigners”–a handful do, and whether they speak for the silent majority I think no one knows. I personally have seen no proof that “they were a sizable segment of the bubble and ensuing fraud,” etc., and I’d be curious to see where Bob has seen it, other than his personal impressions.
Frankly, I think the rage against purchasers is misplaced. My own anger, for instance, is mostly directed at the banks, mortgage brokers, and appraisers who gladly set people up in these homes/”investments.” Their attitude–while the bubble was inflating–was, who cares if the buyer can’t afford it? If he or she defaults, hell, we just foreclose and sell and we still make our money (plus our fees for doing them the service of foreclosing on them!)
I don’t absolve buyers of all guilt. Many, probably most, should have known better–though don’t forget most people are not repeat players in home purchases (for instance, until I did a lot of research, I had no idea what the “rules of thumb” were for how much of a house one could afford). But to me, the real guilty parties are the ones who were lending out other people’s money, irresponsibly.
And now that I think of it, throw the regulators in, as well–perhaps they were the guiltiest of all.
Purchasers were just as complicit as the banks. I’ve seen plenty of buyers in the burbs who bought homes at 6-8x income using option arm mortgages. They wanted in on the boom and now they’re paying the price for living without any foresight. .
I was also told today by a long time client that he expects all four of his investment properties to go into foreclosure. He’s having difficult collecting rent and furthermore he doesn’t want to hold onto properties that are underwater. One of them is already in foreclosure and the remaining three will follow.
So basically I came upon five new foreclosures today. Just another day in the office.
btw none of them were foreigners….
1,050 square feet is large for a one bedroom. In some rental buildings that would be a 2 BR. The asking rental price of $2.50 per square foot seems in line with other good quality rental buildings in the City. Plus the Trump building is new, so the tenant gets to be the first person to dent the hardwood floors!
With new layoffs being announced every day, the market for high priced one bedrooms (buy or rent) is quickly evaporating. And it wasn’t exactly large to begin with. Most people who are truly recession proof won’t be in the market for these places.
I think people underestimate the home grown fraud that took place here. I remember back in 2006 reading about gangs getting involved in mortgage fraud. There’s still street level dope dealing, but they weren’t about to miss out on the easy money and fraud made possible by liar loans.
That being said, I’m sure most of the foreclosures are from stupid/greedy people who took on more than they could handle and were counting on flipping properties.
Well, that and the banks that were foolish enough to give said stupid/greedy people the money.
Homedelete – You are a bankruptcy attorney right? I would guess it would strange if you wouldn’t come across clients in trouble 🙂
The bank pushed the option arms, not the brokers. Countrywide was the king of pushing option arms (stated option arms) to their brokers to push to their clients (Washington Mutual, wachovia as well). The brokers were just doing what they were told. It’s like blaming Walmart for selling lead based toys (from China) to kids. The government took responsibility for lack of regulation on toy saftey and they should also be blamed for a lack regulation on the financial markets. How far does the blame go?
Did anyone watch 60 minutes on Sunday night? There was a great story about the option arm loans and the next ‘wave’ (their term) of defaults. (I’ve been calling it the alt-a and option arm tsunami for quite some time now, it’s nice to see 60 minutes give the story some attention).
The guy said that he expected upwards of 70% of all option arms to default.
Someone posted a link to the 60 Minutes segment. I also saw it and recommend people watch it- given that Sam Zell said he sees a recovery in the real estate market as early as spring of 2009 (running through spring of 2010.)
The “experts” on 60 Minutes were saying it would take years to run through all the inventory (which is only going to get worse as foreclosures continue to rise.)
Of course- the 60 Minutes segment wasn’t Chicago specific.
“The brokers were just doing what they were told. It’s like blaming Walmart for selling lead based toys (from China) to kids.”
Yes, it is.
60 Min: Wasn’t Zell saying something to that effect earlier this year? He isn’t any different than most hopeful sellers. Nothing new there.
“Countrywide was the king of pushing option arms (stated option arms) to their brokers to push to their clients (Washington Mutual, wachovia as well). The brokers were just doing what they were told.”
But how were they pushing them?
Wait for it ….
By offering higher commissions on Option ARMs–that is, appealling to the broker’s greed. Letting the brokers off the hook is insane.
I don’t know why they’re trusting Sam Zell as a sort of authority figure on the subject. The guy lost more money than anyone on here at a fast flip attempting a task every analyst at the time knew was impossible. Maybe he is confusing what he hopes will happen with what is likely to happen.
As far as option ARMs: this and no doc loans are glaring examples of the lack of regulation in the mortgage market. As the top five (the big ones) originators of option ARMs are all out of business at this point its a great example of how businesses are often incapable of self-regulation given the compensation structures at the top.
Guess how many top executives made a boatload off of these five failed firms on the way up? More than a few. None of this money will likely be returned to creditors or bondholders now that we’re on the other side of the curve.
Most to blame for the bubble has to be the ratings agencies: they were entrusted to act as fiducaries in rating mortgage backed securities and weren’t supposed to have a vested financial interest in sugarcoating ratings. I really hope S&P and Moody’s go out of business over this. They really don’t deserve to continue to exist.
Did you really say “the prestige of Trump?” I hope that was sarcasm.
“The guy lost more money than anyone on here at a fast flip attempting a task every analyst at the time knew was impossible. ”
Wasn’t real estate. He *did* sell a huge office portfolio at the absolute peak price. Then he made the mistake of thinking he could translate his combo of skill+luck in RE into another business. Plus, he found an asset he could get 97%+ financing on ($330mm equity and $12b+ debt)–it turned out to be a bad bet, but it’s relative chump change to Zell, esp after the *huge* win the EOP sale was.
Zell said the same thing about the spring of 2008 (that it would be the market bottom). He had no evidence to back up his claim, and we see now how accurate it was. This one will be no different.
Zell may be an expert in buying up companies and stripping off their valuable pieces for personal profit but he is certainly no expert in calling real estate market bottoms.
Sabrina, “phenomena” is plural…
We walked away from a rental offer on one of the “J” units with superior river lake views. Comps were at $4,500/month, this guy asked $3,750 and countered us at $3,300Y1 escalating to $3,500Y2. Again, we passed.
So, why did you pass? Sounds like a nice deal to me. How many bedrooms?
FlipFlop- so the investor was willing to negotiate the rent quite a bit lower? Interesting.
Also interesting that they wanted a 2 year lease.
Rental rates are coming down quickly in Trump Tower.
I’m considering buying a 1 bedroom unit in this building and desperately want people opinion!
Here’s my thought: If they are asking for anything over pre-construction pricing for the unit, it is probably too much. But that’s with NO research on current pricing in Trump, so some here may disagree–I’m sure someone will say that even pre-con pricing is too high.
These high rises are in a ppsf range all on their own, but Trump Tower definitely takes the cake for being among, if not the, most expensive high-rise ppsf wise.
For my money I’d rather live in Legacy at Millenium Park which has comparable amenities and is ~33% cheaper. But as I’m rather, erm, wealth constrained, heh, I won’t likely be living in either.
I do not like the 1-bedrooms at Trump, and at the prices their asking I would look at other projects; either with larger 1-bedrooms units or 2 bedroom units.
Hey Jennifer
I have looked at 2 bedroom units at the Trump and Legacy (have not looked at Museum Park). IMO no other buidling compares to Trump. The location is the best in town. Close to all of the offices with loop locations and close to Michigan
Ave, Northwestern Etc.
There is no way that you could ever compare The Legacy to The Trump. The Trump is far superior. I’m curious – what kind of price per square foot are you being quoted? No matter what you think about Trump personally – his buidlings are always first class
Anyone have an update on the current rental situation at Trump Tower?
Mike: You can find the rentals that are on the MLS on Coldwell Banker or Prudential Rubloff’s website (put in the address on Coldwell Banker’s site.)
Here’s an example of one of the one bedrooms available:
http://www.coldwellbankeronline.com/ID/1243476
Thanks Sabrina – I appreciate your help and love your blog!