Commercial Space Below? Beware: A 1-Bedroom at 2660 N. Halsted in Lincoln Park
This 1-bedroom duplex at 2660 N. Halsted in Lincoln Park came on the market in November 2014.
It is bank owned and being sold “as-is.”
The unit has exposed brick and timber ceilings with a lofty second floor bedroom open to the first floor.
From the pictures, it looks like the kitchen is intact with maple cabinets, granite counter tops and stainless steel appliances.
The listing doesn’t say anything about an in-unit washer/dryer, but it does have a parking space and wall air conditioning units.
Originally listed in November 2014 for $183,750, it has been pending 3 times but has come back on the market every time.
It was recently reduced to $156,655.
What’s the problem?
The listing says:
“non-conforming loans only due to 44% of the building is commercial space and low reserves.”
The building has 6 units and it appears, from the pictures, that three of them are the commercial space on the first floor.
We chattered several years ago about the change in lending requirements in buildings with commercial space.
But I’ve heard from a lot of agents that as of January 1, the rule was tightened. Mortgage brokers used to be able to find a way around it but now, the new rule is thwarting that.
It apparently impacts buildings with more than 25% commercial space.
The tightening of the rule is impacting properties all over the city, even in River North and Streeterville if your building is above one of the big retail malls.
What does the rule change mean?
1. Cash buyers only; or
2. 20% down and a non-conventional loan- meaning a 5/1 or 7/1 ARM. May have to pay a higher mortgage rate because it can’t be sold to Fannie or Freddie.
Would you stay away from a property that had a large commercial component because of this rule?
Sarah Han at Century 21 S.G.R has the listing. See the pictures here.
Unit #5: 1 bedroom, 1 bath, duplex, no square footage listed
- Sold in September 2005 for $250,000
- Lis pendens foreclosure filed in August 2011
- Bank owned in November 2013
- Originally listed “as-is” in November 2014 for $183,750
- Pending 3 times
- Was listed at $164,900
- Reduced
- Currently listed at $156,655 (includes parking)
- Assessments of $250 a month
- Taxes of $2181
- Wall unit cooling
- Washer/dryer ???
- Bedroom: 12×12 (second floor)
There are more properties like this than you would think.
This 2/2 just came on the market in Lincoln Park at 2221 N. Lincoln. It’s a renovation of a vintage space. There are 5 units, with the 2 bottom units commercial space.
It is definitely over the limit allowed for conventional loans.
https://www.redfin.com/IL/Chicago/2221-N-Lincoln-Ave-60614/unit-1N/home/12773084
Non-conforming only. Rates may be a little higher than conventional financing, but not exorbitantly higher. The biggest issues we see with non-warrantable condos locally are too much commercial space (limited to 20%) and single entity ownership greater than 10% of the development (where one person or company owns more than 10% of units). To a lesser extent, HOA legal issues where they are either being sued or suing can be a problem too if the suit is about structural related issues.
Non-warrantability isn’t a huge issue with some of the higher dollar buildings as most of those buyers are putting down larger down payments anyway. However, it does pose a problem for lower priced units as the buyers are not likely to have large down payments.
As much as I love Indian food, I wouldn’t want to live above a restaurant! Nice little deck on the place looks like a cool rental for a college student. The lack of reserves would definitely scare away most investors though.
Is this place so bad that it couldn’t pull $1500 in rent (*with* parking!)? It’s a 6 cap at $1215/mo. Am I missing something?
This is officially the most depressing property ever posted on this site.
I’ve had two separate clients put an offer on this place. One was an all cash offer of $138,000 and the bank denied it in less than 48 hours. I was astonished that they didn’t even counter at the very least. The unit is okay and the roofing is currently being refinished now. There is no reserves in the building and the 6 condo units (6 apartments, and 2 commercial), 4 of them are being rented. The restaurant that the specific unit is above is also for sale.
Buy the crappiest property in the best location, right? Isn’t that the rule? I’m sure someone rich will take the risk and grab this for a steal; probably with a cash offer.
I’m guessing this is approaching “land value”—would have to see the ownership percentage (but assuming around 1/6) I agree that the income would probably pencil out, and long term (or even sooner!) may make sense to tear down. This piece of land should definitely be worth at least a million currently?
sonies: great catch. Living above an Indian restaurant would be disgusting and malodorous.
“helmethofer on April 14th, 2015 at 10:22 am
sonies: great catch. Living above an Indian restaurant would be disgusting and malodorous.”
That’s some serious racist $hit. What if an Indian person said they didn’t want to live above a white person restaurant?
“That’s some serious racist $hit”
Would it also be racist to say one doesn’t want to live above a Hookah lounge?
I wouldn’t want to live above ANY restaurant. All restaurants create odors and even living above Just Bacon! would get old quickly.
Try a Garrett’s popcorn. They purposefully exhaust cooking fumes outside to entice customers.
Sorry, not racist. I wouldn’t want to live above a white people restaurant. I despise the smells of Ed Debevics, Portillos and Union Sushi in my area and sure as hell wouldn’t want to live above them. Only onse that smell really good are Fogo and G&G’s. But even that would get old. As a person who prepares indian dishes at home, trust me, they can really smell up your house and stay there.
I’ve eaten at that Indian restaurant before and will never go back. I will however go to the Home Depot across the street for the free popcorn and $20 Christmas trees. The only smell worse than living above an Indian food place would be from a botulism factory or Staten Island. Regardless, this place will sell to a naïveté Depaul freshman’s parents from Michigan or to a developer’s sister-in-law for a good price.
“I’ve had two separate clients put an offer on this place. One was an all cash offer of $138,000 and the bank denied it in less than 48 hours. I was astonished that they didn’t even counter at the very least. The unit is okay and the roofing is currently being refinished now. There is no reserves in the building and the 6 condo units (6 apartments, and 2 commercial), 4 of them are being rented. The restaurant that the specific unit is above is also for sale.”
Thanks for the update Laycey. I guess the bank thought they could do better than your client’s offer. We’ll see.
“Non-warrantability isn’t a huge issue with some of the higher dollar buildings as most of those buyers are putting down larger down payments anyway. However, it does pose a problem for lower priced units as the buyers are not likely to have large down payments.”
This really impacts first time buyers in a big way. They have to come up with a bigger downpayment AND they no longer get a 30-year (yes, some of them want that with the specter of the possibility of rising rates.) So I’ve heard about more of these deals falling apart.
Why aren’t the agents just listing it on the listing (as this one does)? That way- they’re not going to get unnecessary offers from those who won’t have the proper financing. Why waste everyone’s time?
@Sabrina, I’ve found some of the better agents tend to do their due diligence ahead of time in regards to condo warrantability. However, I think a large number of them think if they don’t mention issues with the development, the lender won’t find out. Kind of a head in sand approach. However, in all fairness, the rules change so much, it is hard to keep track. I’ve had deals close in a building with no problem and then six months later the building is all of a sudden non-warrantable because something changed.
The problem is that the way mortgages are underwritten, there isn’t a lot of room for judgment. The property in this post is obviously risky, however, some other buildings may be non-warrantable for something silly that would have very little affect on the overall credit risk.
There are a few buildings in Old Town particularly that are hard to finance because when they were built, the City forced the developers to include a certain number of units for low income housing as rentals. The developer then leases those units back to the city. Well, in some of these buildings it is greater than 10% so it makes them non-warrantable. This is a bit different from Joe Investor buying a block of units and renting them out, but the two situations get treated the same in terms of evaluating the condo development.
What is this? Does the Declaration of Independence say “All Cuisines are created Equal”? No. Compare the odor of Indian food to a ham sandwich with mayo on white bread. They aren’t equal. Next thing we’ll see is Fair Housing laws coming down on the person who doesn’t want to live above an Indian restaurant. You will live there, and you will bake the LGBT cake too.
Compare the smell of blue cheese to nan.
An agent in our office was one of those 3, purchasing for himself. There is a lot of deferred maintenance. Between that and the reserves, he backed off.
“However, in all fairness, the rules change so much, it is hard to keep track. I’ve had deals close in a building with no problem and then six months later the building is all of a sudden non-warrantable because something changed.”
This rule apparently was tightened as of January 1, so I can understand how many agents wouldn’t have a clue, especially if they don’t work in areas with a lot of commercial properties or only handle single family homes. But I think it’s going to squash a decent number of sales in the city because there are a LOT of condos above commercial spaces all over the city- especially in the neighborhoods outside of downtown. Living above the store on, say, Western or Ashland or Milwaukee, is quite common.
I agree there are plenty of condos along the commercial corridors with retail space on the first floor and residential above; almost all new construction looks like that. However I doubt there are many where over 25% of the building is residential. Look down say Southport in the past decade: everything is 4 stories, with 3 units up, 1 on first level.
I do not have the toolsets or knowledge available to pull up actual building data on the configurations so it would be interesting to learn that more than 25% commercial is widespread beyond outliers like this. Bummer for the owners of those properties.
@Sabrina, the commercial space change has been in effect for at least three years iirc. Maybe longer.
@Sabrina, the commercial space change has been in effect for at least three years iirc. Maybe longer.
Yes Russ- we discussed this rule and the impact it had years ago on this site. It was actually changed much further back than 3 years. I want to say 6 years ago after the bust when Freddie and Fannie and FHA rules were tightened.
BUT- from what I understand from all the mortgage brokers I’ve talked to- and some agents- is that the rule was tightened in the new mortgage restrictions that went into effect on Jan 1. Before, you could get around the commercial space rule by claiming that the space was its own separate association. No one questioned this.
So if you’re buying above the 900 N. Michigan mall, before you could say that was it’s own thing and the condo association was separate. Problem solved. NOW- they won’t let you do that. They’re counting it as one entity and yes, that mall is more than 25% of the building.
Plenty of buildings in Bucktown/Wicker Park will be impacted. Same in LP and Lakeview. Not all of the buildings are new construction with 4 units. Some have 3 and the bottom floor unit is more than 25% of the building in that case. You’d better bring cash or be prepared for a non-conventional loan.
My friend has a 6 flat with a restaurant below and it’s not a great situation, regardless the smell. First, where there is food, there are rats. The place is clean, but all restaurants have rats. Also, lots of grease in pipes, etc etc. There are back ups and problems. I’d never live above a restaurant.
There’s actually an article in the weekend NYT about people suing restaurants over the smell (Indian and, actually, barbecue restaurants.) You think the smell isn’t that bad but if you have it day after day, week after week, it can be.
It kind of reminds me of the luxury condos they built right next to the Burger Boss on Southport (which has now shut down.) You could smell the burgers even a block away depending on what way the wind was blowing and I often thought, “imagine living right there and smelling that every single day.”
“imagine living right there and smelling that every single day.”
I live in the Blommer waft zone and it has NOT gotten old after 5.5 years.