Flipper Alert: 451 W. Huron in River North
Thanks to Pat for asking about 451 W. Huron in River North. It is a new construction building with 135 units. Their website says they are 95% sold. Closings started in September.
It appears that only about half of the building has actually closed.
I’ve found 19 units for sale, which includes some of the unsold developers units. There are a couple for rent as well.
The units range in size from 685 to 1295 square feet. It’s not a “luxury” building and the initial prices reflected that it doesn’t have subzero but has a lower end stainless steel appliance package (heaven forbid!) and 9 foot ceilings (the “luxury” buildings are putting in 10 foot ceilings.)
But unfortunately, the flippers are trying to, well, make money and they are asking a lot of money for units that weren’t meant to sell for those prices. And throw in a bad housing market and lots of inventory and you have flippers who will be lucky to make any money.
In fact some, after paying closing costs and agent fees, are going to lose money just based on their listing prices. (And they still have to sell the unit.)
Pat mentioned in her post that Unit #501 was originally listed to flip at $449,900 (can anyone confirm this? Not that I don’t believe you Pat.)
Unit #501: 2 bedrooms, 2 baths
- Sold in September 2007 for $402,000
- Currently listed for $419,900 plus $35,000 for parking
- Christopher Pagano at Coldwell Banker has the listing
Here’s another flipper who is bolder:
Unit #512: 2 bedrooms, 2 baths, 1100 square feet
- Sold in September 2007 for $395,000
- Currently listed for $484,000 plus $35,000 for parking
- CitySpace Realty has the listing
The one bedroom flippers are getting crushed.
Unit #503: 1 bedroom
- Sold in September 2007 for $280,000
- Currently listed for $293,000 plus parking
- Brenda Tabak at Coldwell Banker has the listing
Unit #804: 1 bedroom
- Sold in September 2007 for $287,500
- Currently listed for $294,900
- Christopher Pagano at Coldwell Banker has the listing
It doesn’t look good for the flippers in this building who are just trying to dump the units and get out. The building doesn’t distinguish itself and the location is just so-so in River North (and certainly not at the higher price points.)
Thanks for the post Sabrina; however, I disagree with a lot of your assumptions. The building is in a great location, right in River North, near Scoozi and many other restaurants and bars. The building is small in terms of number of units and they look nicely appointed for the price point.
Regarding unit 501, it was originally listed at $449,900. It is a terrific unit with a large roof deck.
Overall, I like the building, not the “flip” price points.
Streeterville Realtor: You can rent the same 1 bedroom unit for $1675 a month (including the parking.) Why would you buy it for more a month?
Let’s say you buy one of the one bedrooms with the parking for $315,000. You put down 10% or $31500.
Your monthly payment on a 30 year fixed at 6% is $1700 a month. Assessments of $250. Taxes of another $400. And the value of the unit is declining in this market! Even with the tax advantages- it makes no financial sense (especially when the average length of time in a 1 bedroom condo is about 2 years.)
The two bedroom units are overpriced for what they are. As I just posted, you can get a 1200 square foot loft including the parking for $386,000 or you can buy one of these 1100 square foot units in a location that is not as nice as 300 W. Grand for $70,000 more (including the parking.) Why would you?
These are overpriced.
I’m not saying the product is horrible. But at these price points, it is. The prices need to be lower by about $60,000 in the one bedrooms and $80,000 in the two bedrooms.
Sabrina,
Thanks for the numbers. I completely disagree with you regarding the location not being as nice as 300 W Grand. 300 W Grand is on a busy part of Grand Ave, right by the on ramp to the Kennedy, with the Brown Line zooming by your windows every 10 minutes. The unit you posted about, is very outdated. Most buyers in this price range do NOT want to buy a unit that needs a new kitchen and bathrooms.
If you factor in having to gut the kitchen and bathrooms, it makes more sense to buy a 2/2 at 451 Huron. At least they have new fixtures.
This is a block or two from were Antwon Walker, the NBA player, got tied up and robbed in his home.
I had a buddy that lived at 505 W Huron. The area is good, not great. Ther’s a few decent places within walking distance but otherwise you have to cab or drive it.
I felt my friend over paid in 4th quarter of 2003 when he bought a 1/1 (about 750sqft) with a parking spot for $250,000. The same unit sold originally four years earlier for $140,00. Not sure if a parking spot was included in that sale.
300 W. Grand isn’t anywhere near the Kennedy Expressway on-ramp (which is several streets away.) And while I agree regarding the El being next to the building, that unit for sale is at the far end of the building AWAY from the El line so it’s not as bad.
Yes, you would have to renovate the 300 W. Grand unit. And yes buyers want to just move in these days. (Hence the better price at 300 W. Grand.)
But at the price point of these units there are probably hundreds of similar units all for sale in a mile or so radius. There is nothing about this building that says “buy me”- sorry. Not the location (just so-so for that area), not the finishes and not the price.
In a buyer’s market, it’s all about the price. They’ll have to lower it substantially to sell these units (in my opinion.) But we shall see.
Unit 501 was originally listed on 8/28/07 for $449,900 (plus $35K for parking.) No big coincidence, it went on the market the same day it was acquired for $404,504 (looked to be with the parking since list was only $371,900.) I will not go out on a limb by predicting that this flipper will be taking a loss on this one if a sale ever occurs. In the meantime, it is also for rent for $2500/month (which appears to include the parking spot.)
“Unit 501 was originally listed on 8/28/07 for $449,900 (plus $35K for parking.) No big coincidence, it went on the market the same day it was acquired for $404,504…”
What are these people thinking?!?! Don’t they read the papers?
The closing costs when they bought it had to be around $12000 and if they would have got their original asking price of $449,900 they would have owed over $20,000 in commision to the realtors (unless the realtor who is selling it is the one who bought it). That only leaves you around $10,000 of profit. It’s not even worth the hassle.
Let’s see what happens, but I think this one is going to hurt. Easy come, easy go.
I think most of these buyers bought in 2005 or early 2006 and now are stuck. So far, they are all closing on these units because no one believes they’re actually going to lose money (until they do.) They all have high hopes (as we see from the original price) that they’ll flip it and still walk away with $50,000.
I think it will be pretty obvious in the next six months or so that many of these flippers won’t be able to flip for a profit. Heck, they can’t even rent it out and cover their costs.
What will they do?
I’m more interested to see what happens late next year. Will the flippers even be closing then or will they just walk away from their deposits?
What were the deposits rates? >20% of the closed inventory already back on the market within 3 months of the START of closings?? I assume none of the resales have sold yet or you would have mentioned it, which means the asking prices are far above the market clearing price. How long will it take these ‘investors’ to do the math and stop showing up at the closings?
Let me guess, this building was 95% sold out a year ago and they have sold little to nothing since, where have I heard that before? Oh yeah, everywhere…
John
I have seen very few re-sales in any of these high rises in River North, Streeterville, or the South Loop in new buildings that have been closing on units in the last six months. Most of the investors are simply renting them out (likely at a monthly loss.)
Many of them were also unfortunate in that they closed on their units at the worst time of the year for selling (November/December.) But this building at 451 W. Huron closed over the summer and still there have been few sales.
A few of the one bedrooms appear to be under contract, but I haven’t seen that they’ve closed yet.
I’ll be posting an update on the flipping activity shortly. I’ve trying to give the flippers time to actually sell something so I can report on the re-sale prices, but so far, that’s not happening.
And there are more buildings to finish construction in the next six months. Stay tuned…
“You can rent the same 1 bedroom unit for $1675 a month (including the parking.) Why would you buy it for more a month?
Let’s say you buy one of the one bedrooms with the parking for $315,000. You put down 10% or $31500.
Your monthly payment on a 30 year fixed at 6% is $1700 a month. Assessments of $250. Taxes of another $400. And the value of the unit is declining in this market! Even with the tax advantages- it makes no financial sense ”
Sabrina, bringing a calculator to a meeting with a developer is like bringing a pocket knife onto an airplane, it hasn’t been allowed in over 6 years. But since you started it please allow me to make some comments.
1) $1675 is the ‘asking’ price for rent, my guess is you can get comparable rentals quite cheaper.
2) 10% down is too much, you only need a security deposit to rent so let’s call it a $1675 down payment to keep it apples-apples.
3) Roll $5k in closing costs into the loan or raise the rate, dealer’s choice.
4a) Flippers who already have a primary residence don’t get the same tax benefits.
4b) The tax benefit of buying vs. renting is exaggerated for a large percentage of 1st time buyers. Most young people will be taking a standard deduction if they choose to rent because they have very little to itemize without the mortgage and property taxes. A married couple may need to pay $10,700 in property taxes and mortgage interest before they see any tax benefit at all from buying vs. renting. A single person will benefit much more. Let’s put the monthly benefit at ((($18000+4800)-$8025)*.3)/12= $370. [$8025 is the difference between the married and sigle standard deductions).
All told you are looking at borrowing $318,375 or $1909 per month, + $210 (actual on the 1br) + $400 = $2,519 per month. You will also be responsible for maintaining (and let’s face it, updating) everything inside the unit, forever; best case scenario, this only eats half you tax benefit.
Conclusion:
Renting, certainly less than $1675 per month
Buying, certainly more than $2325 per month
Best case scenario is you lose $7,800 a year waiting for the housing bubble to come back. Invested wisely (6%) over the course of a 30 year mortgage would leave you with over $650,000 in cash.
John
Thanks John! You did the analysis better than I did (I only put 10% down in my scenario because I feel that that’s what the banks are going to be asking for now in order to give out the mortgages.)
I don’t understand those who want to buy a one bedroom condo at these prices. You won’t live in it long enough to make any money.
Oh- and my mistake about 451 W. Huron and possible closings. I don’t see any of the units under contract yet in that building (out of those listed currently). I was thinking of another building where flipping is running high- but I’ll talk about that tomorrow.
Sabrina… Consider it confirmed. MLS #: 06654278… I’m a real estate agent with access to MLS.
Mr. Pat Natale
Pat: What is confirmed? Did one of these units actually sell?
As regards the building at 451 Huron: it is in a fantastic neighborhood walking distance to numerous great restaurants, too many to mention here!! Just sit in the outdoor setting of Erie cafe during the summer and fall months and enjoy a gorgeous view of the city not to mention the interesting river traffic.
The neighborhood is quiet and residential lacking the street noise, police sirens and “orange overcast” like much of the city (especially the South Loop). Multi million dollar private homes line the building to the north providing unlimited north views
( much better than staring at apartments towering over you). The “clip clop” of the horse carriages going back to their stalls for the evening is reminiscent of Mackinaw Island.
It’s a good walk to Michigan Avenue but not impossible. Cabs are readily gotten right outside the building.
The neighborhood is filled with numerous art galleries for browsing. Whole Foods is a few blocks away. Excalibur and other night spots are within walking distance. The redhead piano bar and numerous famous pizza places are within walking distance. Nationale 27 is two block away.
The best part is the access to the expressway without being directly on it nor affected by the sound of it for those who have a reverse commute.
As regards the basketball player that was robbed, it wasn’t the neighborhood but the fact that a lot of sport figures are being targeted for theft….. in the burbs as well.
It remains to be seen what “resale” will bring but “rent money” is just money thrown away. Buying real estate in Chicago has always been good and will continue to be good. Replacement cost for new construction is over $400/ sq. ft.
With this down market,no one is making a lot of money as in years before but it’s still a better investment than the stock market which has gone flat to down (unless you’ve been investing in the foreign market). Real Estate is about timing but in the long run it’s a darn good investment.
Marianne: Do you own in the building?
You left out the part about the housing projects a block to the north with boarded up windows.
The neighborhood isn’t horrible, but it’s not great. It’s a long walk to Michigan Avenue. And I wouldn’t walk it at night (being a woman.) But it’s not horrible. Just not “prime” River North.
And don’t even tell me that real estate is a better investment than the stock market. It’s not even close to being better. And the stock market isn’t flat to down. The Dow was at record highs only a few months ago. The S&P 500 has returned just about 13% on average over the last 5 years (higher than its historical average.)
Renting makes much more sense right now. If you buy a condo right now, odds are, unless you live there 5 to 10 years, you’ll sell for less. And that is money thrown away.
Heck, I had a friend who bought a condo in the loop in 2000 and sold for the same price in 2007. That’s seven years of home ownership for what? He actually “lost” $25,000 on the transaction (but much more when you add in assessments, transaction costs etc.) after he paid his agent.
I’ll rent for 30% less, thanks.
Sabrina,
Sorry it’s taken me so long ot respond to your last comment but I would still like to do so.
Not to be a nitpicker BUT the “Housing Project” to the north is not one block but further. In the near future it will not exist.Compare this to the “Pacific Mission Campus” in the South Loop.Need I say more.
Multi million dollar homes and upscale housing surround 451.
Also I would rather take “deductions” on real estate than “pay taxes” on income earned in the stock market. A second home is entitled to all the tax benefits of a primary home ( except for capital gains if and when sold). So for those who are in for the long term it is an excellent investment.
You see MANY woman walking their dogs at all hours of the day and night in the neighborhood.
My daughter purchased 2 units in the 451 building. She lives in one and rents out the other at a positive cash flow. She had more sense than to get 100% financing.
We’ve stayed in the condo in her absence and all of the previous things I’ve said are indeed true. It is a safe, quiet area with easy access to great restaurants and nightlife. There are a lot of professional people in the building. It may not be everyone’s cup of tea but I am very pleased that she is there and think that it will be a good purchase in the long run.
I do appreciate your website and enjoy the information and comments. I used to be in real estate years ago and still enjoy keeping up on the latest real estate news, information and comments.Keep up the good work!
Oh…just wondering if your friend who lost $25,000 included in the calculations the amount he/she would have paid in rent and parking over that period of time?
Marianne
Marianne: The “Pacific Mission Campus” shut down several months ago and is being torn down and replaced with an extension on the Jones Prep School. They have opened a new facility at 1458 S. Canal.
If your daughter is renting out a unit for positive cash flow, that means she put down quite a bit of money. She could have been making money with that cash in other investments.
Both of the one bedrooms, #804 and #503 are under contract and scheduled to close. The building has been selling very quickly even through the market is slow. There are very few units left for sale. The neighborhood is great and 451 Huron is a great value.
Sabrina, you don’t know what you are talking about when it comes to renting versus buying. Rent money is paying someone else’s mortgage while owning is making an investment in your own future. You must like paying taxes instead of saving money. Earned income from the stockmarket, if there is any, is taxable, while you are taking deductions on any real estate you own.
You also don’t know what you are talking about as far as the neighborhood. The neighborhood is great and getting even better. And, as far as I am concerned it is in walking distance to Michigan Ave as well as many restaurants and shops. There are many young women, I am one, out walking their dogs at night and walking back from many of the restaurants in the neighborhood, Trader Joes, or Michigan Ave.
Maybe you need to get your facts straight and look at things the way they really are. You had a fiend who “lost” money in realestate. What you are quoting is before tax dollars. More people have lost real money in the stock market than in real estate. Take a look at the stock market lately. The seem to be many thousandairs that were millionaires.
I recently cheked out 451 over the weekend to rent or buy and came away pleased but not overly excited. A few things that surprised me was how small the second bedroom was (10×9 or 11×9) and the lack of closet space in that bedroom. Also, some of the smaller units don’t have the full w/d. The workout facility is very small and not adequate for what you are paying. I do prefer 700 North Larrabee!
In regards to investing in real estate compared with the stock market, it is not a fair comparison no matter how you look at it. The stock market has outperformed real estate 13.4% to 8.6% (over 01-06′) and even if you look back 20 years but the fact is that real estate gives you leverage not to mention you can lose your pants in the stock market. I invest in both but by no means am I saying one is better than the other. If the price is right I think 451 would be a great deal as well as other real estate(315k range).
When everyone is running for the door, I’m running in
I love this place!
Here are the resales in 2009:
#604 9/21/2007 $270,720
#604 6/26/2009 $265,000
#911 1/2/2008 $293,228
#911 8/27/2009 $260,000
#1006 11/2/2007 $289,133
#1006 2/20/2009 $277,500
Don’t forget to take out the 6%+ in transaction costs.
The pain is nowhere near over here. By my count at least 30% of the units have been offered for resale or rent to date.
From upthread:
G on December 5th, 2007 at 3:43 pm
Unit 501 was originally listed on 8/28/07 for $449,900 (plus $35K for parking.) No big coincidence, it went on the market the same day it was acquired for $404,504 (looked to be with the parking since list was only $371,900.) I will not go out on a limb by predicting that this flipper will be taking a loss on this one if a sale ever occurs. In the meantime, it is also for rent for $2500/month (which appears to include the parking spot.)
UPDATE:
#501 closed 6/27/2008 for $392,500
The highest rental rates in the MLS for the ’01’ tier:
#1201 rented w/pkg 8/11/09 for $2200
#1501 rented w/pkg 8/8/08 for $2150
#1301 rented w/pkg 8/11/09 for $2100