Flipper Alert: The Tale of a 1 Bedroom in 340 on the Park
For a flipper, it is sometimes good to be on one of the lower floors of a new building. Not only are those units cheaper but they also usually close first which means your unit becomes available earlier to prospective buyers. In some cases, you may be able to list and show your unit months before others in the building.
You also benefit from the “buzz” created when a building first starts closings and everyone is eager to see what the interior looks like.
But in a slowing market, being the first to close can also put you at a disadvantage if you don’t price the flip correctly.
Such is the case with a 1 bedroom unit at 340 on the Park, the new high rise that is still closing on units near Millennium Park in the Lakeshore East development.
Unit #307 was among the first units to close in the building in July 2007. It is one of the prized south facing units. The owner has had to reduce the listing price several times.
Unit #307: 1 bedroom, 1.5 baths, 1186 square feet
- Sold in July 2007 for $415,000
- Originally re-listed for $725,000 in 2007 (don’t know if that included the parking)
- Reduced to $649,000
- Just reduced again and now listed at $599,000 (not including the parking which is $50k extra)
The most recent reduction is suspect. It looks like they probably stripped out the parking and are now listing it with the parking separately- which makes the unit appear cheaper than before when it’s really the same price. If anyone knows if the $649,000 price didn’t include the parking, please let me know.
The listing says it’s priced at $505 a square foot and is the “best deal in Millennium Park”.
It’s been on the market for over 200 days.
Or, you can rent it for $3500 a month. It’s been on the market several months as a rental as well.
Nicholas Colagiovanni at Baird and Warner has the listing.
oh schaudenfraude…..i’d be happy to place a bid @ $405k or rent @ $2200k/month.
but obviously the seller won’t take me seriously…..but perhaps in August.
The truest adage in investing: your first lost is the best loss.
This unit faces directly into the office tower next door!!!!! on one side, but has nice treetop views of the park on the other. Still, the price is crazy, BUT , wouldn’t this be the least expensive unit in the building? (if you could get it for about $480,000) Of all the buildings I have looked at, 340 on the Park is really one of the best.
This unit doesn’t have the views of the higher floors to justify it’s price (not even talking about 1/2 of the unit’s views being of a building next door).
This person is entirely out of touch with reality. Even 480k is aggressive, unless you include parking in that.
I’m surprised it hasn’t rented yet. Maybe not for $3500 but maybe for $3000 or so.
In really want this unit. Any thoughts on when would be a good time to make a bid? I would give $425. I saw a north facing unit today that had no outdoor space and it was asking for $499K. The realtor said I could probably get it for $430 or so… but who wants a N when you can have a S facing view.
Now. They probably won’t take it, but they’ve been making mortgage payments now for seven months, so you might as well give it a try. I like the unit, too, but personally, I wouldn’t pay more than the $415 they initially bought for–and in that price I include the parking.
There are now about thirty five 340 OTP units on mls. As me says, maybe in August…
As great as 340 OTP is, and it is probably my favorite new tower, what will happen when you might need to move in 2010 or 2011 and you have to compete with Peshtigo, Canyon Ranch and Aqua? (as well as the Spire) It will no longer be the new “hot” tower, but it will always have one of the better locations. Mack, I looked at what might be the same north facing unit as you did, and I prefer the south facing view also, but the north views were not that bad, though it seems that everyone in all those new towers has telescopes looking at eachother across the the lake shore east park.
Don’t forget that half of this south facing unit looks into the office building next door.
That’s why I wouldn’t pay more than they paid in 2007 (which presumably was a pre-construction developer price from 2005. And the only reason I’d even be willing to pay 2005 prices is because it IS a very well-made building.)
Kenworthey, I wrote before that I talked with them about how I would be willing to make a 480k offer with parking included. I was told there was no way they would even look at it. Would you think that is too much? It is a “well made building”, the gym-pool area is spectacular, and the garage looks like a Mercedes-BMW showroom.
If I were to choose between 340 and Fairbanks, it would be 340.
I’m with you on preferring 340, though I like 600 NF a lot, too. But to be honest, my opinion about what it is worth is based on simply having looked at downtown condos for a couple of months and reading the news/websites like everyone else. And so as purely a personal preference, that unit isn’t worth $480 to me. I place too high a value on not looking into the BCBS building next door, AND I’m risk averse wrt falling prices.
If any buildings are going to hold their value, it will probably be buildings like this one. However, as Sabrina has pointed out to me, a lot depends on how many investors there are in a building–and there are a LOT of investors in 340 OTP. The worst pessimists on this site see prices in Chicago generally reverting to 1998 levels. The moderately bearish see them returning to 2003 levels. The optimists think that certain buildings in certain neighborhoods are likely to just stay flat for a few years. What will happen with this unit in this building? Who knows! My personal wild-assed guess is a reversion to developer’s pre-construction pricing (which is probably about 10% less than what people closed for)–but I really have no idea.
G and anon (a pessimist and a moderate, respectively) seem to have a very good grasp on the market; if they are reading this, maybe they could hazard their own opinion about whether $480 is “worth” it. I do think that if you are planning to stay there a long time–like five years or more–you’d be fine even if you overpaid a bit. Streeterville Realtor seems to know the market well, too–maybe he/she will pipe in…
But all of this is academic. Dollars to donuts they aren’t going to budge on their crazy price until next fall.
I meant to say, I think they will revert to their closing price, which I am guessing is 10% less than what the developers are selling for today. (I don’t think the building is sold out.)
I think well-made unobstructed views for life bldg such as 340 OTP are going to take a little longer to come down. The fact is that the economics will cause them to. If you want top of the line you go to Spire or Waterview Tower (some would say Trump, but I personally dislike Trump very much). Supposedly the “Mandarin Oriental” is suppose to be built… but I haven’t seen any cranes there yet. There are so many new construction condos in the downtown area. THOUSANDS. 340 OTP will stand out b/c it is a unique bldg when it comes to views… but it too will have to compete on price… hopefully to a point like Kenworthey said would be pre-construction prices.
Any thoughts?
The sales office informed me today that the developer has three units left for sale in 340 on the park, and that there are 25 units up for resale. Unit 900 (?) is available for $539,000 plus $50,000 for parking;unit 1606 is available for $550,000, not clear on whether parking is included; unit 807 is available for $680,000 plus $50,000 for parking; unit 501 is available for $1,050,000, not clear about parking;unit 1203 is available for $1,149,000 plus $70,000 for parking + storage;unit 5101 is available for $1,850,000 plus parking (price not listed).
These may have been discussed before, but thought I would post just in case they had not.
I’m seeing 35 for sale and 27 for rent (some of the same units may be for sale AND for rent.)
But maybe several are under contract now.
Agents?
Also, the building is only about 65%-70% closed so it still has a ways to go.
It is tracking to be at least 30% flipped or rented out.
I am interested in the building and have access to realtors MLS service. I can only find about 10 units for sale at 340. Where do I find the rest of the listings?
I know the owner of Unit 307. He is a “professional” flipper of considerable means (who does nothing all day but manage his real estate investments). Believe me, he can handle the mortgage payment on this property without a problem. I do not know how true it is, but he alleges he has flipped 4 units in this building so far and has two units left. He also told me he did very well on the 4 he sold so far.
He almost always buys on the first two or three floors, and almost always commands a $200K+ profit above the pre-construction price at which he buys. This flipper has a strong preference for selling to forigners who live abroad and are clueless as to Chicago’s true real estate market values. Obviously, that is how he makes $200K or better on each unit, or how he can ask $3500 rent for a one bedroom (that is not worth more than $2000/month, if that).
If anyone here is waiting for this flipper to drop the price to the high 400s, or throw in the parking space, FORGET IT! Hell will freeze over first, as they say. This flipper would not for me OR his fiance, so why would he for a stranger? It is highly unlikely he will ever go lower than $560K (since he actually paid $460K for unit 307).
This flipper thinks one bedrooms in Chicago, regardless of the present market, should be at least $600-650K (like NY or Boston). Because he gets these inflated prices from foreigners, he will not budge. Trust me. No surpirse he emulates the Spire’s Garrett Kelleher.
One more point, I live across the river from 340 on the Park. If I do not close my shades at night, the BlueCross building acts like a night-light in my condo. I am not exaggerating. If you seriously decide to purchase at 340 On the Park AND you face the BlueCross building, I would ask to see the unit at night. You really have no idea how bright the BLueCross building is until you experience it night. Caveat Emptor.
Luke this is interesting information and my agent has also told me that there was no way an offer below 550k would even be looked at for this unit, though that was a while ago. I also agree with you about the Blue Cross building lighting, it is literally right outside of the bedroom window. Where I do challenge this buyer’s thinking is regarding costs for Chicago housing vs. New York and Boston. The difference is Chicago still has LOTS OF LAND without the bridge & tunnel problems. I am convinced that this city has an oversupply of new condo housing.
I come from San Francisco, and I know what expensive is, but New York and San Francisco have a couple of things that prevent more housing construction that we do not. They both have extreme rent controls which keep new apartments from being built, and they both have huge NIMBY neighborhood associations that fight new developement. We have more new residential towers under construction in Chicago right now than probably San Francisco and New York combined. Think about it, the Trump, Spire, Waldorf, 600 N. L.S.D., Preshtigo, Canyon Ranch, Waterview, and on and on and on. As huge and diverse as Chicago is, I am very censorious that there is enough wealth to fill all of these million dollar units.
Let us know if the 1bd 340OTP owner changes his mind. I am “playing” right now with another unit in another tower that has never been lived in, been on the market for over 370 days, and just last week was finally dropped $200,000 in price. I was contacted as I had expressed interest in the past, but where as before I would have bought this unit on the spot at the new price, now I am not interested. Why should I be, when I see more and better deals popping up every day.
Morgan:
I agree with many of your sentiments. Chicago has much more inventory than either NY or San Francisco and it’s the inventory that will bring prices down.
Combine that with it being much more difficult to get a loan which will result in fewer buyers and you have a lot fewer units selling.
This real estate cycle is playing out like all of the other slowdowns in the past.
1. Sales start to slow
2. Inventory builds
3. Ultimately- prices drop
We have #1 and #2 and soon we will see #3.
There are some flippers who are going to hold on- as this “professional flipper” seems ready to do. What he doesn’t realize is that the game has already changed on him. He has to find someone who is clueless about the market conditions and/or who still believes there is appreciation happening in real estate.
Believe me, there ARE still people who don’t get it that the party has ended. So maybe he will find someone to pay his inflated price and still walk out of there with $200k (as he did on the other 340 OTP units.)
But the longer it takes to sell and the more nervous buyers become, the less likely it will be that he’ll be able to sell for the higher inflated price.
He’s been holding it for 8 months already. Lets assume the cost is $3k a month. That’s 24k down the tubes already.
He might be able to “hold on” – as Luke suggested- because he has plenty of money. But other flippers in the building might not be as well-off as he is. Some of them won’t be able to hold on and will either cut their prices to simply dump the units or will go into foreclosure.
Once that happens- all bets are off on what he’s going to be able to sell his for. All it takes is one person to blink in one of these new buildings and a new “comp” will be set. It’s a game of chicken right now.
The better “deals” in this building are the bigger units on the higher floors- where they’re literally just trying to get out by breaking even. You’ll be able to get one of those under the developer’s pre-construction prices by probably next year as the flippers get desperate.
Luke wrote: “If anyone here is waiting for this flipper to drop the price to the high 400s, or throw in the parking space, FORGET IT! … This flipper would not for me OR his fiance, so why would he for a stranger?”
Who tries to sell real estate to their own fiance? That’s not very romantic. Hope the fiance negotiates a good pre-nup.
I agree that the day of reckoning will be coming faster than the flippers think. I looked at 340 when it was in presale and thought the price per sq ft was out of line- how much profit is the right profit for a developer? They will have made it, but the origional purchaser will take a bath due to all the new inventory coming online in the next 18 to 24 months. These are apartments that probably cost 200-250 a sq ft to build less land. I’m waiting to see some sanity in the market and then i’ll purchase a downtown cndo.
Honestly, it sounds like a bogus claim. Who would sell something to his *fiance* (soon-to-be-wife)??
But it doesn’t matter. He can hold onto it as long as he likes. The trend is not his friend unfortunately. Things will get worse before they get better.
I’ve seen this behavior many a time from investors (and traders). Their pride gets in the way. They just don’t know when to get out. If he is really hoping to get 600k, he will I am sure – just maybe in 5-10 years.
Yes, if he really did pay $460K total, and put down only 5%, AND if he can get at least $2500 a month in rent, and he can hold on for five years making up the difference between holding costs and market rent out of his own pocket, then yeah, he’ll probably make a little bit of money (or at least not lose it). That is, of course, assuming that the price of the unit doesn’t dip *below* $460K and that it appreciates from $460 at the historically usual rate for real estate of about 3% a year.
But it’s an awfully hard way to make an easy living. Why not just stick your lucre in an index fund and go on vacation?
Is there an online resource to see what price a property sold for once it is recorded??? That is, without having to go through a Realtor®.
Unit 307 is Under Contract/Pending, so closing any day!
Originally sold for 415K, asking 599K plus parking!
Unit 900 and 1100, largest 1330 sq ft 1/1.5 Reactive, meaning contracts fell through. North facing huge 1 beds
SR: This unit was also available to rent. Could the “pending” be in relation to a rental as well?
Just wondering.
No, someone is buying it and all conditions have been met. Will be closing soon. The rental listing is canceled.
Poor guy, hope he at least got a good price near the original sale. If not, he just tossed away a couple hundred grand.
Well, one loss but two gains. The other two buyers just avoided the worst financial decision they probably would have made in their entire lives.
Who buys into a market that has just entered a recession???