Is This a Good Investment Opportunity? 330 W. Grand in River North
This 585 square foot studio unit at 330 W. Grand in River North just came on the market as a short sale.
The listing says it is a “good opportunity for an investor.”
Is it?
Nice studios rent fairly quickly in River North (if they’re priced “right.”)
Nicholas Katsafados at R.E.I.T. Homes has the listing. See the listing and one more picture here.
Unit #1305: studio, 585 square feet
- Sold in March 2006 for $194,500
- Currently listed in “short sale” for $129,000
- Assessments of $283 a month
- Taxes of $2020
- Central Air
- In-unit W/D
- No parking
We bought a 2+2 at 330 West Grand (called the Grand Orleans since it is at the corner of those two streets) as a weekend place at the end of February. There is nothing fancy about this building. It has few amenities except for 24/7, very pleasant, door people. The management seems to be top notch, and there is an involved and apparently competent HOA. The equipment in the small workout room has just been replaced, and there is a facade inspection going on.
Of the 30 or so places we looked at we chose this building because of the view from our tier 6 unit, and the location both of which are great. A very walkable neighborhood, with interesting (and useful) stores and some nice restaurants nearby. North Michigan Ave. is not far. An unexpected bonus was the dog park one block away.
We probably overpaid, we didn’t know the couple was divorced, but for reasons I have explained on this site before it was the time for us to buy. Nevertheless, most of the 2+2s in the building are greatly overpriced given what we paid.
At this price point it seems it would cash flow as a rental if someone was interested.
i’ll stick w/ my 1br at grand/wells for $1100.
Steve A- I wouldn’t even know about that dog park if it wasn’t for CribChatter. Now i’m a few-times-a-week regular.
Fairbanks,
It does seem like it would cash flow IF you were able to get a tenant immediately and never had a vacancy and nothing went wrong. This is definitely in the right price range, but I would knock another five to ten thousand off to make up for the transaction costs and start a small reserve fund for the unit.
Overall, yes, this is a fair asking price.
Probably not a “good” investment. Assuming you paid $115K for it, you’d have to rent it at $950/month to break even on a before tax basis. Don’t know what this would rent for, but would guess 950-1,000 is generous.
Was the 3-06 sale the original from the developer?
50% overpriced–some of that’s the inflated land price, some of that’s bubbly material costs, but the rest was economic rent to the developers.
Why does no one (in general, not just here) get on the developers for their pricing and profits (rather than the decision to overbuild)? Why is just the bankers who catch the vitriol?
anon(tfo),
Its because the developers build. Thats what they do–they borrow money from the bank and build, its the only thing they know how to do. Also they are aware that their industry (RE development) is highly variable and subject to massive declines, so they try to get their economic profits while they can. Pre-ante the developers don’t care if they go BK as there is potential high margin in RE if its timed right, right location, and its a risk worth taking, but at the end of the day its speculative and the banks money.
The bankers, instead, should have been following a stable business model and been the sanity check on the developers as it was THEIR money they were loaning to developers.
“Steve A- I wouldn’t even know about that dog park if it wasn’t for CribChatter. Now i’m a few-times-a-week regular.”
Yeah I’ve been hitting the Ohio Park Place dog run/park recently as well. Frickin awesome as its only a block south of me!
I don’t think people will rent studios in this location for $1k a month, it would be a horrid buy though at this price point if you did any sort of financing, Cash only wouldn’t be bad I guess but
If you did FHA you’d only need $4515 down + about $5k for closing costs.
Your mortgage would be about $830 and the assessments + taxes would be $451… or $1281 a month to live in a studio… blech!
anon, the bankers’ behavior this time is on a scale not seen before. If anything, they prohibited (intentionally or not) prior national RE bubbles. This time they sought one out. Hence, the vitriol.
Couple that with the fact that developers have always been held in low regard and maybe you have your answer?
“The bankers, instead, should have been following a stable business model and been the sanity check on the developers as it was THEIR money they were loaning to developers.”
And the construction lenders did okay until about the last 18 months, when the bubble ran out. The bubble that was driven up, in part, by builders increasing their asking prices by 100%+ over 2-3 years. They helped set the comps. What do you think Trump’s $1000/ft units (used only b/c it’s easy and everyone is familiar) actually cost to build? Add 15%, you’re still nowhere close to $1000/ft, or that would have been his original asking price.
I’ve seen SFH developers price list in SoCal from the 02-05 period–they raised their prices bascially *every* month, by 5-10%. That wasn’t about increasing costs, it was about maximizing profits without regard to the destabilizing effects on their future market and therefore their business (exactly what the banks were doing, too).
If you buy this at list price of $129,000 as an investor with 25% down (i think investors are required to put this much down, maybe more) at 7.5% mtg rate (i’m guessing here), your monthly mortgage is $675 dollars.
add $450 for tax/ass and you’re at $1125 monthly nut.
it’s really hard to make condos work as cash flow investments. ugh.
What the fuck are you calculating it at a 7.5% mortgage rate for? Last time I checked they’re just under 5%.
bankrate.com anyone?? Am I missing something?
“What the fuck are you calculating it at a 7.5% mortgage rate for?”
Non-o/o. Much higher rates. And they’re checking again.
Sorry, uh, not to familiar with the terms. What is Non-o/o?
Owner Occupied? Really? Damn those banks will screw you on everything.
FYI, there is no limit on the percentage of rentals at 330. Currently 24% of the units are rented.
When I was buying condos 15 years ago, it was very difficult to make them cash flow without large downpayments. The real reason for the purchase was value appreciation on the unit, any increases in rent was added gravy. That being said, the condo market will be dead for probably a decade or two so there in no point in buying today. Look to other investment vechicles.
Well put, valasko. This market will destroy “investors” for a while, though. They just can’t help themselves.
First time buyers and investors are the easiest marks right now.
a – if you did buy this unit for owner occupancy at got a 4.75% interest rate your monthly mtg would be $505 w/25% down. so monthly nut is $955.
I can’t speak to rental rates in the area – but at that point it may be cheaper than renting.
Don’t forget, rents are declining. You are trying to hit a moving target, why not wait until it stops?
> Don’t forget, rents are declining
Where is that? I have never lived in a rental that ever saw a rent decline. And I have rented in various cities in various economic situations.
I’ve heard several people say rent is declining but how come my rent, for a studio in LP, is going up another 5%?
“how come my rent, for a studio in LP, is going up another 5%?”
Because you’re a sucka?
It’s the asking rents for new renters that are decliing. You’ve decided you want to stay, so your rent is going up. Try suggesting that you might not renew b/c the increase is too big–maybe they want you out, but maybe they’ll offer something to stay.
“I’ve heard several people say rent is declining but how come my rent, for a studio in LP, is going up another 5%?”
Because you’re a sucker? Seriously–tell your landlord if s/he doesn’t drop your rent by 5% you’ll move.
What my landlord does to entice new tenants is offer them a month free on a 13 month lease. Its a clever trick so us remaining tenants can’t easily claim they’re getting a better deal even though they are. With craigslist now all landlords must know their ads are under the microscope..
KW–
Ha! Beat you to it.
oops… I guess that was too easy for us, anon.
Called on this condo yesterday. They have two cash offers both for over the asking price.
Suuuure they do… they’re spoon feeding you the BS it sounds like.
“Called on this condo yesterday. They have two cash offers both for over the asking price.”
I have heard this line more in Chicago than any other city I have done business in. Yet somehow, that pesky listing turns up in the next weeks MLS.
“it’s really hard to make condos work as cash flow investments. ugh.”
Duh…yah…It is nearly impossible, in today’s market to make any money whatsoever on condo purchases/rentals. Other than O/O, I stay away…far away from purchasing any condo units, anywhere.
I read this Comment of the Day in CurbedNY:
“I live in a three bedroom one bath in Gramercy and we paid $3855. We managed to negotiate our rent down to 3050 which is more than 20% off. The landlord was offering the same three bedroom a few floors down for 3200 so we called their bluff when they tried to renew at 3855. In this market I would start at 20% when negotiating for a better lease.”
> In this market I would start at 20% when negotiating for a better lease.
Yeah, in any market I would start there. Not gonna get it, unless the landlord is hurting to keep people. (Every building I have lived in is always 100% rented.) I always try to negotiate rent, because I am a cheap a##. But I also know that there is a cost to move, both financial and stress-wise. So you have to do a cost-benefit analysis.
Seems like a convenient location for walking to work and proximity to East Bank Club. The asking price is under $225 per sqft for newer finishes.
A 1 bdr/1 bth was just listed at 630 N. Franklin for $130,000. The following are the agent remarks:
REO. Not short-sale. DO NOT DISTURB OCCUPANTS. Buyer is aware that property may be currently occupied & cash only offers unless interior inspection can be obtained. Seller may not be able to convey possession at closing. Eviction proceedings may have begun. Buyer’s agent to pay $160 management fee. * Drive by view only, no interior access for now. *
Agent Remarks: Highly upgraded one bedroom. Hardwood floors throughout, stainless steel appliances, granite countertops, custom granite breakfast bar, in-unit laundry, built-in closet organizers, extra-large parking space included.
Brad asks, “Where is that? I have never lived in a rental that ever saw a rent decline. And I have rented in various cities in various economic situations.”
Welcome to Chicago! “Downtown apartment rent falls by most in 7 years” http://www.chicagorealestatedaily.com/cgi-bin/news.pl?id=33086
Note in the graph that this is not a new phenomemon in Chicago, not even in this decade. It has occured in many other major metro areas in the past 20 years, so I wonder how “various” those “economic situations” were?
It still amazes me to see rent rolls where long-time tenants are paying much more than new tenants, even though it is pretty typical in all but bubbly times.
VB, great one. It looks like a cash buyer solves all of their problems. That way the buyer doesn’t have to get inside the unit or obtain possession at closing. Heck, the seller won’t even have to bother to check if they started the eviction or not. The place is “highly upgraded,” so that guarantees that no subsequent tenant “downgrades” have occurred, right?
What could go wrong?
“A 1 bdr/1 bth was just listed at 630 N. Franklin for $130,000. The following are the agent remarks:
REO. Not short-sale. DO NOT DISTURB OCCUPANTS. Buyer is aware that property may be currently occupied & cash only offers unless interior inspection can be obtained. Seller may not be able to convey possession at closing. Eviction proceedings may have begun. Buyer’s agent to pay $160 management fee. * Drive by view only, no interior access for now. *
Agent Remarks: Highly upgraded one bedroom. Hardwood floors throughout, stainless steel appliances, granite countertops, custom granite breakfast bar, in-unit laundry, built-in closet organizers, extra-large parking space included.
”
That could be a great deal if the current tenants don’t find out and trash the place, that would easily be CF positive… you could easily rent out one of those 1br’s for $1k a month. But lol at the cash only no looksies or bothering tenants with drive by showings.
What the fuck are you calculating it at a 7.5% mortgage rate for? Last time I checked they’re just under 5%.
bankrate.com anyone?? Am I missing something?
I have perfect credit and as a first time home buyer (as most studio buyers are), I was quoting 6.75% w/ 10% down and 6.25% with 20% down. NO ONE wants to give loans on condos w/ 10% down. And no one will fund PMI if your DTI ratio is above 30%. It literally makes me sick.
*make that quoted, not quoting
kn,
If your credit is as good as you say it is check out aimloan dot com. With 20% down you can get anywhere from 4.375-4.875% depending on whether you want to pay up to 1.5 points. I expect 30 year fixed mortgages to hit 4.25% soon with a similar amount of buydown points.
The reason they won’t fund PMI is because the entire dynamics of the industry changed very quickly. Yesterday we just found out Chicagoland single family homes lost 4.5% of their value on a month over month basis. If you are the lender on one of those loans and your borrower put 10% down only a month ago, you just lost half your cushion protecting you from potentially big losses.
Price isn’t bad and you may be able to get about $1k for rent.
Sadly the downtown market is flooded, so it’s challenging for landlords to rent their places unless they’ve got some really nice upgrades.
I’ve seen investor loans offered @ 5.5% rate with a point, but unfortunately you won’t get that with 10% down.
Getting a loan, in my case, is one big pain in the ass and I have excellent credit. However, every time I get a loan it’s the equivalent of having my prostate checked.
Unfortunately the downtown market is flooded, so it’s challenging for landlords to rent their places unless they’ve got some really nice upgrades in the units.
FYI I was just quoted for 300k with 10% down @ 4.875% on a 30 yr fxd. Need PMI though.
Low rise condos are best for investment purposes. The crazy HOA of these places will almost never let you turn a profit. I own a low rise condo and break even (but I have a 20 year fixed, so if it was 30 i would make money).