“Nice Investment Opportunity”: Short Sale 2-Flat at 3741 N. Janssen in Southport
This vintage 2-flat at 3741 N. Janssen in the Southport neighborhood of Lakeview is listed as a short sale.
The listing calls it a “nice investment opportunity”.
It has only been on the market for about a week and already it is under contract.
The building consists of two units:
- 2 bedrooms/1 bath, rented for $1300 a month
- 2 bedrooms/1.1 baths, rented for $1875 a month
Both units have central air and washer/dryers in the units. There are also separate utilities paid by the renters.
The property has a 2-car garage.
The listing has other particulars:
- Rental income: $38,100
- Expenses (water/insurance): $4285
- Net operating income: $33,815
Even at the short sale price, which is $76,500 under the 2004 purchase price, does this make sense as an investment?
There are no interior pictures in the listing.
Stephen Baker at AMR Group has the listing. See the listing here.
3741 N. Janssen: 2-flat, 4 bedrooms, 2.5 baths, 2 car garage
- Sold prior to 1991
- Sold in May 2004 for $626,500
- Originally listed in April 2009
- Lis pendens foreclosure filed in May 2009
- Withdrawn
- Currently listed as a “short sale” for $550,000
- Under contract in less than a week
- Taxes of $9757
- Units have in-unit washer/dryers
- Central Air
- Separate utilities
Ummm…let’s not leave the taxes out of the NOI calc LOL. Even at a VERY agressive 6% cap rate, this place is only worth about $400,000 as an investment.
I don’t understand how this building is only two 2 bedroom units when it appears as though there are 3 stories with an unfinished basement.
Rent minus expenses (only those listed, don’t worry, there will inevitably be more) minus taxes leaves $24000/yr. You’d have to be paying a huge amount of cash to be profitable, and then surprise, you get to be a landlord now too. Not for me, thanks.
Wonder what the buyers plans are.
burn it down for the insurance money?
I’ll bet this was bought as a SFH conversion. Certainly doesn’t make sense as an “investment”. No pictures usually means it’s pretty scary on the inside though it does appear to be rented.
This should be worth a few chuckles:
1) It’s owned by a real estate agent.
2) They’ve been trying to sell it since June 2008
3) Originally listed at almost $1.2 MM
“Wonder what the buyers plans are.”
Option 1:
Kick out one of the tenants and live in that unit while using the rental income from the other unit to help pay the bills.
Option 2:
Demonstrate incredible business skills by jacking up the rent to get a reasonable ROI, forgetting that the units will end up vacant until the rent is lowered again.
Oh…apparently the top 2 floors are a duplex unit in answer to Michael S. I bet that top floor is a rough open space.
Who knows why anybody buys anything. Somebody on my block bought a frame two flat in the spring for what is arguably a screaming steal (less than $200k) and they immediately gutted it. Now it’s just sitting vacant with boards over the windows, the siding is stripped and the grass is overgrown. No work on the outside or the inside in months.
Same with this place. Somebody thinks its a screaming steal at $550k and they’ll buy it and then just sit on it, or who knows. time will tell.
“No pictures usually means it’s pretty scary on the inside though it does appear to be rented.”
I’ve been meaning to ask about that – virtually all multi-units do not have picture of the apartments if there are tenants living there. Is there some regulation or requirement that you can’t post pictures if there are tenants?
I walked by this place months ago and thought it would be perfect for a sfh conversion (Blaine district?), but saw it was listed at over a mill. Ridiculous. Also, although in an area of lots of sfh’s, this block is kind of gross, and mostly 2 flat rentals.
Its location within the Blaine school district attendance boundaries make it an appealing option for an owner occupant taking the cheaper unit and planning to expand into the basement.
Matt,
You can certainly post pictures with tenants. It’s done all the time. The trick is getting the tenants to make the place presentable. It’s not like you are going to get them to de-clutter.
Thanks Gary. I guess the absence of pictures means the majority of tenants must be pigs….
I can confirm that from personal observations. Why anyone would want to be a landlord is beyond me.
Richard Lefrak (NY landlord) was interviewed and I heard him say: “RE is really an income business, and wealth is created when loans are paid down, not when you ‘borrow’, ‘refinance’…”
He was really critical of the RE investment community during this massive credit boom.
With every “real estate recession”, people become so incredibly pessimistic and short sighted. I have seen it in the 70s and 80s in Boston, L.A. and, to a lesser extreme, here in Chicago. The truth of the matter is that housing will recover in the next 5-10 years and, believe me, in 2020 we will be chatting about how much prices have gone up, etc.
If people can wait 10-15 years for their profit, real estate is still a great investment.
If someone bought this place for 500k cash, they would still be getting a 4-5% return (much more than any bank/money market). In addition, if they wait 10-15 years, it probably will be worth quite a bit more than 500k (of course, there are the huge issues with being a landlord, maintenance, etc. – but there are still big rewards – people just have to start looking at the big picture (10-15 years instead of 1-5 year profitability).
No offense, soothsayer, but none of us has ever lived through a real estate bust of this magnitude so you can’t say that if they wait 10-15 years it will be worth more. In Japan, they are still waiting (and it’s been 18 years or so since their real estate bubble burst.) Prices declined for 15 years there.
Why would you tie up your money for 15 years simply for an “investment”?
To live in it- fine. For an “investment”? What a waste.
I agree with Sab regarding buying solely for investment purposes. The state of the economy as it is, no one is able to predict what pricing will be like 10-15 yrs down the road.
If you are planning on buying now, buy for your own long term use and not as an investment.
Like Suzie Orman says “You can’t live in a stock certificate”
“To live in it- fine. For an “investment”? What a waste.”
But a stock certificate, like pets.com, drops to zero and that’s all. Real estate is an albatross. You have to pay taxes, upkeep, maintenance, insurance, random city fines, new roof, new appliances, mortgage interest…
“roscoevillager on July 12th, 2010 at 8:58 am
Like Suzie Orman says “You can’t live in a stock certificate”
“To live in it- fine. For an “investment”? What a waste.”
“
but you can still live in it if you need to…
One thing everyone seems to forget is that Americans love to be comfortable and feel rich. We are (and always have been) extremely spoiled. Just take a look at the people still spending lavishly at restaurants and bars….
My point (it’s in here somewhere) is that while people can be a little skiddish about high end real estate now, they will soon forget and, as soon as some smart businessman comes up with a scheme to get them into nicer places, there will be plenty of people jumping at the bit. The U.S. is NOT like Asia or Europe (where people will “suffer” and live in crapholes just to save money). Mark my words…. real estate will come back (all you have to do is know the psychology of the American people)
“To live in it- fine. For an “investment”? What a waste.”
Wow, just lost a lot of respect for the people that post here. You don’t want to tie up money for a long-term investment? What do you think an investment is?
Do you ever wonder… how are all those people rich and I am not? This is how.
How many of you Michigan refugees had grandparents with money tied up in Michigan real estate?
Yeah, because real estate always goes up.
There are ways to get rich, real estate is one of them, but merely repeating the real estate mantra won’t make you rich. You need to be savvy, sophisticated and have a little bit of luck, just like most other things in life.
“#brad on July 12th, 2010 at 10:26 am
“To live in it- fine. For an “investment”? What a waste.”
Wow, just lost a lot of respect for the people that post here. You don’t want to tie up money for a long-term investment? What do you think an investment is?
Do you ever wonder… how are all those people rich and I am not? This is how.”
Sabrina,
As bad as this downturn is, and I don’t minimze it at all, it is not the Japan “bubble”. While prices here got very high, they were “2001 Tech bubble” high in Japan!
I believe this is not great deal but it might be good. Paying all cash, the owner might expect to make 3-4%, plus depreciation. I’m no tax specialist but tax rates are likely to go up. So the real short term return exceeds the return on 10 yr treasuries and provides a hedge on inflation.
Snowball
The dirt here would sell for $550k alone. No brainer. I have clients actively looking for single lots in this area and would pay that in an instant.
It’s not that I don’t believe that but that’s totally crazy.
“#vincentg on July 13th, 2010 at 11:54 am
The dirt here would sell for $550k alone. No brainer. I have clients actively looking for single lots in this area and would pay that in an instant.”
vincetag,
if this is a no brainer, i am assuming your clients have put this under contract for 550K? dirt is not 550k, especailly a residentail property located on a commercial street.
also, the costs listed to operate this property are way off, and goes to show how litle most residentail brokers know about investment properties.
most RE brokers have never owned an investment property, and have literally no clue how to underwrite a simple 2 flat. unbelieveable.
also, this looks like it was a 3 unit, that was deconverted by duplexing up. you will never get that unit added back, and that was a huge mistakte by the owner, and has drmatically de-valued the property.
this will go for 425-475k in the end. you heard it here first
“if this is a no brainer, i am assuming your clients have put this under contract for 550K? dirt is not 550k, especailly a residentail property located on a commercial street. ”
Since when is Janssen a “commercial street”?