Owning an Investment Property in Old Town: 1618 N. Cleveland
This vintage 2-flat at 1618 N. Cleveland just came on the market in Old Town.
The listing says it is a “terrific investment property in perfect location.”
The 2-units are as follows:
- Unit 1: 3 bedrooms, 1 bath, currently rented for $1200 a month
- Unit 2: 2 bedrooms, 1 bath, currently rented for $1200 a month
It looks like there is a 2-car garage with the property.
There is also central air and a washer/dryer in the basement.
Sandra Adler at Prudential Rubloff has the listing. See more pictures here.
1618 N. Cleveland: 5 bedrooms, 2 baths, 2 car garage, 2-flat
- I can’t find an original sales price but last sale was in 1998
- Currently listed for $590,000
- Taxes of $10,712
- Central Air
explain to me the cash flow here?
it might work with $400k downpayment….
Great location, property is kind of beat up, taxes WAY too high.
Pricing is not derived from cash flow but land value on this one.
“Pricing is not derived from cash flow but land value on this one.”
Yeah, you only have to hemorrhage cash until you find someone to pay you $700K+ for the lot. Which I’m sure will happen in no time flat in today’s market. It’s the very definition of a “terrific investment!”
It is a great location. What’s a lot go for in Old Town these days? I remember when LP had them at over 1 million.
Great investment if you want a 3% return on your money and tons of headaches.
It’s 2004 all over again!
JPS
I am not advocating this property. Simply stating a fact that value is in land, not cash flow.
Matt,
I realize that. My point that it’s being marketed as a “terrific investment” which to most people means operating it as a rental property.
The new construction market is comatose so the lot value is basically irrelevant. The value of this property is in the structure which is far less than $590k. Three years ago when bird dogs and builders were still using 100% financing to buy tear downs this would have easily sold for $600k or more. But today, when nobody is looking at this property as a tear down, not so much.
Why is the land value that great? If it is Old Town Triangle, you can’t raze the existing property and build something else, right? Just wondering…
How about as a live-in situation? A 3BR in Old Town for less than $600k with a tenant to pay some of the mortgage?
Clearly doesn’t make sense for cash flow. But what about a conversion? Assume you pay $550k then put in $250k to convert to single family. You then have a newly remodeled single family in Old Town for $800k. That’s starts to sound like a good deal if you’re willing to put in a little work.
so… 2400 a month of income
10k in taxes
you would have to put 400k down to barely break even, I could think of a lot more “terrific investments” than this awful property… in fact you could put 400k in a long term treasury and get a better, more liquid return with a lot less headache…
FAIL!
But do you want a newly remodeled single family on that street right there? It looks to me to be like that whole side section of the street has a bunch of similar worker style cottages that are inexpensive rentals
No way would I put any money into that structure. It looks awful. And the lot is only 80 ft deep.
This plot of land from the center of the earth all the way up to 2000 feet in the air is worth $590k!
question,
dont the $1200 for a 3 bedroom in old town seem low?
It doesn’t matter what street you are on. Wieland Mohawk Cleveland N. Park.
There are two bedrooms for 1200 – 1400 and three bedrooms for not that much more. These are not nice places. The third bedroom usually is rather small. More like a flop room. A lot of these places are professionally managed junky places. Disappointing to me really as I really like Old Town.
On the other hand there are two bedroom duplexes that rent for 2800 a month too. So Old Town really has the gamut.
The value is in the land, but that doesn’t necessarily equate to someone wanting to build on the land.
A friend of mine who grew up near the Southport brown line stop just watched her mom clear almost a million for an old SFH, as the McMansion owners on each side were each willing to pay almost $500K to get 12.5 feet of side yard (aka “living space”).
The neighboring houses don’t (ha) exactly seem to qualify, but the fact that land does have inherent value as green space is something that often got overlooked in the building frenzy. I know plenty of thirty-somethings stuck in condos who now wish they weren’t sharing walls with other people, you know?
Land is still worth something, even if not to much is being sold at land value for the moment.
If this crappy structure were is Roseland or Austin, it would be worth about 16k.
Possibly as low as 7k.
Only difference is the (location) land…..
Obviously Old Town land has significant value, but that doesn’t make the asking price of this place rational in a market in which there is virtually no chance of it being purchased as a teardown.
So none of the die hard LPers picked up on the fact that this is technically in LP?
“So none of the die hard LPers picked up on the fact that this is technically in LP?”
The entire Old Town Triangle (aka “real” old town) is “technically” in LP.
JPS-
Are you aware of any two flats in a comparable location that have traded in the last eight years that generate cash flow based upon market leverage and rates? What pool of buyers are looking at this as an investment property based upon cash-flow? Certainly not the future owner.
I’m curious if this was a lot with dirt what the commentary would read either at its current price or even in the $400s or $300s. I’m really interested if the readers know what ground up new construction costs per sf these days or rehab in an existing structure… both for SFH, condo conversion and rental quality.
NOT ADVOCATING A $590k PURCHASE PRICE.
CHICOW – this pocket of Old Town is not full of “places are professionally managed junky places.” Not at all. There isn’t a lot of third party management in this area… But there are probably units in close proximity that you may not find desirable having nothing to do with whether the owner manages their property or if that is handled by a professional management company. I’m not involved with management. I just think your comment should be clarified since it holds no water.
Let me tell you something: there is no mortgage on this property. The owner is trying to get an unrealistic price from his 1970s or 1980s investment property.
Its very obvious that few northside properties have cash flowed during the last 8 years or at all during the bubble. But you cannot use the investment strategy of the last eight years ie capital appreciation, properties going forward need to cash flow.
AaronERG
coming on rather strong aren’t u? Re-read my post. I mentioned a number of streets not just “this pocket of Old Town”. As for proving whether or not each place is managed by an individual, contracted out to a third-party, etc. I stand by my statement. And you stand by yours. I admittedly am not willing to go knocking on each door to ask who the landlord is…
I can say however that I have been in Old Town for more than a decade. And I walk the streets. And their are parts that are more owner occupied and ones that are rentals (that may or not be in the best upkeep).
We’re still not in a market where you can purchase a two-flat that generates a cash-on-cash return in this location (obviously depending on if and how the property is financed). There just isn’t enough potential income in a three flat to overcome the tax and insurance burden. You want a cash-on-cash return on a two-flat? Go to South Shore. Go to Austin. If your investment goals are cash-on-cash return, you’re targeting too small of an asset in too nice of a location.
What HD said. I know most North Side properties haven’t cashflowed for the past eight years, but going forward they are going to have to at least come close to doing so, because return on capital isn’t going to be there.
Just pointing out that the listing description of this property as a “terrific investment” is BS. There might be other reasons to buy it at $590K, but that ain’t one of them.
“JPS-
Are you aware of any two flats in a comparable location that have traded in the last eight years that generate cash flow based upon market leverage and rates? What pool of buyers are looking at this as an investment property based upon cash-flow? Certainly not the future owner.”
“I’m really interested if the readers know what ground up new construction costs per sf these days or rehab in an existing structure… [] for SFH”
No, but please tell us. And then provide a few GCs who would contract for work at those $$/SF. I’m genuinely interested.