If there is any doubt that the real estate market has changed in 2012, look no further than this story from Crain’s about 2 different flippers in the new construction luxury high rise at 2550 N. Lakeview in Lincoln Park.
We’ve seen plenty of “renovators” or “rehabbers” in the past couple of years.
Those are investors who are taking beaten up properties, usually foreclosures, and rehabbing them and putting them back on the market for profit.
But flippers are different.
Flippers buy new construction properties at pre-construction prices, wait for the building to be built and for there to be appreciation, and then sell the units at a profit to new buyers without any rehabbing or renovating.
According to Crain’s, there are two flippers looking to sell units, in bulk, in the new high rise.
The investor has hired @properties agent Tricia Fox to sell purchase contracts for the 15 condos and 30 parking spaces at Lincoln Park 2550 even before closing on them. To sweeten the deal, the investor, whose identity could not be determined, also is offering to pay property taxes and assessments for a year after the sale.
“There are plenty of people looking to tie up capital right now, and there’s limited inventory,” Ms. Fox said.
The client isn’t the only investor trying to cash out. Another undisclosed buyer also wants to sell a portfolio of one-bedroom units in an “investor blowout” at the tower, according to marketing materials from Coldwell Banker agents Elena Frankel and Patrick Santry, who are handling the sale. The agents did not return messages.
The building has 218 units.
Crain’s is reporting that the developer has said he has contracts on half the units.
According to the MLS, there have actually only been 25 closings. Appraisal Research said 43 have closed. Some units may be slow in actually being put into the MLS as having closed.
There are apparently 67 units under contract.
All of these units the flippers are trying to sell therefore make up a big chunk of the units under contract in the building which have not closed yet.
Ms. Fox declined to say what her client has agreed to pay for the condos and parking spaces but said the contracts were signed before construction began. Asking prices have since risen at the project, allowing the investor to price the portfolio at $700,000 per unit, or 30 percent below current listings marketed by Ricker-Murphy, Ms. Fox said.
That price undercuts the developer, which had sold just 43 units in the tower by the end of the third quarter, according to a report from Chicago-based consulting firm Appraisal Research Counselors. Another 67 units were under contract at the end of the quarter, the report said. Asking prices for the developer’s units at the tower range from $465,560 to nearly $11.5 million.
Ricker-Murphy co-principal John Murphy declined to comment through a spokesman.
Because Ms. Fox’s client would assign the purchase contracts rather than sell real estate, the investor would not have to pay transfer taxes and other closing costs. That discount allows her client to sell at a modest gain, Ms. Fox said.
“The seller is not planning to lose money, but they’re motivated to sell at a reasonable price and not make a killing,” she said.
Ms. Fox declined to disclose the makeup of the portfolio but said the units are “smaller rather than larger,” with a mix of west and east-looking views. A potential buyer could rent out the units at projected monthly rents between $2,500 and $3,200, she said.
Ms. Fox said her client aims to sell its contracts before the end of the year.
“From the time this building started marketing until now, we’ve certainly seen a lot of shifts in the marketplace,” Ms. Fox said. “The time is right for my client to let go.”
Asking price for the 15 units?
$10.5 million.
With a time table of the end of the year, this flipper has only 4 weeks to sell $10.5 million worth of luxury apartments.
Will it happen?
There are so many other questions- where does one begin?
- With investors apparently buying luxury units in bulk, will 2550 N. Lakeview simply become a very nice rental tower?
- If these flippers succeed, will flippers show up in The Ritz and other buildings?
- Are flippers a sign that the condo market is “back”?
- Is there really “limited inventory” when inventory in the upper bracket, once the Ritz comes on the market, is multiple years? Or is “limited inventory” referring to rentals and investment properties?
- Is this even a successful investment for someone renting out these units at only $2500 to $3200 a month? (I’m assuming they’re 1-bedrooms at that price because the 2-bedroom units are already renting in this building for $4000 and up.)
Questions, questions, questions…
Investor looks to flip 15 units at Lincoln Park 2550 [Crain’s Chicago Business, David Lee Matthews, November 29, 2012]
