The Chicago Tribune recently reported on the state of the multi-unit property in Chicago. Multi-unit properties became all the rage in the last 10 years as investors bet on appreciation.
“Those were some of the first buildings people were willing to walk away from,” says David Hanna, president of the Chicago Association of Realtors. “The number of foreclosures on those buildings has really been high.”
Leaving prices relatively low. “You’ve got some two-flats selling today for the same price they sold for in 2000, 2001,” Hanna says.
Anup Bhattarai has been watching a lot of YouTube lately. Not that he has idle time on his hands — quite the opposite, in fact.
Bhattarai, 34, just bought a two-flat in Logan Square for $265,000, which he’s rehabbing himself: repairing leaky pipes, patching drywall, pulling up old carpet. “I have no training whatsoever,” Bhattarai acknowledges. “YouTube has videos for everything. I just watch and go along.”
If you’re going to live in the property, instead of simply buying as an investment, you can get an FHA loan for as little as 5% down.
“They’re a phenomenal investment right now,” says Stephen Northey, Koenig & Strey Realtor and owner of an Edgewater two-flat. “It’s a great way to get a leg into a better neighborhood than you could ordinarily afford.”
Northey and his wife, Debra, have owned their two-flat for five years. Within that time, they’ve rented the top floor to three different tenants.
“It’s a much more flexible investment than a condo or single-family home,” Northey says. “You live there and collect rent, and even if you outgrow it, you can rent out both floors and still borrow against it to buy a single-family or something bigger.”
Back in 1994, Steve Hobbs bought a Wicker Park two-flat for $150,000, fixed up the first floor and quickly found a renter.
“I rented out the first floor for $900 a month and my mortgage was $1,300,” Hobbs says. “My wife and I were living in the top floor for $400 a month.”
They’ve since moved to Sauganash, but he and his wife held onto the Wicker Park two-flat as a rental property. “Now it generates about $3,200 a month, so it’s sort of been a little ATM for me,” he says.
“I have no control over my 401(k) or mutual funds,” says Hobbs, who works as a Baird & Warner Realtor. “These guys are managing my money for me. Over the next 20 to 30 years, quite frankly, I feel like I have more control over my property investments than I do with my money at TIAA-CREF.”
“I personally would not spend my money on a condo if I had the ability to buy a two-flat,” Hobbs contends. “If I’m looking to spend 200 grand, I don’t want to live in a condo where people are going to tell me how to live. I’d rather pay 265 or 350 and get a tenant to cover the difference and me be the person who tells them how to live.”
Two-flat Comeback [Chicago Tribune, Heidi Stevens, June 28, 2009]
