Rent Versus Buy: What Makes Sense? Vintage in the Gold Coast
We’ve chattered several times about the discrepancies between renting versus buying (that basically it’s much cheaper to rent many properties than it is to buy them.)
Such is the case with this vintage 2-bedroom gold coast unit that is on Craigslist.
Check out the “for sale” Craigslist ad here.
Check out the “rental” Craigslist ad here.
Vintage unit at State and Division: 2 bedrooms, 2.5 bath, 2000 square feet
- Can buy it for $799,000
- OR rent it for $3500 (or maybe $2600– it’s unclear in the ad)
- Assessments of $1700 a month
- Washer/Dryer in the unit
- No parking
- SP Suites has the listing
Interesting looking place… not my style but certainly not cookie cutter.
Also, are those assessments for real? Why would anyone want to buy into that sort of money sink since afaik you don’t get a tax deduction for assessments like you do for interest and taxes.
1800 a month after assessments? Factor in taxes and this thing goes negative.
The only thing that would be more surprising than this unit selling for $800,000 is someone signing a 1 year lease to rent it for $3500/mo. There seems to be a big difference in asking rent and amount that places realistically rent for.
The higher the price, the lower the rent to value. C’mon Sabrina… why would you pick an $800k place to do a comparison (other than the obvious- to make buying look illogical)? Pick $100k places and you’ll get a different calculation.
Anyways, the answer to why buy is that the expected return on your down payment via appreciation and/or cash flow justifies the expense.
2/2.5 for 800K. what a joke! the 2nd full bathroom sucks! IMO, i wouldn’t consider any bathroom “full” w/out a standup shower. and the master bathroom (i assume from the photos) is def not spacious. You can see there’s no storage since a toothpaste bottle and other incidentals are on the countertop. for 800K I would personally expect a master bath who’s door won’t be knocking my knees.
I do see this thing being rented out. A large chunk of the GC crowd is all about impressing and keeping up with the Joneses; I’m sure quite a few of those people have fallen on hard times and have had to sell their property. This is a perfect way to act as if. My landlord was just telling me about a friend of his who’s neighbors are trying to short sell their condo, yet they threw a top of the line Xmas party -> Act as if.
kp- That’s actually a pretty good assessment for a GC vintage condo. Some of those places have assessments starting at 3k and only approve 75% or less financing – those are the money sinks.
“Pick $100k places and you’ll get a different calculation.”
MADFLY–show us some $100k places you’d be interested in living in (not pure slumlord-cashflow plays). It’s mostly Austin, Humboldt Park, Lawndale and the less-reputable parts of the Southside, no?
Who said I’m going to live there? How many times do I have to say it? Rent to value is NOT consistent in neighborhoods, or across the nation. You will see that the answer varies if you run units from across the board ($100k is still way closer to the median home than mf $800k). But if you truly wanted to see if renting or buying was cheaper/better, you’d run the numbers for a longer time period so that appreciation could be a factor. Of course Sabrina won’t do that though so the audience can be comforted that they are justified in renting.
LOL at Madfly’s last sentence. It is rather funny because it is true. But I like being comforted so..:D
On a related note my rent escalation was negotiated today. It went up 2.7%. Over 30 years this would mean my rent would increase 2.25x. All expenses in for owning I suspect would be similar over 30 years (when you include property taxes, HOA, insurance & the capex for upkeep).
MADFLY–
You don’t want to do what I asked, so why should Sabrina do what you asked? Sabrina’s presenting the question (a canard, you would say–I don’t necessarily disagree) whether a particular property being offered for sale and for lease **that she finds interesting for some reason** is a better value to buy or rent–if you actually wanted to live in it.
I *don’t* want to come here and see a bunch of crappy, slummy “buy-to-let” properties that would cashflow. Wouldn’t find that entertaining. I *don’t* want Sabrina to do a bunch of cashflow analysis and specualtion on appreciation (not that I think real appreciatio is much of a concern with this property). Wouldn’t find that entertaining, either.
MADFLY, what we are interested in is finding a place in a nice neighborhood that makes sense to buy. Running the numbers for a longer period of time to capture the biggest real estate boom in history doesn’t really help us going forward. It would be no surprise to find someone renting out a Lincoln Park condo for positive cash flow when they bought it in 1999. Everything went up from the 1999 price. Our concern is what will happen 10 years from now. Are prices attractive enough today that it will make sense to buy? Is there a reasonable chance of becoming cash flow positive in the near future? Everything I’ve seen so far tells me that now is not the time to buy, unless I’m planning to slumlord.
I understand your responses, but to pick an $800K property during a global recession and ask “Rent vs Buy: What Makes Sense?”
C’MON!!! That’s retarded!
“but to pick an $800K property during a global recession and ask “Rent vs Buy: What Makes Sense?”
Tell that to the Trump or Aqua sales offices.
“Over 30 years this would mean my rent would increase 2.25x. All expenses in for owning I suspect would be similar over 30 years (when you include property taxes, HOA, insurance & the capex for upkeep).”
?? You mean to say that, if PITI+A today were $1000, you believe that after 30 years T+I+A+amortized maintenance would be $2250? Or are you excluding a mortgage payment?
The first part. Well all but P, actually. I think 30 years is a long enough timeframe to include periods where its CF positive to own vs. rent. Those periods do occur as well.
I.T.A + insurance + amortized capex should equal rents over 30 years time is my guess.
Those bathroom pictures do nothing to sell or rent this place. I am sure I could electrocute myself for much less…even in the GC
The listing says 4,000 sq ft. So the cost comes out to about $200/sq ft. If the listing is correct, then it may not be so badly priced. If the unit is 2,000 sq ft, then the cost is twice as much per sq ft. The finishes look very nice.
I like how at the top of the listing it says “offered at 799k”
There’s no frickin offers on the place, talk about misleading… then again, there aren’t any realtor tricks I haven’t seen before that surprise me. Talk about shady!
dd: “The listing says 4,000 sq ft.”
The *lot* the building sits on is 4000 sq ft. The *condo* is 912 (nine hundred twelve) square feet. They are asking for $876/sqft. I don’t think that is reasonable.
Sonies–it’s weirdly phrased, but not wrong–it is “offered [for sale] at $799k”. The “for sale” is omitted, but implied.
Uhhhh… They pack two bedrooms and a formal dining room into 912 square feet? How? Are the bedrooms 9×9? Shocking…
There are several different Craigslist ads with the same pictures. One says 912 square feet. Another says 2000 square feet.
The problem with a number of these types of places in GC are they were made for a different (and dying) generation.
Before 1992 or so, most condos were not yet rivalling SFH sq. footage. The Gold Coast was one of Chicago’s first condo communities built for the wealthy. Access was far more important than square footage when most of these places were thrown up.
The Playboy mansion, Ambassador East and Seneca were internationally known seats of power, so having a second home, albeit small, in the area was a sign of status.
With the exception of a few SFH on State, Astor and a couple spots on LSD, everyone of the condos in the area are WAYYYYYYYYYYYYY! overpriced. If they weren’t, they wouldn’t be for sale, every one of the condos would be getting passed down to the next generation within the family.
The special assessments are also going to kill new tenants, as most of these places have not been updated much since the early 1980’s. A friend living in Sandburg Village shared a story of a $30,000 SA at a building on east Division street. Apparently they needed a redo of their entire parking structure. It just can’t be good for these places in this market and these economic times.
young people take your money elsewhere, there is so much more bang for your buck!
anon:
Lot does say 4060 sq ft. Not sure why a lot size would be included in a condo listing. Not sure what the sq ft is as there are no room sizes. Suffice to say that listings have lots of mistakes, as this listing demonstrates. Hard to comment on this listing not knowing the size, floor, or address.
If this place can be rented for 2600/month, I think it’s a steal. I’d pay that just for the “I’ve arrived” feeling I’d get every time I curled up with a book in that sitting room with the dark wood wainscoting. (But first I’d have to find a couple of cheap but expensive-looking oil paintings of aristocrats or fruit in giant gilded frames to put on the walls…I can’t have a proper gold coast library without some giant oil paintings.) I think certain young Chicago white-collar professionals are relishing this opportunity to splurge a bit on rent and live in homes that would normally only be occupied by multi-millionaires. I think it’d be fun to play house in a place like this for a year or two.
Danny,
So true about the playing house bit for a year or two!
I’m not a GC fan myself, but there are other overbuilt developments and ‘hoods where killer deals occasionally pop up. I just made sure there’s no lease breakage fee on my apt this time around and am reserving the right to move to the right pad if the opportunity presents itself.
I’ll never be able to likely own a 600k+ place any time soon, but these days with a reliable roommate you can certainly rent one for $1200-1400/month!
To think I could live in the lap of luxury for this amount when friends in NYC lived in little boxes of squalor for the same amount less than two years ago makes me laugh out loud. Yeah Chicago’s not NYC and thank goodness for that!
“Tell that to the Trump or Aqua sales offices.”
Trust me they know at the end of the month looking at the commis these days.
“Sonies–it’s weirdly phrased, but not wrong–it is “offered [for sale] at $799k”. The “for sale” is omitted, but implied.”
Its stupid is what it really is…