The Rent V. Own Conundrum: 1101 S. State in the South Loop
This 1-bedroom at 1101 S. State in the South Loop has been on the market since May 2011.
It is a short sale and has now been reduced $15,100.
This high rise was built in 2004/2005.
From what I can tell in the public records, only 2 units have sold in 2011 (there may be some that haven’t yet shown up in the public record.)
There are about 159 units in the building.
This 1-bedroom has cherry floors throughout, including in the bedroom.
At 882 square feet, it has southern views.
The kitchen has all the new construction finishes including stainless steel appliances and granite counter tops.
It has central air, in-unit washer/dryer and parking is available.
But if you don’t want to buy it, you can also rent the identical floorplan higher up in the building- on the 21st floor.
That unit also has stainless steel appliances, granite counter tops and cherry hardwood floors (but only in the living room- the bedroom has carpet.)
It is available for $1700 plus $100 a month for parking. See the rental listing for Unit #2105 here.
It appears to be much cheaper to buy than to rent in this building.
So why isn’t anyone buying this unit?
When will this rent v. own “conundrum” (where no one wants to buy the condos- only rent them) change course?
Rebecca Thomson at Jameson has the listing. See the pictures here.
Unit #1305: 1 bedroom, 1 bath 882 square feet
- Sold in July 2005 for $288,000
- Originally listed as a “short sale” in May 2011 for $175,000
- Reduced
- Currently listed as a “short sale” for $159,900
- Assessments of $485 a month
- Taxes of $3051
- Parking is extra
- Central Air
- Washer/Dryer in the unit
- Bedroom #1: 15×13
This isn’t that unusual. In my own case I can buy a nicer place than I can rent for the same money, which is why I am looking to buy now. Also, when you factor in potential rent increases in the future buying becomes even more compelling. This is why reluctant sellers are choosing to become landlords.
When the economics shift it often takes a while for consumers to catch on.
“So why isn’t anyone buying this unit?”
indeed why? and yet this one sells for twice as much:
http://www.redfin.com/IL/Chicago/100-E-14th-St-60605/unit-3203/home/21797199
“In my own case I can buy a nicer place than I can rent for the same money, which is why I am looking to buy now. ”
I bet sloop rent prices are set to collapse. Maybe not university village but definitely the overbuilt concrete jungle that we call the “south loop”. Too many yahoos with too much speculation thinking they were going to be mini trumps.
Perhaps the thing to do is rent 2105 for 6 months or more while you wait for a response from the bank on 1305. My guess is one reason this isn’t selling is because no one wants to deal with a short sale, especially if this isn’t approved.
Last month 3 units rented in this building for just under $2/ SF/ month. No sign of the rental market slowing down.
What a large spacious one bed that short sale is a great deal. Somebody will buy it. It’s almost at rent parity. Rents seem to be going up too. Everyone islooking fr a good rental deal but there just aren’t any. In this case here I would suggest buying.
“Everyone islooking fr a good rental deal but there just aren’t any”
It’s weird in this neighborhood the rent/buy parity is drastically different than in Lincoln Park or Lake View.
Hard to find one bedrooms below $1,100/month here, yet you can find one bedroom condos for $150k.
Err one bedrooms below $1,200/month here. Studios are around $1,100. This includes almost all addresses other than River City.
I see the rent v. own conundrum in nearly every neighborhood (with condos.) You can rent out a condo in the gold coast, for example, in about a day- but good luck trying to sell one.
Rent #2105 for $1,800 (incl. parking)???
Why would anyone want to do that?
At this price, if I used my tax refund ($5,000) as a down payment on an FHA loan, the P+I is only $773, plus PMI ($100?) plus taxes $254 plus HOS $485 = $1,612 a month AND the added tax benefits in the 28% tax bracket or higher. To me this is a no-brainer: It’s time to buy in the south loop.
There is a rental restriction enforced by the condo association in that building just recently. I guess thats the reason it is hard to sell in this building unless you plan to live there for quite a while.
I wouldn’t buy this one bedroom until the ownership benefits from renting are well over 10% on my investment. The south loop is historically a poor neighborhood for investments. If you look at the supply of units available for rent they are overwhelming, the media may not be letting that information out. So if I buy as an investment strategy and then sit on the unit for 4 months before I rent it out then I am not making the returns I had expected. I currently rent a one bedroom in the south loop with parking for 1300. Has a w/d in unit and is about 850 sq ft. I scooped in up about a year and half ago and was a great idea compared to buying at the time. If prices in the south loop go down another 25% is this unit going to be looking like a steal, especially when rent prices drop with it…
“especially when rent prices drop with it…”
yeah right – you and everybody else, including me, is renting. few want to buy. but you know the saying: you buy when everyone else is selling, and you sell when everyone else is buying. This is the time to buy SLOOP.
My guess is it’s the threat of the foreclosure spiral of death- an ever-decreasing pool of residents paying association fees, subsequent built-up maintenance, then a special, then a smaller paying base, and on and on.
“When will this rent v. own “conundrum” (where no one wants to buy the condos- only rent them) change course?”
People are going to continue to pay a premium to rent 0-1-2 bedrooms in the city – until:
1. the economy stabilizes and improves
2. the housing market starts taking off
3. job security increases
Until then, why would they want to tie up their money (esp if they think they may move in the next 4-5 years)?
Sorry, Homedelete, but I trade markets all over the world and when the government has both their hands in a market and its still decreasing its pretty obvious its heading lower.
Also no one is selling, they are only offering and that is why you are seeing such a problem. Once they start selling then people will start buying, then you will see rent prices actually drop with condo prices…
“Also no one is selling,”
That’s not true that ‘no one’ is selling. It’s that only some are selling. And because so few are actually selling, there are plenty of deals to be had. It’s not going to be getting any better than this.
The kitchen has a terrible layout….the stove, sink and dishwasher right next to one another…that feels very rental.
When I see numbers such as these, I think there must be something going on with that building…not a possible special (you could aways factor that into your offering price) but perhaps too many rentals such that no one can get financing to buy the unit. The SLOOP has many hung people who probably need a mortgage to buy a unit like this. Perhaps this building is on a no lend list b/c of too many rentals…and that is why the building had to institute rental caps.
“Why would anyone want to do that?”
Probably because this unit wouldn’t rent at 1800 in the first place, and even if it did, it’s a 1 bedroom. The age of flipping these is over and most people realize now that 1 beds aren’t a viable option long term, nor do they want to become landlords.
The buildings in the Sloop that have been converted from all condo to all or mostly rental (Astoria Tower, Roosevelt Collection, etc.) still think they can get premium prices. I looked at a couple 1BR units in those areas and they were wanting $1800 a month and there weren’t any available (except for in Astoria, where they have the weirdest layout for 1BR plus dens I’ve ever seen–a living room that you couldn’t even fit a full-size couch in by any stretch of the imagination). And those prices did not include parking, which many of these places wanted an extra $150-200 for. The condos that I looked at being offered by individual owners were much more reasonable. Looked at a couple for $1600, and all were 1BR plus dens (buildings like 1305 S. Michigan and 1250 S. Michigan)
I am also shocked at the price of rentals in lakeview. I have a unit there 2/2 with 2 indoor garage spaces and it commands 2500/month (which is a little more than my monthly payment). I just am shocked at the number of people willing to pay this much for a unit like this in this particular area.
I look at the rent premium as the cost of my option to move with no strings attached on short notice. In these uncertain times, this option is quite valuable to me.
I’m not good at these calculations, but even assuming the short sale and rental prices are the operative prices, you’ve still go to own this place for at least a couple/few years to make it pay off, right? And if you assume a significant downside risk on your sale price in the future, that’s a big factor against. Fine if you plan on living in a 1 bed for the foreseeable future. But if you might decide you want to live in a different neighborhood, go back to school in a different city, move for other reasons, get married and/or have a kid, it seems like a pain to own this and have to deal with it. As opposed to just moving out of your rental.
“I bet sloop rent prices are set to collapse. Maybe not university village but definitely the overbuilt concrete jungle that we call the “south loop”.”
“I just am shocked at the number of people willing to pay this much for a unit like this in this particular area.”
I know CC regulars give SLoop a terrible RE “investment” reputation, deserved probably by most measures, but you can’t dispute the location benefits (note I’m not saying for buying or renting, just benefits for living, period). Especially this area, State/Wabash/Michigan + Roosevelt. You are 10min at most from central loop driving (i.e Migh/Wacker, or Sears Tower, whatever floats your boat), 15min on CTA/BUS, a dozen bus lines to choose from, spitting distance from the lakefront, grand park and museum park. I don’t want to beat a dead horse here, I thin most regulars knows what this area offers, but choose to ignore it while posting. For all that, you WILL have a guaranteed groups of renters (mostly young professionals who don’t/want to buy yet, but want to be close to work and some level of lifestyle (i.e. not your wrigleyville binge drinking style, or your WP/BT hipster style, or your LV family style, or your LP whatever style, I know I’m generalizing here, just to make a point). Walk around the neighborhood on a weekend day, see for yourself. It’s a very diverse neighborhood, and I don’t mean that in a racial way. IMHO, this group of people in total #s isn’t going to change as long as Chicago downtown doesn’t move and the lake/park don’t move.
For what it’s worth, I personally know three condo rented here in the last 3months, from 1BDR to 2BDRs, all are covering their mortgages+tax, at lease one is covering the assessments on that.
Actually as jc points out SLOOP had much better rent/own parity especially because many of the building have lower assessments compared to older loop and GC buildings. If someone does not like the area or is wary of large inventory I can respect that but categorically saying that investing in SL is bad to me sounds more like everyone just parroting something rather than really knowing what they are talking about. I actually will buy my next condo most probably in SL again as the premier building like the MPs are very well managed and I love the amenities I get at very reasonable assessments.
“For what it’s worth, I personally know three condo rented here in the last 3months, from 1BDR to 2BDRs, all are covering their mortgages+tax, at lease one is covering the assessments on that.”
So your ringing endorsment of the Sloop is you know one person that isn’t losing money on their home every month?
In 20 years, all these dense high-rise condo developments that went up during the boom in the Sloop, LV, Miami, etc… are going to be voucher accepting, work visa boarding, straight out the dorm, yokel magnets.
Please see Presidential Towers for your future.
Additional confirmation that the bottom is in on home pricing as rents skyrocket due to demand.
http://blogs.smartmoney.com/paydirt/2011/07/05/renters-see-prices-skyrocket/
The el station on State and Roosevelt is truly awful for anyone not on the el. The announcement speakers are incredibly loud. Driving by State and Roosevelt, with my windows up and music on, the announcer can still be heard and has made me jump on more than one occasion. I would not be surprised if the announcements could be heard in this condo even with the windows closed. I would hate to hear, “Next stop…” and “doors closing” all day long.
Jenny- I suppose it would be worse if the announcements made you jump while on the el platform…it’s a long way down.
I think the restriction on renting pretty much explains it. Cash buyers are propping up the market at this point. Eliminate them and who is left? Who would want to commit to living in this place for 5 years or maybe more at say $1400 a month if you put 20% down? I don’t get how rental restrictions will help property values in this building. I guess the owners want to stop sales altogether so they can pretend their units are worth more than they are. It’s just strange, especially in a building with one bedrooms.
“Who would want to commit to living in this place for 5 years or maybe more at say $1400 a month if you put 20% down?”
Come on, be serious, this place is better than rental partity especially with 20% down.
I would prefer to live in a building with rental restrictions. Rental restrictions mean fewer college students in these buildings. Maybe it hurts property values to have such restrictions, but for people who plan to stay in the building a long time, it works out well.
rental restrictions makes financing possible. often times buildings with too many rentals are black listed by banks. i don’t understand why but that is the main reason associations pass restrictions.
Thank you miumiu for pointing out the obvious. That is at heart the real issue of why they have a rental restriction. If a building is over a specific percentage then the loans on units can not be resold by the originator of the loan. That really hurts values quickly.
Also renters just do not take care of things as well as owners. It is true. Don’t start a thread about how you are a renter and take better care than an owner. It may be absolutely true in your case however if we lined up 100 renters and 100 owners there would be a clear difference with how the units are maintained in favor of the owners.
I agree with jp3 regarding renters. Yeah.. there are lots of great renters out there, but on average their standards for caring about the property are lower than that of the owners.
I stand corrected.
And I definitely could understand why condo boards would rather have owners than renters, it just seemed to be to be a real detriment not to be able to sell to cash investors at this point in the market. And you can put limits on the kind of renters and force approval for the board which seems better IMO but I can see the counterpoint.
homedelete, why commit your capital to this place? It’s not cheap. I did overstate it though, I do think someone would be willing to pay $150,000 plus for it but I wonder if the bank will accept it and whether a qualified buyer will wait that long.
“And you can put limits on the kind of renters and force approval for the board which seems better IMO but I can see the counterpoint.”
Um…no you can’t!
The board can’t say, “we’ll only rent to those over 25 years of age” or whatever other restriction you seem to think they can impose. Sorry!
This is why that south loop tower put into place the move in/move out fees that were so high it would basically restrict the number of units that would be rented out. THAT was their way of trying to control “who” moved in (i.e. the recent college grad wouldn’t be able to afford the $1000 “move in” fee.)
Fannie/Freddie/FHA have renter restrictions in place to prevent condo towers from simply becoming all renters and driving down property values.
You can go on and on about how nice an area the South Loop is, but the reality is that there were way too many large buildings but there in a short period and there’s still a massive oversupply of available units. I had a friend telling me how she hasn’t seen anyone else living in her little part of the hallway with 5 or 6 units total since last year some time. I think that this was obvious at the time, and it was the reason I was scared away from the South Loop. Ultimately, supply and demand is very important in determining real estate values and pricing, and the South Loop has supply and then some.
“The board can’t say, “we’ll only rent to…whatever other restriction you seem to think they can impose. Sorry!”
I’m not following this – is there some reason, under condominium association law, that it would be illegal for a condo association to, in a duly authorized manner, adopt a restriction against renting to certain people if that class of people wasn’t either protected by Illinois law or likely to result in disparate impact to a protected class? Do rental restrictions have to be in place from the establishment of the condo association? I’m not seeing how it would be illegal for a condo association to do something like restrict rentals to people born on odd days of the month or something like that.
JJJ:
What’s the “restriction” they’d want to impose?
I’ve NEVER seen a condo board even approve a rental (but I’m sure some of the agents have their stories and will prove me wrong). All they want is a copy of the lease. That’s it. It’s not in their power to determine WHO rents it. Why in heavens name would a condo board want to write in a restriction to restrict people “born on the odd days of the month”? You’re going to get the association to agree to that restriction? What for? And what a waste of time.
Condo boards have power- but not THAT much power. There’s no legal way to “restrict” who rents in a building.
You certainly can’t legally discriminate against tenants because of age, sex, race, sexual orientation (in Cook County), or number of children. Of course people discriminate all the time with regards to who they rent to. However, you cannot have anything approaching a “restrictive covenant” in writing with your condo association. This stuff was litigated decades ago.
You can in some circumstances. Fair Housing Laws in Illinois only apply to certain types of units. You wouldn’t be able to do this in a high rise like this, but there are exceptions for housing units of 4 or less units and when units of the building are owner-occupied. You could then have very explicit discrimination covenants. Would apply to like a 3 or 4-unit walk-up.
“However, you cannot have anything approaching a “restrictive covenant” in writing with your condo association. This stuff was litigated decades ago.”
Last I checked with the management at 1101 S. State, the rental restriction was that only owners of units in the building who bought directly from the builder can rent their units out. Kind of a crappy rule, was the deal breaker for me, since I was seriously considering buying there.
Thanks Kevin for that clarification.
I thought my parent’s condo association required approval but instead they require using the ABOMA lease form and a credit report and a signed paper on condo rules etc. So they don’t have much discretion.
http://www.redfin.com/IL/Chicago/1101-S-State-St-60605/unit-H1305/home/26816186
Sold for $157,000.