Want to Sell? It’s All About the Price: 506 W. Armitage
We’ve chattered about a lot of properties that seem to stay on the market for months.
But there are properties that sell quickly- either because it’s in the right location, somehow unique, or because it’s priced right.
Take this vintage 2-bedroom, 1 bath unit at 506 W. Armitage in Lincoln Park. The bathroom and kitchen are both out-of-date. It does have a washer/dryer in the unit- but no parking.
But it has a good location in the middle of Lincoln Park- not far from the Lake. And it was priced at not much more than what it last sold for in 2004.
Carol Duran at Rubloff has the listing. See more pictures and the virtual tour here.
Unit #1: 2 bedrooms, 1 bath, no square footage given
- Sold in September 2004 for $312,000
- Currently listed for $325,000
- Under contract
- Assessments of $216 a month
- Taxes of $3,706
- W/D in the unit
- Woodburning fireplace
- Central air
The kitchen and bathroom look like something you would find in an old ladys home.
Nice location but considering the upgrades needed, I wouldn’t pay over $300,000.
That said, the buyer will upgrade the place and try to resell it next month at $500,000 LOL
Great location. Great potential. Greatly overpriced.
this place takes me back to when I was fresh out of college and lots of friends rented apt’s like these… though usually 3 bedrooms. same vicinity too. wonder what it would rent for today.
“wonder what it would rent for today.”
Looking at craigslist, somewhere around $1400-$1600. Which makes it “worth” max $200k (stretching it) as a rental, max $275k (really stretching it) for a rent-saver occupant.
anon – how do you calculate value based on rental income? is there a multiple you use or do u just figure $1,500 per month would service a $160,000 mortgage with some left over for tax/assessment?
How many of you posters rent vs. own? I’ve been reading this blog for a while now and it seems most of you are bitter renters who could never really afford a decent home and are praying the housing market totally goes upside down so you can buy your 200k condo. Lames, all of you.
TO roughly calculate the rental vs purchase I use a simple multiplier of 20 – so a place that brings in 19200 per year (1600*12) should sell for about 380k (max), less now with capital risk and tax/maintenance – the reason for 5% gross is that despite what anon thinks, there is such thing as asset arbitrage. If all of a sudden a reasonably secure asset could bring in 9% p.a (19200 over 200k) gross, when CDs are at 3.5 and junk bonds are at 8.7%, then everybody will be rushing in and bring the price up. Proof is, this place will not sell for 200k max, it will sell for more. I believe that expecting that ownership should sell for the price of rental is ridiculous wishful thinking.
Anon – You are dumb! No offesy and I certainly do not mean to be rude, but your are not very smart.
“TO roughly calculate the rental vs purchase I use a simple multiplier of 20 – so a place that brings in 19200 per year (1600*12) should sell for about 380k (max)”
Of course, this place wouldn’t actually bring in $19200 per year at $1600/mo rent. Subtracting off $216/mo assessment and $3706/yr taxes you are netting only $12900/yr. With your multiplier of 20, that is $258K. Seems to match anon’s number…
Kevin – Please realize that any fixed multiplier is a joke. Use a cap rate to determine the profitablilty of an investment. INterest rates drive cap rates which in turn would change your multiplier on any given day.
Steve — what multiplier would you use for an investor in this unit *today*?
Let us learn from your wildly profitable ways. I expect to hear about how you would discount costs such as assessments, taxes, vacancies (and related advertizing and tenant evaluation costs), and evictions. Feel free to make assumptions about what sort of downpayment and rate is associated with an IO loan these days, but please state your assumptions. Feel free to play games with depreciation, but I expect it to be correctly accounted for when considering profits associated with appreciation in property values.
Or, go hide in a corner like you do anytime you are asked for data or numbers to back up your claims.
“I believe that expecting that ownership should sell for the price of rental is ridiculous wishful thinking.”
A “bubble is the new paradigm” believer?
First of all the fair rent for a unit like this is closer to $1800 -$2000. I look at everything on a 10-year hold and use historical averages for year-over-year changes in value, rents, and expenses. No Eviction or advertising expense as it is not needed in this area. Vacancy of 5%. 25% down 6.25% for the loan.
How many-
Owner here… Guess if you are long it is not permissible to think your position sucks? This market is already a dog and that dog is about to get fleas.
Regards,
IB
G,
When was the last time that Chicago rents were on par with the cost of buying? Since you are a hot shot “consultant” I’m sure you can get that data quickly.
D
Owner here, too. As is G, I believe. As has been Sabrina in the past; she’s now (smartly) waiting for the right opportunity to buy–and in the market, she can afford to wait.
Steve H., a multiplier is the same as a cap rate, just inverted, so call it what you want it’s essentially the same thing.
i’ve just started looking at buying condos to rent out, as it hasn’t made cash flow sense to do this in YEARS. I’ve bid on a few foreclosures and have lost out to other buyers. When the prices get low enough that it makes sense to rent them out, then the buyers come out of the woodwork. If i were still willing to go into dicey neighborhoods of course it all changes, but i will no longer do that. Call me a bitter owner, but i’ve learned the hard way that it’s not worth it.
For the little properites i’ve been looking at i don’t even consider cap rate/multiple, i just do the quick math to see how it cash flows w/25% down 6.5% mortgage.
I just bought a place this summer. Found one at a good price (on 1990-1998 $/sqft trend for the building, and well below the 1990-2003 trend), and I intend to stay long enough to wait out any short-term price drops. Plus, I have enough resources to deal with an unexpected move even if prices drop another 30% (below 1990 levels for this building).
That said, there is a lot of wildly overpriced stuff on the market, and the few things priced near the long-term trend seem to go fast. I think that outlying parts of Chicago are due for big drops, because prices inflated so quickly there. The south loop will do much worse, due to overbuilding. The truly premium areas like eastern LP and Gold Coast don’t need to drop as far because they didn’t go up as much, but they are somewhat overpriced. It seems like nominal 2003-4 prices are about correct today, and we might match (nominal) peak prices by about 2012-2015. Of course, that means a real loss for people who bought after about 2000.
(It seems like the 2000-2006 price increases were at about double the usual inflation-matching rate. This means that each of those years needs to be matched with a no-growth year for prices to return to normal.)
“It seems like nominal 2003-4 prices are about correct today, and we might match (nominal) peak prices by about 2012-2015.”
If 2003-4 prices are “about right” today, that would mean that prices have dropped at least 10% nominal or more since the peak in 2006. How come there is no evidence of this? Median prices have gone up, not down, so why would we have to wait 4-7 years to get back to nominal peak prices if prices haven’t even gone down yet?!
D
Has there ever been a correction in Chicago that didn’t return (or overshoot) condos to rental value?
I don’t know, G, I’m asking you! Please provide us an example and/or some data to substantiate your claim.
D
Hey you DB, check the CS index for yourself.
Sabrina provided an article the other day that you dismissed. I guess you should have paid closer attention. Use the search. Good luck.
Sorry G, I don’t have time to go searching for data to support YOUR claim. That burden is yours alone.
“If 2003-4 prices are “about right” today, that would mean that prices have dropped at least 10% nominal or more since the peak in 2006. How come there is no evidence of this?”
Have you looked at the Case-Schiller indices?
Jan 2005 149.69
Sep 2006 168.60 (peak)
Jun 2008 150.25
That looks to me like we are almost back to 2003-4 prices, and are 10% off peak.
What claim? I asked a question.
Try to concentrate you DB.
If you prefer tiered Case-Schiller (low,medium,high)
Jan 2005 159.33, 154.39, 143.05
Sep 2006 181.97, 174.82, 160.15 (about peak)
Jun 2008 161.04, 154.06, 144.59
Again, back to early 2005 nominal prices, and about 10% off peak. The low end is a bit worse, but the high tier certainly isn’t immune
bubbleboi – I do the same “back of the napkin” approach. If it breaks even or cash flows it is worth a hard look. Area of course is very important for future rent and property appreciation.
“How many of you posters rent vs. own? I’ve been reading this blog for a while now and it seems most of you are bitter renters who could never really afford a decent home and are praying the housing market totally goes upside down so you can buy your 200k condo. Lames, all of you.”
This is too funny. Right now inventory is very high – there are more units than there are buyers. If a current owner simultaneously buys and sells, the net effect on inventory is zero. In order to reduce inventory, renters need to buy. And if we “bitter renters who could never really afford a decent home” continue to sit on the sidelines due to the lack of affordability, how will inventory reduce? Does the government plan on bulldozing all the vacant units to reduce inventory? Will our next president give these houses away for free to us “lames”? You obviously ditched economic class the day the teacher discussed supply and demand. The best way to increase market activity is to lower prices to a level where us ‘bitter renters’ can reasonably afford a $200k condo. And fortunately, time is on the side of bitter renters.
I’m not sure how the term “bitter renter” even started. I don’t meet many–any–bitter renters. What’s there to be bitter about? But I do meet a lot of bitter owners, who are having a hard time selling their places for what they bought them for.
In my office we always joke about certain decisions in life that drive clients into financial ruin. For as long as I can remember, there have been three rules. The first one is don’t have a baby momma because child support garnishments for 18 years hurt wreck havoc on a budget. Secondly, never co-sign a car note for someone else, because the other person will inevitably default. Third, don’t ever use a payday loan under any circumstance. We’ve recently added a fourth: don’t ever buy a second home as an investment.
So many people don’t understand that a capital gain at the sale isn’t the only consideration when investing in real estate. Here’s another story. A friend of mine who rents in lincoln park was just summoned to court for an eviction. His real estate investor landlord hasn’t paid the $650 a month condo assessment in 5 months. We analyzed the situation and figured out that my friend’s rent probably doesn’t cover the mortgage. Fortunately my friend didn’t renew his lease and he’s moving, today actually. This sort of stuff is extremely common in my world.
I’m going to a bbq and i’ll enjoy the nice weather. have a nice day.
“We’ve recently added a fourth: don’t ever buy a second home as an investment.”
I’d revise that to “don’t ever buy a home as an investment”.
Go ahead and buy other real estate for investment reasons, but don’t look for your home to be anything more than shelter.
Kevin,
Are you using national CS numbers or just for Chicago?
D
“This sort of stuff is extremely common in my world.”
Sounds like you live in a world of losers. Somehow I’m not surprised.
D
“I’d revise that to “don’t ever buy a home as an investment”.”
I disagree with that. Remember, for most Americans their home has been their largest source of wealth. It should be “don’t ever buy a home as a SHORT TERM investment.”
D
You asked a rhetorical question that was clearly intended as a statement. You crack me up, G. You always try to change the subject when anyone challenges and try to turn it around on them. Pathetic!
“Are you using national CS numbers or just for Chicago?”
The ones I reported above (150.25 in June 2008) were Chicago numbers. Same with the three tiers.
“I disagree with that. Remember, for most Americans their home has been their largest source of wealth. It should be “don’t ever buy a home as a SHORT TERM investment.””
That is fair, although it seems that much of that wealth comes from the forced savings that amortized mortgages provide. House prices traditionally haven’t grown faster than wages — see the chart that the New York Times printed from Schiller a while back. (Google for New York Times and “A History of Home Values”.)
“although it seems that much of that wealth comes from the forced savings that amortized mortgages provide. House prices traditionally haven’t grown faster than wages”
Agreed, but a lot of people need “forced savings” unfortunately.
A recap of the day.
DB claimed “If 2003-4 prices are “about right” today, that would mean that prices have dropped at least 10% nominal or more since the peak in 2006. How come there is no evidence of this? Median prices have gone up, not down, so why would we have to wait 4-7 years to get back to nominal peak prices if prices haven’t even gone down yet?!
D
Of course, the CS index is evidence of the drop and another of DB’s claims is proven incorrect.
SSSD.
Er, SSDD that is.
there are a few reasons why ownership should not sell for the price of rental. Or in calculations, use interest only mortgages with no reconstitution of capital , for one – since rental does not build equity, but amortization loans do. After 25/30 years, the investor actually owns sthing.
In addition, there is a qualitative premium, call it what you want, that makes owners feel better if they own sthing (usually….) – – whether you partake in that feeling or not, some people do feel about what they own – they’d rather own a Gucci than a Wal-mart handbag and they’d rather own a porsche than a tata – even at EQUAL capability. GO figure . There is a price for this, it is called ownership premium. You can howl to your heart’s contents, it will still exist and sell luxury bags and houses.
“Deaconblue on August 31st, 2008 at 11:59 am
“This sort of stuff is extremely common in my world.”
Sounds like you live in a world of losers. Somehow I’m not surprised.
D”
If you post your e-mail address I’ll shoot you an e-mail with my info. With your arrogance and ignorance, it’s just a matter of time before you’ll be needing my help… 😉
owner vs renter: The own versus rent premium is at most a 10% addition to an equivalent place to rent. It is more of a security issue knowing that you have a place that is yours and have “full” control over it. Unfortunately, the current pricing would seem to allocate a much larger premium on owning right now which is not why people paid those prices. Renting right now makes a lot of sense in many circumstances. You also have to include taxes, maintenance, and other costs to compare to renting prices.
We had a financial environment where housing was booming but interest rates were low and kept low as if housing were a big bust combined with silly lending standards based on not one’s income and ability to pay but housing prices appreciation and you get the biggest boom in housing history. Rates can’t go lower really and lending is now back to traditional standards of ability pay and even more strict with the assumption of house price declines will result in the biggest bust. As mortgage rates creep up a bit, the bust factors will only grow stronger and prices will drop below the long term trend line. We are probably half way through the price declines but not half way through the financial pain….
G,
Does the Case-Schiller index show just Chicago, or the entire Chicagoland region? Perhaps you should make sure you know what you are talking about before you “show that I am wrong.”
D
My email is:
homedeleteisaloser@renterforlife.com
Hilarious, DB, hilarious.
Stevo:
On what basis do you believe that a unit like this would rent for $2k? A check of current offerings in the near vicinity shows that similar places are available for about 1600. Is there something special about this building?
I also am VERY surprised to see you touting the purchase of an apartment conversion (on a semi-major street no less) as a good investment–I thought these were all capital losers in your estimation. Any personal interest in this one, Stevo?
I have now just finished reading all of the trash comments between people and have to say it is very amusing… thank you!
I’m not sure who said it (too lazy to scroll back to the top), but you could EASILY rent this place for $2K/month. Location location location. How many fresh out of college kids, that are new to the work world, and care only about living in LP do you think scrutinize over the comparable listings around the neighborhood? not many.
for this listing, I have to agree, the ownership premium or status of the location will come into play.
Oh, and $200k was a typo (should have been $220k). But you can thank me for the amusement value. And, yes, if y’all think that it can reliably rent for $2k right now, then add 25%–$275k max as a rental; $340k+ as a owner-occupant. And maybe you’re right–a unit in 508 was listed for rent for $2200/month. Still, I think that $2200/month is nuts (which, yes, would make this almost a cashflower at just under ask) for a dump like this.
“It is more of a security issue knowing that you have a place that is yours and have “full” control over it.”
i disagree with this statement. pretty much everyone i know who owns a condo one floor above someone has met his/her downstairs neighbor when said neighbor pounded on the door, saying, “i can hear you walking!” then DEMANDED that the person walk quieter. plus, there’s usually all kinds of stupid, petty things/people that one has to deal with when living in a condo. friends tell me about what they go through, and i think it’s sad that, most times, they have more rules—in a place that you are *supposed to* have “full” control over—than there were growing up in my parents’ house.
Are you a buyer? The news only gets better. Rumor has it Coldwell Banker is asking the Chicago market current customers to drop their asking price by 10% in October. They will have a marketing blitz shortly but rent for another year …
Brian,
Welcome news but how many sellers who bought in the 2004-2007 time period can afford to drop their ask by 10% and bring money to the table if they are underwater to seal the deal? Many can’t, so they won’t.
It may work with some sellers who purchased before then and are sticking with 2006 comp prices, but theres an awful lot of people _stuck_ in their condo ‘investment’.
This unit is back on the market. I wonder if something happened during inspection. I went to the open house and it looked like it needed some updating. A 2nd floor unit in 502 w armitage sold for 315k after only 1 week.
I saw the unit at 502. It needed updates to the kitchen and bath but was gorgeous otherwise. Great floors, open layout, high ceilings, very similar to the photos of 506 unit 1. No parking is the biggest downside but Mohawk is one block west of here with almost all single family homes to easy to find street parking.
I heard this place sold (or maybe just under contract). Anyone know what it went for?
“Are you a buyer? The news only gets better. Rumor has it Coldwell Banker is asking the Chicago market current customers to drop their asking price by 10% in October. They will have a marketing blitz shortly but rent for another year …”
This is why you stay away from Coldwell Banker. Dropping the price by 10% causes a quick sale which puts lots of money in their agents pockets in a short time. Isn’t it the job of the real estate agent to consult you on what price your property will sell? If my agent told me to list my property at $1,000,000 and then asked me to drop it 10% for a quick sale I would fire them.
This is a scam by a very well known Brokerage to bring in revenue at the expense of the homeowners.
Fire Coldwell Banker if they try to get you into their “Cash in their agents pockets program”
Tara – the property is still under contract…
“In my office we always joke about certain decisions in life that drive clients into financial ruin. For as long as I can remember, there have been three rules. The first one is don’t have a baby momma because child support garnishments for 18 years hurt wreck havoc on a budget. Secondly, never co-sign a car note for someone else, because the other person will inevitably default. Third, don’t ever use a payday loan under any circumstance. We’ve recently added a fourth: don’t ever buy a second home as an investment. ”
Sounds like you work at a real high profile law firm. My god Homedelete, what type of clients do you have. I know a lot of attorneys and NONE of them deal with any of your 4 points from above. “Baby Momma”? “Co- sign for a car loan”? “Pay day loan”?
“anon on September 2nd, 2008 at 7:57 am
Stevo:
On what basis do you believe that a unit like this would rent for $2k? A check of current offerings in the near vicinity shows that similar places are available for about 1600. Is there something special about this building?
I also am VERY surprised to see you touting the purchase of an apartment conversion (on a semi-major street no less) as a good investment–I thought these were all capital losers in your estimation. Any personal interest in this one, Stevo?”
Anon- What I have always said was you should buy a condo conversion when converted. You will always over pay for those shiny new appliances. Hence, the 0% appreciation since 2004.
Thanks for proving my point Anon!
Hey SHill, isn’t the CB rumor good for you and all of your able-monied buyers? I am surprised you are not elated that your proclaimed “good time to buy” is now a “better time to buy.”
Stevie boy, quite a few of your colleagues have been through the door of my firm the in last few months. My firm has taken away their homes in foreclosure, filed their bankrupties, litigated their divorces, and lots of other good stuff. Your industry is being washed out. My door will always be open for your Stevie boy, but I’m going to charge you a higher hourly rate. And because I don’t trust you, I want a large retainer too. You’ll have to beg your parents for the cash to pay my fees.
HD are you a lawyer?
Yes I am an attorney.
HD – You don’t have to worry about me. I have a real attorney and don’t plan to utilize his services any time soon. How is your 401K?
The two of you behave like 6 year olds.
I am also an attorney, that’s why I asked.
“HD – You don’t have to worry about me. I have a real attorney and don’t plan to utilize his services any time soon. How is your 401K?”
You let me know when you want to use my services because the attorneys you know practice only in sophisiticated areas of law like MBS/CDO securitization, etc. Many of us lawyers in the trenches make a good living assisting the low-lifes in society like you. I tend to do better when the econony is tanking anyways. Business is counter-cyclical at times. Just make sure you have a large wad of cash for a retainer; you’ll probably have to beg your mommy for the funds. Cashier’s check only.
My job is adversarial, this is par for the course.
My beef with SH goes way back; I tried to ignore him but like a bad rash he won’t go away.