Author Topic: View on Chicago housing market?  (Read 6330 times)

money2012

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View on Chicago housing market?
« on: November 01, 2019, 10:24:22 AM »
Do you think now is a good time to buy in the Chicago market over renting?

On a monthly basis renting is more expensive than the all-in housing costs putting 20% down on a purchase.

Thinking I will live in the property for 3-5 years and either sell or rent out afterward. Interested in everyone's thoughts or any specific suggestions.

Sam

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Re: View on Chicago housing market?
« Reply #1 on: November 11, 2019, 05:49:51 AM »
Do you think now is a good time to buy in the Chicago market over renting?

On a monthly basis renting is more expensive than the all-in housing costs putting 20% down on a purchase.

Thinking I will live in the property for 3-5 years and either sell or rent out afterward. Interested in everyone's thoughts or any specific suggestions.

I think buying in Chicago now is better than renting. The value of a property is the rent it generates and if renting is more expensive, that's a good thing. Calculate the cap rates of properties you plan to buy and make a decision.

Overall, I think there's a good buying opportunity in real estate until January 2021. See: https://www.financialsamurai.com/a-golden-opportunity-to-buy-real-estate-is-upon-us/
Regards,

Sam

chitown-2020

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Re: View on Chicago housing market?
« Reply #2 on: November 11, 2019, 06:30:06 PM »
I sold my personal Chicago real estate.    This market is a bit broken with a bankrupt city (think teacher's pensions) and taxes spiraling out of control.   Regardless of what you think of him, Mr. Trump hates Chicago, and made sure that everybody with high real estate taxes pays dearly.

There are still some amazing deals, but be super careful not to overpay.   Last summer was probably the tippy top in most areas of the city for this cycle, although I do acknowledge that there are still a few hot neighborhoods that are still increasing substantially in value (thank you Google office).    I just don't see any reason why the decline here won't be slow and painful in broad terms.   Even Walgreens who just moved their HQ downtown, which was supposed to be a housing demand driver, just announced some big job cuts.

For full disclosure, i did a crowdfunding commercial deal here in the city -- but it had a huge tax incentive and historic credits, so it was positioned well, regardless of Chicago's structural flaws.

Just my two bits.   I feel your pain on renting.


david123

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Re: View on Chicago housing market?
« Reply #3 on: November 15, 2019, 11:02:15 AM »
I've been looking at buying investment property in the suburbs or the city, and it is hard to find anything with positive cashflow.  That would indicate it is a better renters market, but each property is different.

Eric

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Re: View on Chicago housing market?
« Reply #4 on: November 19, 2019, 08:45:21 PM »
I would echo chi-town's concerns.
The city being bankrupt is a huge red flag. The state is in similarly dire straights.

You are comparing current rents, current taxes and current mortgage rates.

What happens when taxes go up on rich homeowners to bail out the city/state. That is going to eat into any valuation.

I would look for real estate investments elsewhere and keep renting in chicago. Taking a levered bet in an insolvent municipality with no desire to change is like playing Russian roulette

Behemoth

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Re: View on Chicago housing market?
« Reply #5 on: November 20, 2019, 05:51:54 AM »
I am currently renting a 3BR condo in Old Town for $3,600/month. The owner just approached me and asked if I would be interested in buying it. Obviously this piqued my interested since we could avoid any realtor fees. We would plan on staying here for at least 2 more years before looking to move. Rough math shows that once you include HOA and taxes, I am paying roughly the same per month. Our condo is in a great location (off of Eugenie) and the area is only getting better.

Do you think this is worth exploring or should I just eat the $86k I will be paying in rent for the next two years? I am terrified of the state's financial situation but maybe I am overestimating it.

Thoughts?
****
« Last Edit: November 21, 2019, 01:28:12 PM by Sam »

Sam

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Re: View on Chicago housing market?
« Reply #6 on: November 21, 2019, 01:28:26 PM »
I am currently renting a 3BR condo in Old Town for $3,600/month. The owner just approached me and asked if I would be interested in buying it. Obviously this piqued my interested since we could avoid any realtor fees. We would plan on staying here for at least 2 more years before looking to move. Rough math shows that once you include HOA and taxes, I am paying roughly the same per month. Our condo is in a great location (off of Eugenie) and the area is only getting better.

Do you think this is worth exploring or should I just eat the $86k I will be paying in rent for the next two years? I am terrified of the state's financial situation but maybe I am overestimating it.

Thoughts?
****

I am impressed that you are willing to rent their long-term and have already calculated how much you will spend. Do you learn to live in Chicago? Is your job stable? I’m personally getting bullish on buying physical property again.

See: https://www.financialsamurai.com/a-golden-opportunity-to-buy-real-estate-is-upon-us/

Regards,

Sam

Behemoth

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Re: View on Chicago housing market?
« Reply #7 on: November 22, 2019, 08:06:55 AM »
Quote
I am impressed that you are willing to rent their long-term and have already calculated how much you will spend. Do you learn to live in Chicago? Is your job stable? I’m personally getting bullish on buying physical property again.

We love Chicago but we plan to move back to the south over the next few years to be closer to family. I do have a stable job. Many of my friends in Chicago in professional services who should be buying houses are choosing to rent for essentially the same reasons:

- Since 2000, Chicago home prices have grown 44% while inflation in the same period is 46%
- Illinois is in absolute dire straits with $200B in pension debt, mostly unfunded (and the state cannot declare bankruptcy!)
- Income taxes are going to go up next year
- Cook County property taxes, already the second-highest in the country, are likely to increase


money2012

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Re: View on Chicago housing market?
« Reply #8 on: November 25, 2019, 03:43:44 AM »
I have thought about this as well and have come to the conclusion that despite all the issues with the city and state Chicago isn’t going away.

-   It’s the third-largest city in the country and despite a declining population it is almost entirely focused on the less desirable neighborhoods on the south and west sides.

-   Strong economic activity in the downtown with the fastest-growing downtown in the country

-   Top tier global city that still maintains an affordable cost of living

-   Top-ranked city for attracting tech workers “Chicago’s tech market has seen a lot of organic growth and a tremendous amount of growth from coastal companies expanding here, particularly firms from California,” said Brad Serot, vice chairman with CBRE and member of the firm’s tech and media practice group. “Labor has been the big driver of this.”

-   Chicago remains more affordable when compared to coastal cities. The annual cost for a 500-employee, 75,000-square-foot office in Chicago is approximately $40 million, far below the most expensive markets of San Francisco ($59M), New York ($55M), Washington D.C. ($51M) and Seattle ($50M).

-   Migration isn’t due to tax reasons. When residents with incomes of $100,000 or more leave Chicago, they often head for New York City, San Francisco, Seattle and Los Angeles — all places with higher taxes.


Rather than shorting Chicago real estate by renting I plan to purchase a two-bedroom condo in the downtown area for ~350K despite having the ability to purchase a much more expensive property.

-   Rent for a similar place would be roughly $2,750 per month which provides savings of ~$185 per month
                - Assumes 5-Year Hold, 0% Appreciation, $450 HOA fee, 1.5% annually for Insurance and Repairs, 2.32% Property Tax, 3% Closing Costs on the Buy
                - Also included 6% Closing Costs on Sale despite planning to hold this property much longer than 5-Years as will use as a rental once I am ready to move

-   Even if property values were to decrease or property taxes were to increase there would still be a buffer over renting

-   On a per Sq. Ft. basis you can buy an existing downtown apartment at approx. 50%  of what it would cost to build new with construction costs continuing to rise

-   Eventually, will look to buy a larger home and if the market goes down the cost of the next purchase will also be cheaper

 

Sources:

https://www.rejournals.com/chicago-a-top-three-market-for-tech-talent-growth-20190802

https://www.npr.org/local/309/2019/05/23/725913379/downtown-chicago-grows-while-the-south-and-west-sides-lose-population?t=1574679070847

https://budgetblog.ctbaonline.org/who-leaves-illinois-and-where-do-they-go-55779062e9ea

Sam

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Re: View on Chicago housing market?
« Reply #9 on: November 25, 2019, 06:39:38 AM »
Great analysis on the Chicago real estate market guys. Buying during the middle of winter probably gets you some better deals as well.

If my thesis of coastal money and workers continuing to migrate to the heartland for better value, I don't see why more people won't find Chicago to be a relatively attractive market as well. Jobs there are plentiful and it is a big city feel.

https://www.financialsamurai.com/focus-on-investment-trends-why-im-investing-in-the-heartland-of-america/

I'm just afraid of high property taxes in Illinois at 2.32%. Then again, property is so cheap there, it seems to more than make up for the difference.

https://www.financialsamurai.com/property-taxes-by-state/

« Last Edit: November 25, 2019, 06:43:41 AM by Sam »
Regards,

Sam

chitown-2020

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Re: View on Chicago housing market?
« Reply #10 on: November 30, 2019, 01:26:16 PM »


-   Rent for a similar place would be roughly $2,750 per month which provides savings of ~$185 per month
                - Assumes 5-Year Hold, 0% Appreciation, $450 HOA fee, 1.5% annually for Insurance and Repairs, 2.32% Property Tax, 3% Closing Costs on the Buy
                - Also included 6% Closing Costs on Sale despite planning to hold this property much longer than 5-Years as will use as a rental once I am ready to move


Honestly, I originally bought here for all the reasons you stated above.    But in the end, math is math -- and I don't see Chicago improving its bottom line (as a city) anytime soon.   Beware the RE tax increases -- I had a 99% increase once, followed by a 30% increase, just saying.   I do hope you find value (and you're super smart to stick to that price range -- its much more easily trade-able.)

SteveGood

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Re: View on Chicago housing market?
« Reply #11 on: December 17, 2019, 01:26:03 AM »
Hi,


How much cost for 1BHK individual house to buy in Chicago, USA?.