First Investment Property Analysis - Chicago, IL

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First Investment Property Analysis - Chicago, IL

Austin Anderson
Member since 2019 · 1 post · 2 votes

Hello Everyone!

I'm a long-time observer and first-time poster. I appreciate all the insight and wisdom everyone has provided, and it was the motivation to push me to buy my first rental.

The Property is in Chicago, IL, specifically in the Gold Coast Neighborhood. If you're not familiar with the neighborhood, it's one of the most prominent neighborhoods in Chicago. It's an A neighborhood, where most single-family homes are over 1 million dollars, and most one-bedroom condos are 400K and up, and it's the same neighborhood as the original playboy mansion.

Neighborhood:

-Close to two Beaches

-Close Lakeshore Drive, which allows you easy access to anywhere in the city.

-Lincoln Park

-Nightlife and Restaurants

-Shopping

-Museums

-5 Minute Ride to Downtown Chicago

Property: Studio Apartment: Approximately 575 Sqft, with an open floorplan.

Laundry in Building

Price: Original Price: $187,000

Close Price: $166,000

Taxes: $1900/Yearly

Renovations:$12,000 (Includes Materials + Labor)

Includes:

Repainting of Entire Apartment and Ceiling

Updated Countertops

Patch Work

Updated Lighting and Fixtures

Updating of Backsplash and Tiles

Adding Closet Doors

Glass Partition Wall (Will be a divider between the bedroom and living space)


Rental Estimates:

Rentomoter: 1800/Monthly or 2500/Monthly with Airbnb Rentals

*The property allows Airbnb's if they are one-month minimum.

Expected ROI:

Yearly Rental: 8.5% Return

Airbnb Monthly Rental: 11.5%

Question:

1. First, is this a good deal?

2. Does anybody have any experience with Airbnb Monthly rentals? Would you recommend going the Airbnb rental route or yearly rental agreements?

3. My lease is approaching, and I was planning to live in the property for 6-8 months, so I'll be able to save enough money for another renovation, or would you recommend I rent an apartment and start making money ASAP?

*Some background; the mortgage, including Morgage payment + HOA + Taxes, come in about $1200, and similar properties rent will cost about $2,000.

Thanks in Advance!

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Michael K.
Investor · Chicago, IL · Member since 2018 · 352 posts · 176 votes
4y

Hi @Austin Anderson congrats on getting started. A cash flow of 600 dollars on this small of a property would be excellent. The only thing I would question is the rental data you pulled. I just took a look on the MLS. Across 160 studio rentals in the Gold Coast over the past year, the median rent was only about $1200. I only found a few that closed over $1600. I would be careful that you're not pricing the unit as a 1 bedroom. Obviously, it also depends on the condition of the apartment and since I don't know the address and have seen the interior I can't say for sure. PM me if you need help pulling comps. And best of luck!

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  • Michael K.
    Investor · Chicago, IL · Member since 2018 · 352 posts · 176 votes
    4y

    Hi @Austin Anderson congrats on getting started. A cash flow of 600 dollars on this small of a property would be excellent. The only thing I would question is the rental data you pulled. I just took a look on the MLS. Across 160 studio rentals in the Gold Coast over the past year, the median rent was only about $1200. I only found a few that closed over $1600. I would be careful that you're not pricing the unit as a 1 bedroom. Obviously, it also depends on the condition of the apartment and since I don't know the address and have seen the interior I can't say for sure. PM me if you need help pulling comps. And best of luck!

    1Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    4y

    @Austin Anderson - Looks like a good deal to me.  Anywhere in the gold coast will be a great long-term investment.   Like you mentioned, it is a staple of Chicago and is not going anywhere. 

    I'd double-check what the demand would be for a long-term (1 month +) AirBnB.

    It might be worth throwing your analysis in the BP calculator.  Also, your renovation budget looks way too small seems like it would need to be 2-3X to cover the repairs you mentioned.

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  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    4y
    Quote from @Austin Anderson:

    Hello Everyone!

    I'm a long-time observer and first-time poster. I appreciate all the insight and wisdom everyone has provided, and it was the motivation to push me to buy my first rental.

    The Property is in Chicago, IL, specifically in the Gold Coast Neighborhood. If you're not familiar with the neighborhood, it's one of the most prominent neighborhoods in Chicago. It's an A neighborhood, where most single-family homes are over 1 million dollars, and most one-bedroom condos are 400K and up, and it's the same neighborhood as the original playboy mansion.

    Neighborhood:

    -Close to two Beaches

    -Close Lakeshore Drive, which allows you easy access to anywhere in the city.

    -Lincoln Park

    -Nightlife and Restaurants

    -Shopping

    -Museums

    -5 Minute Ride to Downtown Chicago

    Property: Studio Apartment: Approximately 575 Sqft, with an open floorplan.

    Laundry in Building

    Price: Original Price: $187,000

    Close Price: $166,000

    Taxes: $1900/Yearly

    Renovations:$12,000 (Includes Materials + Labor)

    Includes:

    Repainting of Entire Apartment and Ceiling

    Updated Countertops

    Patch Work

    Updated Lighting and Fixtures

    Updating of Backsplash and Tiles

    Adding Closet Doors

    Glass Partition Wall (Will be a divider between the bedroom and living space)


    Rental Estimates:

    Rentomoter: 1800/Monthly or 2500/Monthly with Airbnb Rentals

    *The property allows Airbnb's if they are one-month minimum.

    Expected ROI:

    Yearly Rental: 8.5% Return

    Airbnb Monthly Rental: 11.5%

    Question:

    1. First, is this a good deal?

    2. Does anybody have any experience with Airbnb Monthly rentals? Would you recommend going the Airbnb rental route or yearly rental agreements?

    3. My lease is approaching, and I was planning to live in the property for 6-8 months, so I'll be able to save enough money for another renovation, or would you recommend I rent an apartment and start making money ASAP?

    *Some background; the mortgage, including Morgage payment + HOA + Taxes, come in about $1200, and similar properties rent will cost about $2,000.

    Thanks in Advance!


    1. Is it a good deal?  Can you get 8.5%  to 11.5% return by investing in another asset with less risk? Is 8.5% good enough for you?  I pose these as questions rather than answer if it's a good deal because it's really on you to decide if these numbers work.

    2. AirBnB monthly versus Yearly- Consistent cash flow is the key so my preference is the yearly rental. But with that said there is nothing to prevent you from advertising for both. A monthly AirBnB can fill the gap when a yearly tenant has moved out or you can time a new yearly tenant moving in while a monthly AirBnB is occupying. Take advantage of both.

    3. Living in the apartment for 6-8 months or start cash flowing immediately?  This is a math problem where you have to consider the likelihood of having to carry two notes and for how long. How long will it take you to rent the new place, whether its long term or short term? And can you pay rent and pay the note?  Get some data on either vacancy rate or how long on average it takes to rent out a unit. Run the numbers and see if the numbers till work. If they do then start cash flowing the property  right away. 
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