Please help evaluate a condo purchase in Chicago + timing

[Account Closed]

Hello everyone,

I am looking at a junior studio in Chicago, Lincoln Park area. Since I'm new to this real estate market, I'm hoping to get some insight from the pros on whether this is a good deal or not.

Here are the basics:

Priced at 190K, hoping to get 185+5K in sellers concessions for net sale price of 180K. Currently it's rented out for the next 2 months (red flag?). Rent is 1300$. The place seems clean and well-kept. 4 minutes from CTA station on brown/pink line. Trader Joes 5 minutes, WF 10 minutes walk, so is a major university. Downtown within a 20 minute train ride. 

Running basic numbers, the pmi+hoa+taxes come up to about 1250$. I know, I know! Not meeting the 1% rule, BUT initially I would live in it. Not sure for how long (hence primary residence loan with 20% down).

Here are my questions:

1. How good of a deal is it for Chicago area, given the shortage of inventory?

2. What am I getting in if I purchase a *leased* property?

3. During my conversation with the realtor, she gave away a vibe that a market may be flattening given the incredible appreciation rate over the last few years combined with raising interest rates. I appreciated her honesty,  but it does concern me. Should wait to purchase given the current state of the market (insane appreciation; incomes not keeping up with it), as well as the fact that cash flow would be negative if I had to rent it out for some reason (i.e. if economy went down and I had to move to another state for a job)?

4. Given Chicago's potential (or lack of it), is this a good buy and hold deal? Like I said, I currently live in Chicago, enjoy it and would rather not pay rent, but don't know how long I will stay here. 

Also, ideally, I'd like to hold on to my properties for 30 years until they are paid off. 

Overall, I'm a bit hesitant purchasing in Cook County and would appreciate any insight. Should I run or go with it?

[Ibn Abney]

@Account Closed Lincoln Park is a great area, one of the best in Chicago. Definitely will get appreciation, especially if you are holding for 30 yrs.

With that said, I always invest for cash flow. Some folks speculate on where the market will be in the future, but I prefer to count appreciation as gravy on top. If the rent now is $1300 and your mortgage/tax/HOA is $1250 there is no money to be made. In 5 years rent will be $1400-$1500, maybe? but your taxes and HOA will increase as well. in a downturn you go negative.

Also, do you plan to live in a studio long term? Not much room to grow. I think for the money, you can get a nice 2 bed room in a decent area  and cash flow much better come rental time.

Lastly, I would suggest putting down 5%-10% for a owner occupied unit vs. 20%. Allows you to go after another investment much sooner and grow faster. let your future tenants pay down/off your residence balance. I believe the term is called "nomad investing" similar to house hacking (2-4 units), you buy 1 unit with 5-10% then wait 1-2 years and do it again and again. until you hit 4 mortgages. but by that time you have equity in 4 properties and 3 rental units.

good luck