Anyone own Chicago multi-unit rentals during the last crash?

Question

I’m looking to hear from folks who owned multi family rentals in Chicago (or elsewhere, though specifically interested in Chicago) during the last downturn.

- Did rents go down?

- Did you have higher or lower demand for renters?

- Increased issues with non-payment / evictions?

Basically aside from the obvious hit of the resale value, I’m looking to hear about what you experienced from a landlord perspective. Anything wish you knew or wish you had planned for also welcome. We just bought our first multi and with all this talk of a potential downturn want to be as prepared as possible if and when it hits (especially since we are looking to buy another now).

Weston Harding · Answer

Hey @Gillian C. !

Great topic! I owned multiple properties and helped a large number of clients through the downturn. The big difference from the past to the expected downturn in the next couple of years is the past downturn was created by a bubble in which the previous year before the crash, rent prices were going down because every renter was buying a condo.

Once the crash happened, renters could no longer buy condos and a large number of past renters, who had purchased condos, were being closed on causing a shift in the rental market. There was a high demand in rentals and a low amount of supply because a large majority of the rentals were converted to condos. This is why you would see the rentals skyrockets from 2010 to what they are now.

Most neighborhoods seeing a 50-90% increase in rents. From a landlord perspective, the last downturn was great for 3-4 unit multi-unit owners. Buying property in the downturn with rent prices increasing and the return value of sales prices going up as well. Buying in the downturn, the upcoming downturn is not caused by a bubble but caused by the fact that the buyers are not willing to pay the high prices we are seeing, therefore causing the market to shift.

Rent prices will most likely take a small decline, mainly because of oversupply, but your building should be fine and running great. Things for people to consider immediately is that with the shift in the market, it will be harder to refinance current properties. People who have purchased in the last year or two should consider refinancing immediately to take advantage of those higher sales prices. Especially if you have made recent improvements. With the refinance you can remove PMI or possibly cash out and refinance for your next down payment.

@Michael Facchini can talk more on that though than myself :)

Aaron Vaughn · Answer

Great questions Gillian! Rents, especially subsidized rents which make up the majority of rents in class C and D neighborhoods did not go down, nor did the demand. Chicago has long been a city that’s had a housing shortage. as far as evictions are concerned, those folks not in subsidized housing were affected more so than low or no income section 8 renters.

I sense a concern about moving forward with rentals and I’ll quote Warren Buffet who said when some become fearful , become greedy! Use fear as a motivator not something that halts your investing. Hope this helps.

I sense a concern about moving forward with rentals and I’ll quote Warren Buffet who said when some become fearful , become greedy!  Use fear as a motivator not something that halts your investing. Hope this helps.

Michael Facchini · Answer

Great breakdown @Weston Harding and agree with that analysis.  Yes, we certainly will see rental appreciation slow down, but to help increase net rental income we can take advantage of lower rates (seeing rates hit levels the past few days we haven't seen in over a year) and reducing our monthly payments....not to mention, accelerate amortization and principal pay down in our favor by paying less interest and more principal each month.

Aaron Vaughn · Answer

Great questions Gillian! Rents, especially subsidized rents which make up the majority of rents in class C and D neighborhoods did not go down, nor did the demand. Chicago has long been a city that’s had a housing shortage. as far as evictions are concerned, those folks not in subsidized housing were affected more so than low or no income section 8 renters.

I sense a concern about moving forward with rentals and I’ll quote Warren Buffet who said when some become fearful , become greedy! Use fear as a motivator not something that halts your investing. Hope this helps.

I sense a concern about moving forward with rentals and I’ll quote Warren Buffet who said when Most become fearful , become greedy!  Use fear as a motivator not something that halts your investing. Hope this helps.

Anyone own Chicago multi-unit rentals during the last crash?

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