Sell or hold Chicago south side rental?

Question

I purchased an apartment in the Chicago area near my university campus while I was studying back in 2006. Of course they gave a full-time student with no real income a mortgage with just 20% down payment back then. Anyhow I've held onto this apartment since then and it's been leased. But each month I have to put in cash to account for all its expenses. I tried to sell it two years ago but I had to put in 10-15K to close to deal. At this point I paid down its mortgage enough to probably be able to sell it without having to put extra cash. Note that we bought it for 210K and now it probably won't bring in more than 170K. Interest rate is fixed 7%. What would you do?

PS refinancing is not really an option because I live abroad, work abroad and it's an investment property.

Jeff Burdick · Answer

Take "Zestimates" with a grain of salt and have a quality broker give you a CMA.

Frank S. · Answer

Hi,

How much are you currently receiving in rent?  In RE you make money in cash flow, amortization, tax shelter and (sometimes) appreciation.  It's not only cash flow.  Look at those options.

If you are not able to manage the unit and are not comfortable putting more money into it each month, you could consider taking the loss if there is value on your inner peace.

Note that $210K from 2006 equals to $260K of today's money, adjusted for inflation. At $170K sell, the unit would sell at $90K less than what it was listed in 2006.  Your downpayment of $52K equals $64K today. You are paying about $10K in interst per year. Your amortization is about $4.5K this year.

What's your cash flow?

What are your management expenses?

Can you cut back somehow?

Are you sure about the sell price?

Can you increase the price by doing some repairs?

As you know, the sell will set you back $10K in Realtor comissions (6%) and about $3K in title and other costs.  Assuming there are no other repair costs.   You can try a lower flat fee company or do a FSBO.

How about a rent-to-own type of deal?  It all depends on your current rent.

I'm interested in what others have to say.

Good luck,

Sarah K. · Answer

Thank you all for the responses. This sounds like an overwhelming vote for selling. Since I can't afford to have it empty I just leased it out for another year and will have to put it on the market next spring. I will hire someone to conduct a CMA and see where things are by then.

Elbert D. · Answer

@Sarah Kamhawi wow......Im so sorry your going through the headache of this......but I tell fellow investors(landlord owners) and flippers everything is a learning experience within real estate. There are going be times you get smoked and you want to just cry but it just taught you a lesson of what not to do next time.....As @Bob Floss II and @Jeff Burdick mentioned I'll look to sell the property ASAP.Dont listen to these other people such wholesalers(who normally give incorrect ARVs) and have a really experienced realtor provide for you solid tight sold comps. Save your time, energy and effort and allow them to do it. Sold comps take awhile to do. REAL comps apples to apples within the previous nine months.

As Jeff mentioned these websites such as Zillow are nomrally incorrect. Rather its a little or a lot, you want accurate comps. See what those comps are and factor in closing cost for getting it closed and the realor's commission as well. You want all your numbers to be accurate. The market here in Chicago is  weird right now with many things being Waaaaaaaay overpriced. Im going assume since you put funds into the unit that its "move in ready"? because a potential buyer will want to know what repair cost they need to factor into their budget. Know who your targeted buyer is....if your looking to get as much money as you can your buyer is normally going be a retail buyer. If its a investor you might end up getting much less than what your looking for. Please reach out to me if you have any questions.

Bob Floss II · Answer

@Sarah Kamhawi Sounds like you got your value out of your personal use while studying. Based on the narrative I would recommend selling and avoid the headache.

Vincent Incopero · Answer

@Sarah K., you might consider an ibuyer platform like roofstock.com if you are having difficulty finding local interest in the property.

Erika Carter · Answer

Thats a desirable area. If you dont want to be a landlord and cut your ties, i would sell.

Sarah K. · Answer

Unfortunately no - the association only accepts 1 year leases and does not allow short-term rentals or even sublets. There are too many limitations in the condominium, and thus it is not the ideal building for an investment. Investors were interested, but there's a waiting list for renting and any new buyer gets bumped to the back.

Samed Arif · Answer

Can you possibly Airbnb the rental? You could bring in x3 the cashflow. It would require more management because there's people coming and going. With the university of Chicago nearby, it should stay booked.

Sarah K. · Answer

Hello all - as an update, I finally listed the apartment for sale over a month ago and it has yet to receive an offer. It looks like there's a lot of inventory in Hyde Park and little movement. I think my unit is unique because it's a 2-bed and 2-bath with in-unit washer/dryer, storage space, minimal assessment fees, and I believe it is priced to sell. We have had 20+ showings and no offers even though all agents who saw it said that it is well-priced and showed well. Tenants move out September 14 and I really need to get it sold. There's one other owner on the waiting list for rentals, so it's not well positioned for an investor buyer even though its location is ideal for that. Any suggestions?

Sell or hold Chicago south side rental?

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