Investing in Chicago Condos

[Thomas Kayes]

I have been given conflicting advice:

Buy condos! When I told him that my fiance and I wanted to put some money in real estate for the first time, a family friend -- who is a long-time Chicago banker specializing in real estate lending -- told me to start by putting 50% down on a nice condo and renting it out. He said that would be an easy sell to a lender; that we'd get our feet wet landlording; that condos are easy because the HOA takes care of the out-of-unit maintenance; that if you buy relatively new and in the right neighborhood your expenses and vacancy will be minuscule; that the risk, overall, was minimal. After that, he said, the same lender will be much more willing to loan to you on the next condo, and then the next bigger property. Grow slow, he says. You and your fiance are too busy (we're lawyers) to be landlords anyway.

Buy anything but condos! So from others -- including a successful investor with a lot of local knowledge who posts regularly here -- I have been told to buy anything but condos. The HOAs will slam you with special assessments. The regular assessments (dues, sometimes I hear them called) will eat your cash flow alive. 

For my part, both sides make sense. I can find condos on the MLS with numbers that appear to work (counting the dues and assuming 50% of gross rents to other expenses-they obviously work better at 30-40%). And, because I'm a lawyer with some familiarity with HOAs, I feel comfortable vetting prospects for problems like fiscal mismanagement and rental restrictions. But the numbers on more time-intensive, expensive properties (duplexes, three-flats, four-flats) hands down work better.

So what do you think?

I'd love to hear from folks with Chicago condos or condos in any larger city. In particular, I'd love to know whether any condo-investors (in new-ish condos) tend to find their expenses going anywhere near 50%. Heck, I'd love know anything more than what I know now.

Thanks to you all.