Chicago Cap Rates by Neighborhood - updated SEP 2019

Hello to all my blog readers out there!

I am back with some more great information for you.

I just analyzed the last 2 years of sales information for Chicago multi-family properties.

My main goal was to derive Chicago cap rates by neighborhood.

There is not a lot of good cap rate information out there by neighborhood.

But, I was happy to find my last post about Chicago cap rates was ranking 

pretty high on Google!

What is Cap Rate?

Here is a refresher on the concept of Cap Rates.

According to Investopedia:

"The capitalization rate, often referred to as the "cap rate",

is a fundamental concept used in the world of commercial real estate.

It is the rate of return on a real estate investment property based

on the income that the property is expected to generate.

This metric is used to estimate the investor's potential return on his or her investment.

The capitalization rate of an investment can be calculated by dividing the

property's net operating income (NOI) by the current market value

or acquisition cost of a property - expressed in the following formula:

Capitalization Rate = Net Operating Income / Current Market Value"

Please keep in mind that this is a high level analysis.

It should give you a ballpark idea of cap rates in the various Chicago neighborhoods.

But some assumptions were made for this analysis.

For example, to determine the net income for a property, I assumed it would be 50% of the Gross Rental Income.

Also, I tried to weed out properties that require a significant amount of rehab work.

Typically those properties will sell below market value and they will make the cap rate look deceptively high.

I also tried to weed out properties that were vacant.

In this year's analysis, I included the number of properties that were sold in that neighborhood for the time period considered. So if only 1 or 2 properties were sold in the 2 year period, I would not be extremely confident in the displayed cap rate.

However, if several properties were sold in the 2 year period, you can have a higher level of confidence in the displayed cap rate.

If you are considering purchasing an investment property in Chicago for $250,000 or more, I would be happy to do a more detailed analysis for you. Of course, this is assuming I would be your buyer's agent and represent you in the transaction. As much as I enjoy helping others, I have to keep the lights on :)

Either way, I hope you find this information useful.

Feel free to leave a comment here... or send me a note: [email protected]

You can also text me at 773-354-6693 or visit me online at: www.buybronzeville.com

Thanks,

Mark Killion, Real Estate Broker

Kale Realty - 2447 N Ashland Ave - Chicago, IL 60614

Cell: 773-354-6693

Visit me online today: www.buybronzeville.com

Equal Housing Opportunity

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