All Forum Posts by: Joe H.

The market is going to get slammed and already is in many places. 

r/REbubble has called this for a year now.

My uncles are both contractors in the valley. I'll ask them who then would recommend and get back to you. 

Lol, way to totally misread my comments. When I say these things it's for a sense of scale. Even without the other two leases, the 500,000 SF Salesforce lease is still 2/3 the size of the LARGEST lease ever in San Francisco... 750,000 SF is a big lease in Chicago, but it's not uncommon and certainly is not the all time record. So call me "Trumpian" all you want, but the facts don't lie, Chicago's office market could eat San Francisco proper alive. All day, any day. If you want to include the entire bay area in the picture, then maybe San Francisco is somewhat comparable to Chicago, but it's not even close if you compare SF proper with Chicago proper.

You might want to actually know a market before you spout nonsense like this. I'm willing to bet you don't own anything that has averaged out over it's five years at a 54 cap. And as for that comment someone made about high taxes, I have a six unit mixed use building I bought for $10, yes $10 no digits missing, that brings in about $10k a month and only pays $5600/year in taxes. It's worth $1.2 million, I don't know a lot of states where that would be possible. Taxes are high in Illinois, but not so much in Chicago proper. 

Chicago has a lot of demographic changes in progress that look downright spectacular. Did you know Chicago just rocketed up from 7th or 8th to 1st in percentage of residents with college degrees out of the 10 largest metros in the US? Higher than NYC, higher than LA, etc. Did you know that Chicago has seen higher growth of six figure earning households in percentage terms than any other city in the US since 2010? Did you know that it beats any other city except NYC in raw numbers of six figure households gained? Did you know that it did all this despite a falling overall population? Did you know that in the last 60 days Google leased another 100,000 SF, Facebook leased another 250,000 SF, and Salesforce leased 500,000 SF in Chicago. These three deals combined are larger than any single lease in the history of San Francisco. And those are SMALL deals for Chicago's mammoth and extremely diverse economy where you have companies like McDonalds, Walgreens, United, etc all moving their headquarters downtown in a mad rush to tap the exploding talent in Chicago's core. Did you know that, unlike other big cities in the US which have seen rapid slowdowns the past two or three quarters, Chicago's rental market just notched yet another record high in rents while occupancy rates rose to just shy of the all time record?

In other words your statement is false, Chicago is changing more radically than almost any other city in the US. It is losing population but gaining wealth and education faster than anywhere else. For better or for worse the poor are fleeing Chicago and the yuppies are moving in. Don't listen to the media hype, Chicago is on fire almost on a whole 'nother level than most other cities because it involves deep, systematic, and fundamental change. Chicago isn't dying because of issues like population loss, it's being reborn. These demographic symptoms are indicative of radical change, not "slow growth". 

You will have to do separate copper lines, one to each address. The city will force you to put in a 3x5' meter vault in the parkway (or under the sidewalk if you have a big parkway tree in the way). This will cost you between $14,000 and $17,500 a line and there is no getting around it. The city will force you to pay heavy fees, install the vault, run the new line, cut the street, and repair the street. Source: I literally just replaced the water lines to two buildings I own right next to each other. The city makes water lines such an awful process that only three subcontractors are left in all of Chicago that tap residential water lines. One of the requirements of a water line permit is for the contractor to put a $5,000 deposit down that they don't get back for several years. 

Chicago will offer a far higher long term return. Simply put cap rates in Chicago are much higher than in NYC because there is less competition. This is partially to do with Chicago's stagnant population (the city itself is holding steady, state is losing population), partially do to with the "unique" (read borderline corrupt) nature of dealing with the City of Chicago itself, and partly to do with Chicago just being more off the radar of national or internationally investors. 

The key here is to identify which areas are on a long term upward trajectory, which areas are stagnant, and which areas are having serious issues. I've been able to find several areas where my properties have multiplied in value quickly, but I'm sure not every deal here is so great. Start studying neighborhoods or suburbs and try to learn about what is going on in each submarket.

If the question is "should I buy a condo in a smaller building rather than a larger complex" then the answer is "maybe?". The downside to buying a condo in a 2, 3 or 4 unit building is that you have fewer owners to split the cost of a big special assessment with. The other downside is that it's easier for a crazy neighbor to have an ill effect on the functioning of your association. If there's only three owners in a building and two of them decide something, sucks to be the third owner. This is actually also a benefit sometimes if you plan to take an active roll in the association you might have more control over turning around or improving an ailing condo association. 

In either case I don't recommend investing in condos, the margins are slim and there's a lot of room for other people to interfere with the proper management of the asset. Chicago is a cheap enough market that you can find a 3 or 4 unit brick building on the edge of a gentrifying area for very cheap and improve the units and therefore the rents. If you are lucky the area will improve further and you will get significant market appreciation as well. I bought in Avondale just a block outside of Logan Square right off Milwaukee Ave in 2011 and paid $136,000 for a two flat with an illegal attic apartment. I fixed it up as I lived there and its now worth easily $500,000 because the market in this neighborhood has gone buckwild. 

Now I saw your other thread about buying in the Milwaukee Ave corridor, but remember that this area has already seen a huge wave of price appreciation. It probably is less risky like you say, but that also means lower potential upside. You can still find cheap pockets of the city near transit and improving areas, it might be worth taking a bit more risk because the upside is huge. It is worth considering areas like McKinley Park (right next to Bridgeport and also becoming a Western extension of Chinatown), West Pilsen (still seedy enough to yield an occasional good deal), or Bronzeville (again, pockets of dereliction open up the opportunity to help clean up your own little corner of the neighborhood). 

I think the first thing you need to do is narrow down your search by identifying exact what type of investment you are pursuing and then study the crap out of very specific sub markets. Watch a few areas you think are interesting on Redfin every day for a month. Look at what comes on the market and look at what sales close. Start building a database in your mind for roughly what stuff lists for and what it sells for. 

Hey,

Welcome to Chicago, though you have been here for a while, so welcome to the Chicago RE market. I'm actually marrying a girl from Des Moines in a few short weeks! I started buying with owner occupied multifamily FHA doing "house hacking" back in 2011. Let me know if you have any questions, I've done it all from brokerage to investing to flipping to wholesaling.

Joe

Not to nitpick, but Chicago prices are WAYYYYY lower than Denver prices. My sister just bought a duplex in a gentrifying area South of Downtown Denver along I-25 and it was almost $700k in totally unupdated condition. The Chicago equivalent is a brick two flat (stacked apartments not side by side) and $700k could buy you an unrenovated unit in all but the nicest parts of the city where it's beyond gentrified. I just bought a two flat, a four flat, and two vacant lots literally adjacent to the elevated train 15 minutes from downtown Chicago for $150,000. They needed to be gutted, but still, Denver is way out of Chicago's league when it comes to prices.

Its possible to do, but you are almost better off searching for vacant properties that are privately owned but in trouble with building court. I've gotten properties in all sorts of way, but directly from the city is the hardest to work with.