Posted by: union03g | August 11, 2009

Good Or Bad Investment – Waveland 1/1 Goes Under Contract

630 W WAVELAND Ave Unit 2B just went under contract. My question is: would this be a good investment to rent out? There are just enough high end finishings to keep a tenant (appliances, WBFP, floors) but not so many that would run up the costs unnecessarily (high end cabinets, moldings, central AC). It’s in a good lakefront location in East Lakeview and a nice sticky stepping-stone apartment for a 20-something. Here are the specs:

Unit #2B: 1 bedroom, 1 bath, no square footage listed

* Sold in June 1994 for $59,000 – wow
* Sold in April 2004 for $185,500
* Originally listed in July 2009 for $205,000 (parking is $25,000 extra)
* Under contract
* Assessments of $229 a month
* Taxes of $1888
* In-unit washer/dryer
* No central air (window units)
* Living room: 18×12
* Kitchen: 12×10
* Bedroom: 13×10

An $1100/month estimated rent only gets a 5.1% going-in cap rate, assuming it closed at exactly $205k. The real killer here is the $229/month assessment – these can flatten your ROI (like having an extra 2 months of vacancy per year). The cap rate would have been 6.44% with no assessment- the difference between a potential deal and garbage.

This is why buying a whole building/2 flat makes sense. You can control assessments and expenses and you have more negotiating leverage because there are fewer buyers at those price points. So, Go big or Go home???

-Jetty

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