I recently read that Chicago Cap Rates for Single Family
Homes average about 7%.
This may be true when you look at the city as a whole.
But cap rates vary greatly by neighborhood.
Cap rates can be 5% downtown and 15% in some areas on the South Side.
Cap rates in many parts of the city are much higher than the
quoted 7% average.
In areas that are experiencing appreciation, the cap rates will be lower.
In areas where appreciation is flat, but rental demand is high,
the cap rates are 10+.
For example, a single family home was purchased in the South
Shore neighborhood, on 72nd and Luella, in 2011 for $60,000.
Let’s estimate that $25,000 was spent to rehab it.
It is now renting for $1,650 per month. Your Gross annual income
is $19,800.You figure that you are spending about $7,500 per year
on taxes, water, insurance, and property management.
That gives you a Net Income of $12,300 per year.
When we divide $12,300 by $85,000, we arrive at an attractive
cap rate of 14.5%. That is double the average stated cap rate for Chicago.
If any investors out there are interested in learning more about investing
on the South side of Chicago, please let me know.
Until the next time,
542 W. Roosevelt Rd.
Chicago, IL 60607
Visit me online: www.773property.com
EQUAL HOUSING OPPORTUNITY