Chicago Multi-Family Income Property

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 that my last post about Chicago cap rates is still ranking 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”,

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 $300,000 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: mark@markkillion.com

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

Equal Housing Opportunity

Chicago Cap Rates by neighborhood

Chicago Cap Rates by neighborhood

Chicago Cap Rates by neighborhood

Chicago Cap Rates by neighborhood

Chicago Multi-Family Income Property

Hello to all my blog readers out there.
I know it has been a while, but I am back with some valuable information!
I analyzed 2 years of sales transactions for Chicago
Multi-Family apartment buildings.
I wanted to find out the average cap rates by neighborhood.
This is one of my most popular reports.

This report is based on MLS data for the period of
01/01/2015 through 12/31/2016.
The MLS system is used to list and sell properties that are brokered
by a licensed real estate agent.
So this analysis does not include properties that were sold “off market”.
But the MLS includes about 90% of all sales transactions.

As a refresher, let’s talk about cap rates right quick.
According to Investopedia, Cap Rate is defined as follows:

“The capitalization rate is the rate of return on a real estate
investment property based on the income that the property is
expected to generate. The capitalization rate is used to estimate
the investor’s potential return on his or her investment.

The capitalization rate of an investment may be calculated by dividing
the investment’s net operating income (NOI) by the current market value
of the property, where NOI is the annual return on the property minus all
operating costs. The formula for calculating the capitalization rate can
be expressed in the following way:

Capitalization Rate = Net Operating Income / Current Market Value”

For more info on cap rates, please visit:
http://www.investopedia.com/terms/c/capitalizationrate.asp

To derive cap rates for my report, I looked at the stated gross income for each property.
I then assumed the expenses would be 50% of the stated gross income.
This is known as the 50% rule.
It gives you a quick way to analyze properties at a high level.
So this analysis assumes that for multi-family properties your expenses
will be about half of your revenue.
On average, this is about right. Once you have your net income, you divide
it by the selling price to get the Cap Rate.
So if a property has a annual net income of $100,000 and it sold for 1 million dollars,
it has a cap rate of 10.
Note: If a property had a stated gross income of $0, it was not included in this analysis.

Generally speaking, neighborhoods with high appreciation rates have lower cap rates.
And neighborhoods with high cap rates will usually have low or flat appreciation rates.
These two metrics are inversely related and I think this report highlights that relationship.

If you are thinking about buying or selling an investment property in Chicago,
please let me know! You can send me a note: mark@markkillion.com

Until the next time,

Mark Killion
Kale Realty
2447 N. Ashland
Chicago, IL 60614

Office: 312-939-5253
Cell: 773-354-6693

Send me a note!

Visit me online: www.773property.com

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The report is shown below:

Cap Rates, by neighborhood, for Chicago Multi-Family Properties 2017

South Shore Chicago Cap Rates

I just did a quick analysis of closed transactions for South Shore Chicago.
I focused on Multi-Family Apartment Buildings only.
This was for sales that took place in 2016.
About 20 transactions closed on the MLS this year.
The estimated median Cap Rate in South Shore was 10.9%

I estimated the Cap Rate by looking at the Gross Income.
I then assumed 50% expenses to get the Net Income.
I like doing this because some sellers may play with the expenses
to make them look lower than they really are.
Many feel that the 50% rule is a pretty good estimate of expenses.
Then I divided the estimated Net Income by the Selling price.
So I arrived at a median Cap Rate was 10.9%
So this should give you a good idea of where Cap Rates are in the
South Shore neighborhood.
If you have any questions about buying or selling investment
properties in South Shore, you can send me a text (or call)
Mark Killion 773-354-6693.
You can also send me an email: mark@markkillion.com

Until the next time,

Mark Killion
Kale Realty
2447 N. Ashland
Chicago, IL 60614

Office: 312-939-5253
Cell: 773-354-6693

Send me a note!

Visit me online: www.773property.com

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Chicago Cap Rates by neighborhood

Chicago Cap Rates by neighborhood

Chicago Cap Rates by neighborhood

I analyzed about 1,000 closed transactions of “2 to 4″ unit properties
in Chicago. These properties were sold during the 6 month period
ending Nov 15th 2015.

This analysis should give you a good idea of current cap rates in various
Chicago neighborhoods. If you have any questions about investment properties
in Chicago, please Send me a note!

Mark Killion
Kale Realty
Chicago, IL

A Bronzeville Investment property that recently sold for $375,000

Available Bronzeville Investment Properties

Let’s look at buying an investment property in the Bronzeville neighborhood.
We will focus on Two-to-Four Unit investment properties.
I like to analyze properties that are fairly turn-key investments.
This means that the units are in decent condition and they are already rented out.

Of course, you can find fixer upper properties that are not yet rented.
But those are harder to analyze, because there are so many unknowns
(i.e. cost of repairs, building permits, length of time to find tenants, etc).

It is nice to see that the Bronzeville real estate market is alive and well.
Bronzeville usually has a limited supply of available investment properties.
I would say that the demand for quality investments far exceeds the supply.

Owners of Bronzeville properties tend to hold on to them for long periods of time.
So the turnover of properties in Bronzeville is lower than in some other neighborhoods.
But, I found 5 recent comps for this analysis, so this will give us a good idea of
the current market.

Here are the details of the 5 investment properties:

1) Price: $390,000 .. (4 units – 14 beds)..Gross Income: $57,084.. GIM: 6.83
2) Price: $380,000 .. (3 units – 11 beds)..Gross Income: $54,960.. GIM: 6.91
3) Price: $375,000 .. (4 units – 11 beds)..Gross Income: $52,500.. GIM: 7.14
4) Price: $331,000 .. (3 units – 8 beds) ..Gross Income: $37,620.. GIM: 8.80
5) Price: $317,000 .. (2 units – 7 beds) ..Gross Income: $32,400.. GIM: 9.78

Property #3 is right in the middle and it represents a typical Bronzeville
investment property. Property #3 will be the subject of this analysis.
Now let’s dig into the numbers:

Income

This property sold for $375,000. It was fully rented and generating an annual
income of $52,500. Here is the income of each unit:

1) 2bed/2bath $950
2) 3bed/2bath $1,110
3) 3bed/2bath $1,020
4) 3bed/2bath $1,295

Each unit was recently rehabbed with hardwood floors and updated kitchens.
Total monthly income was $4,375.
There is also room to increase rents every year until they are at the market rate.
The current market rate for a rehabbed 3bed/2bath unit in Bronzeville is $1,500.

This building’s “Gross Income Multiplier” was a little over 7.
This just means that if you multiply the annual rental income by 7,
you will arrive close to the selling price. So right away, we have
a good metric to use when searching for potential properties in Bronzeville.
This metric is also known as the GRM (Gross Rental Multiplier).

This is also a useful metric if you are thinking about selling and you own a
4 unit property in Bronzeville. Multiply your annual rental income by 7 and
that will be a good estimate of its current market value.

Expenses

Now let’s dig a little deeper and analyze estimated annual expenses:

Property Management: $5,250
Repairs: $3,750
Taxes: $3,600
Vacancy: $2,625
Collections: $2,625
Insurance: $2,000
Water Bill: $1,500
Landscaping: $1,200
===============================
Total Annual Expenses: $22,550

So our estimated annual expenses come to $22,550. This is about 43% of our
Gross Income. I think typical expenses for this type of property will run you
between 40% and 50%.
So our estimate looks pretty good.

To get our Net Income, we just subtract expenses from our gross income.
Net Income = $29,950

Cap Rate

Using our Net Income, we can calculate our “Cap Rate”. Cap Rate, short
for capitalization rate, is defined as [Net Income] divided by [purchase price].
So using this formula, we find that our Cap Rate for this property is 8%.
You may see the term “Cap Rate” quite a bit when you start looking for investment properties.
It gives you a way to compare different investment opportunities.
But it is just a “rule of thumb” metric that will help filter out bad investments.
One thing that has a huge impact on the “Cap Rate” is the amount of expenses.

If the owner is understating the expenses, it can skew the Cap Rate and
make it look higher. On the other hand, if the owner had a huge one time
expense last year (replaced the boiler), it can make the Cap Rate look lower.
When you are doing your analysis, if you estimate expenses at about 40%,
I think you will be OK.

In Bronzeville, most of the good investment properties will have a Cap Rate of about 8%.
Some will be higher, some will be lower. But the average Cap Rate in Bronzeville is about
8% to 9%. In other neighborhods where purchase prices are higher, the cap rates will be lower.
Hyde Park is a great example. Cap rates in Hyde Park are about 6%.
OK… enough about Cap Rates, let’s continue.

Cash Flow

So now we have about $30,000 in annual net income.
That is decent income for one property, but how much cash flow will be generated?
What is cash flow you say? Cash flow is what goes in your pocket!
It is your Net Income minus your mortgage payments (debt service).
If you bought the property in cash, then obviously your Net Income is your cash flow.
But most investors will use a mortgage when purchasing a property.

SCENARIO #1

So if we get a conventional loan and put down 20% ($75,000), our monthly payment will
be about $1,520. This assumes the loan had a 4.5% APR.
Once we subtract the mortgage from our monthly net income, we are left with
$976 every month. This means our annual cash flow is $11,710.

This may not sound like a lot of cash flow for a $375,000 property, but remember,
we financed this property.
Our actual cash invested in this property is $75,000 plus closing costs.
If we figure closing costs to be about $4,000, then our
cash-on-cash return on investment (ROI) is 14.8%.

That is pretty good considering Bank of America is currently only paying
.07% interest for a CD.
To put that in perspective, our $75,000 would only earn a measley $52 per year.
That is $52 per year vs $11,710 per year!
Of course, CDs are easier to manage. They don’t stop up the toilet or lock
themselves out at 2 AM. But we are paying $5,250 per year for a property manager.
That way we don’t have to deal with any tenant issues directly.

SCENARIO #2

Another option when buying this type of property would be to live in one of the units,
and rent out the rest. If you take this option, you can qualify for a FHA insured loan.
FHA loans only require a 3.5% down payment. In this case, that would come to $13,125.
Of course, the property’s annual income, and cash flow, would drop because you are
living in one of the units. But you would be living rent free. So saving $1,000 per
month on rent has the same impact on your finances as having $1,000 monthly cash flow.
This is the ideal situation for a 1st time investor. Let the tenants pay off your
mortgage and help you build equity over time.

Well that is enough number crunching for now.
I hope you found this information useful.
If you are thinking about buying or selling an investment property in Bronzeville,
please send me a note: mark@markkillion.com

Bronzeville

Available Bronzeville Investment Properties

Until the next time,

Mark Killion
Kale Realty
542 W. Roosevelt Rd
Chicago, IL 60607

Send me a note!

Visit me online: www.773property.com

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Chicago Income Property

Hello to all my blog readers out there!
I just wanted to talk about some simple things that
you can do to increase your non-rental income.
Some people call this type of income “ancillary income”.

1) Late Rent Fees

In Chicago, rent is typically due on the 1st of the month.
Tenants usually receive a five day grace period before a
late fee is assessed. If you own property in Chicago,
you have to make sure that you don’t set the late fee too high.

The Chicago Landlord and Tenant Ordinance says that you can
charge $10 plus 5% on the amount of rent that exceeds $500.
So, if the rent is $1000 per month, $35 is the most that you
can charge as a late fee.

2) Application Fees

When prospective tenants submit an application to rent your property,
be sure to ask for an application fee. Hopefully, you are ordering a credit
report and background check. But you should ask for an extra $10 to $15
above your costs. It is not uncommon for owners to charge a $50 application fee.

If the tenant complains that they don’t want to pay an application fee,
then move on to the next applicant. If they can’t pay a $50 fee, imagine what
is going to happen when it is time to pay rent.

3) Install coin operated washers and dryers.

All of those quarters really add up!

4) Vending Machines

This might be a good idea if you have 20+ units with a large laundry room.

5) Parking spaces

You can charge an extra $50 to $75 per month for an off street parking space.
In densely populated neighborhoods, you might be able to charge $100 or more!

6) Pet Fees

You can probably charge an extra $25 to $50 per month in rent if the tenant has a pet.
I would also advise getting a $250 pet deposit when the tenant moves in.
Many tenants have a pet or they are thinking about getting a pet.

You can capitalize on this, because many owners still don’t allow pets.
You may want to check with your insurance company though.
Some insurance companies might not be happy to find out you have pets
in your apartments.

7) Lease Cancellation Fee

If a tenant wants to break the lease, let them do it.
But charge them a two month rent cancellation fee. Once they move out, try to
get the unit rent-ready in one week. If you find a new tenant within another
three weeks, you just made yourself one month’s rent!

8) NSF Fees

If a tenant bounces a check, you can probably charge them a $35 returned
check fee. Just make sure that you state this fee in your lease.

9) Storage Locker

You could install storage lockers in the basement and charge an
extra $20 per month.

10) Cable Fees

If you have a larger multi-family property, you might be able to strike a deal
with a local cable company. Your tenants will get their cable through that company.
In return, you get an extra stream of revenue.

So, there you have it.

10 ideas that you can use to increase your investment income!
Even small increases in monthly income can have a huge impact on your bottom line.

What do I mean?

Here is a formula that I do in my head to quickly estimate a property’s ball park value:

I take the net operating income (gross income – expenses) and multiply it times 10.
So, a property that has an annual net income of $25,000 is worth roughly $250,000.
(That number might need to be adjusted depending on location and condition)

Now what happens if we increase the monthly net income by a mere $100?
The property value jumps to:
(100 x 12) + 25,000 = $26,200…. 26,200 x 10 = $262,000!

Pretty slick huh?

We just turned $100 per month into $12,000. This is how real estate investors build
wealth. They buy apartment buildings and add value by increasing income. They hold
them 3 to 5 years, and then they sell them for a nice profit.
Then they lather, rinse, repeat …

Until the next time,

Mark Killion
Kale Realty
542 W. Roosevelt Rd
Chicago, IL 60607

Send me a note!

Visit me online: www.773property.com

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I broke it down by neighborhood. Then I compared that to the average
selling price for a 3 bedroom Single Family Home in Chicago, also broken
down by neighborhood.

Comparing these two results allows us to compare Revenue to Purchase price.
This is very useful information, because it lets us know which neighborhoods
offer the higher returns for investors.

Here are some interesting metrics:

Median Rent for a 3 bedroom in Chicago: $1,442
Median Selling price for a 3 bedroom home: $145,612
Average Gross Rent Multiplier: 8.14

Here is a snapshot of this report:

Single Family Rental Analysis – Chicago

We can also use the above information to estimate a property value
for a Single Family Rental in a particular neighborhood.

For example, let say that we have a single family home that is
renting for $1,000 in the Chicago Lawn neighborhood
(Neighborhood ID = 8066).

According to our analysis, the average Gross Rent Multiplier (GRM)
in Chicago Lawn is 4.40. The annual gross rent for this
property is 12 x 1,000 = 12,000. Then we multiply the annual
gross rent times our GRM of 4.4 and get $52,800.

So the value of $52,800 would be our derived value based strictly
on income. We can also look at our average comp value, which is
$57,523 in the Chicago Lawn neighborhood.

I would then average our income value and our comp value.
This would give us a value of $55,161.
Well, that’s all for now. I hope you found this information useful.

If you would like the full report, please send me a note:
mark@markkillion.com

p.s. I have packages of Single Family Rental Homes For Sale in Chicago!
Right now, I have a package of 5 homes in the Morgan Park neighborhood.
Gross Income = $72,000 Asking Price = $450,000

*** Guaranteed Returns during first two years = 12% Cap Rate ***
For more info, please send me a note: mark@markkillion.com

Until the next time,

Mark Killion
Kale Realty
542 W. Roosevelt Rd
Chicago, IL 60607

Send me a note!

Visit me online: www.773property.com

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Chicago Apartment Building For Sale

Hello to all my blog readers out there. Today I want to take a look at a
Chicago Multi-Family property that is currently on the market. This
property is near 48th and Archer. It is listed by Eliseo Guzman , RE/MAX United.

I think that this property would make a nice addition to your portfolio.
But, we won’t know for sure until we run the numbers.
This 12 unit property is listed at $800,000. 10 units have 2 bedrooms and
1 bathroom.
The other two units are one bed/one bath. This property has been on the
market for almost 2 months. The gross scheduled income is $118,200.
This is a good location. It is close to Midway airport, public transportation,
and the I-55 expressway.
Let’s take a look at our key metrics:

Asking Price: $800,000
Gross Rent Income (GRI): $118,200
Gross Rent Multiplier (GRM): 6.77
Net Operating Income (NOI): $73,415
Cap Rate: 9.2%
Cap Rate at 92% of Asking Price: 10%
Number of Units: 12
Price per unit: About $66,000
Year Built: 1971

Expenses

Taxes________________________$$8,450
Repairs (7.5%)__________________$8,865
Vacancy and Collections (5%)________$5,910
Insurance_____________________$4,300
Electricity_____________________$1,150
Scavenger_____________________$3,000
Water________________________$3,000
Landscaping & Snow Removal_______$1,800
Property Management (5%)________$5,910
Pest Control___________________$1,200
Advertising______________________$600
Miscellaneous_____________________$600
=======================================
Total Expenses: $44,755

Based on my estimates, the expenses are running
at about 38% of gross rental income or $44,755.
This will give us a net operating income of $73,415.
When we divide the Net Operating Income by the asking price of $800,000,
we find that we have a cap rate of 9.2%.
If we adjust the purchase price down to 92% of asking price, we have an
attractive cap rate of 10%. Also, keep in the mind that the property
is in an ideal location, close to the airport, expressways, and public
transportation.

As you can see, the purchase price and the cap rate are inversely related.
If you want a higher cap rate, then you need to offer less for the property.
After you purchase the property, if you want to increase the cap rate, then
you need to increase the Net Operating Income. This can be done by
raising the rents, increasing non-rental income (i.e. vending machines, coin laundry, etc.),
or by reducing the expenses (improve collections, fix leaky faucets, etc.).

So at a 9% to 10% cap rate, I definitely think this property warrants further investigation.
As a buyer’s broker, I can assist you with purchasing this property or any
other multi-family property that is listed on the Chicago MLS. I am licensed to sell
real estate in the state of Illinois. Just send me your search parameters and I can
send you properties that meet your acquisition criteria. For more information, please
send an e-mail to mark@markkillion.com.

Until the next time,

Mark Killion
Kale Realty
542 W. Roosevelt Rd.
Chicago, IL 60607

Send me a note!

Visit me online: www.773property.com

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Chicago Multi-Family Property – 3500 S. Artesian

Hello to all my blog readers out there. Today I want to take a look at a
Chicago Multi-Family property that is currently on the market. This
property is near 35th and Western. It is listed by David Padgurskis, Showtime Realty.

I think that this property would make a nice addition to your portfolio.
But, we won’t know for sure until we run the numbers.
This 21 unit property is listed at $649,000. Each unit has 2 bedrooms and 1 bathroom.
It has been on the market for almost 9 months. The gross scheduled income is $126,600.
Let’s take a look at our key metrics:

Asking Price: $649,000
Gross Rent Income (GRI): $126,600
Gross Rent Multiplier (GRM): 5.13
Net Operating Income (NOI): $77,056
Cap Rate: 11.87%
Number of Units: 21
Price per unit: $30,905
Price per square foot: $30.23
Year Built: 1910

Expenses

Taxes________________________$9,335
Repairs (7.5%)__________________$9,495
Vacancy and Collections (5%)________$6,330
Insurance_____________________$5,233
Electricity_____________________$1,183
Scavenger_____________________$1,367
Water________________________$6,071
Landscaping & Snow Removal_______$1,800
Property Management (5%)________$6,330
Pest Control___________________$1,200
Advertising______________________$600
Miscellaneous_____________________$600
=======================================
Total Expenses: $49,544

Based on my estimates, the expenses are running
at about 39% of gross rental income or $49,544.
This will give us a net operating income of $77,056.
When we divide the Net Operating Income by the asking price of $649,000,
we find that we have a cap rate of 11.87%.
If we adjust the purchase price down to an even $640,000 we have an
attractive cap rate of 12%!

As you can see, the purchase price and the cap rate are inversely related.
If you want a higher cap rate, then you need to offer less for the property.
After you purchase the property, if you want to increase the cap rate, then
you need to increase the Net Operating Income. This can be done by
raising the rents, increasing non-rental income (i.e. vending machines, coin laundry, etc.),
or by reducing the expenses (improve collections, fix leaky faucets, etc.).

Another thing that makes this deal look interesting is that the owner is willing
to “hold paper”. So you might be able to get this one financed with only 15% down.
This will definitely increase your cash-on-cash returns.

So at a 12% cap rate, I definitely think this property warrants further investigation.
As a buyer’s broker, I can assist you with purchasing this property or any
other multi-family property that is listed on the Chicago MLS. I am licensed to sell
real estate in the state of Illinois. Just send me your search parameters and I can
send you properties that meet your acquisition criteria.

Until the next time,

Mark Killion
Real Estate Broker
Century 21 Affiliated
5200 S. Harper Ave
Chicago, IL 60615
24 Hour Voice Mail: 312-242-1822
Send me a note!

Visit me online: www.773property.com

Hello to all my blog readers out there. Today I want to
take a look at investing in condos. This is an interesting
niche for investors. There is an interesting dynamic happening in some Chicago neighborhoods.

Condo prices are relatively low and rental prices are relatively high.

This creates an excellent opportunity for investors.
Today I will look at the Bronzeville neighborhood in detail.
Bronzeville is one of those neighborhoods that has great
investment potential because of this very dynamic.

I have helped investors purchase condos in this neighborhood.
I have also helped many tenants rent condos in this neighborhood. So the next logical step for my business is to provide a complete solution for investors. I will help with the purchase of a condo and provide assistance all the way through finding a qualified tenant to move in. This is a turn-key, A to Z, solution.

So today we will look at two case studies.
We will also answer an interesting question:

Which is more profitable: a 2 bedroom condo or a 3 bedroom condo?
The answer may surprise you.

CASE STUDY 1

A three bedroom two bath condo was recently purchased in Bronzeville near King Drive and Oakwood. It is 1,475 square feet. It has hardwood floors, a fireplace, and it comes with a parking space.

It was purchased for $67,000 and it was in move-in condition. The property was purchased by a cash buyer.
This is a typical purchase price for this type of
condo.

Analysis:

The median rent for an updated 3bed/2bath condo in Bronzeville
is about $1,500 per month. If your unit is in great condition
like our subject property, I can get it rented in about 30 days.
You should have low turnover because Bronzeville is in demand by renters.

At $1,500 per month, the gross scheduled income is $18,000 per year. Next, we will look at expenses so that we can figure out our Net Operating Income (NOI).

Expenses:

Taxes: $3,666
Assessments: $1,800
Water: $600
Insurance: $1,000
Vacancy: $900
Repairs: $900
Prop Mgmt: $1,440
———————–

Our expenses total $10,306.
This gives us a Net Operating Income of $7,694.
Here are our key metrics for this investment:

Net Operating Income: $7,694
Cap Rate: 11.5%
Years to Break even: 8.71
Monthly Cash Flow: $641.17
NOI/square foot: $5.22
Price per square foot: $45.42

So, we see that this is a pretty good investment. Our
capitalization rate (cap rate) is 11.5%.
For Chicago investments, most investors are looking for
cap rates between 10% and 12%. A cap rate in this range
is considered a good one. Since there is no loan involved,
your cap rate in this case will equal your return on investment.
This investment will pay for itself in just under 9 years.
You may realize additional gains if the home values appreciate
during this time period.

==============================================================
Now let’s look at our 2nd case study which is a 2 bed/2 bath condo in the same neighborhood.

CASE STUDY 2

A 2bed/2bath condo was recently purchased near 48th and Vincennes.
It is a 950 square foot condo. It was purchased for $42,000.
This one was also purchased by a cash buyer.

This was rented about a month later for $1,250 per month.
The gross scheduled income is $15,000 per year. Next, we will look at expenses so that we can figure out
our Net Operating Income (NOI).

Expenses:

Taxes: $2,028
Assessments: $1,5480
Water: $400
Insurance: $1,000
Vacancy: $750
Repairs: $750
Prop Mgmt: $1,200
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Our expenses total $7,676.
This gives us a Net Operating Income of $7,324.

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Side bar:

At this point in my analysis, I thought to myself
“Wow Mark! what a stunning revelation”

A two bedroom condo yielded a NOI of $7,324 which is only $370 less
than what a 3 bedroom condo yielded.
But, the purchase price was $25,000 less!
So all you Bronzeville Chicago condo investors out there, I just revealed something quite valuable. You will get a better return on your investment by purchasing two bedroom condos instead of three bedroom condos.

But, back to my analysis.
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Here are our key metrics for our 2bed/2bath investment condo:

Net Operating Income: $7,324
Cap Rate: 17.4%
Years to Break even: 5.73
Monthly Cash Flow: $610.33
NOI/square foot: $7.71
Price per square foot: $44.21

Look at the yields for our 2bed/2bath investment condo.
At a cap rate of 17.4%, this is an outstanding investment.
This condo will pay for itself in less than 6 years.

CONCLUSION:

Investing in condo rentals can be very profitable.
Our 3bed/2bath purchase gave us a respectable yield of 11.5%.
Our 2bed/2bath purchase knocked it out the park with a yield of 17.4%.
Imagine if you added 5 of these condos to your portfolio.
You would have a net monthly cash flow of about $3,000
(assuming you paid cash). Not bad at all!

Remember, I can offer you a turn key solution, from purchase to rental to positive cash flow!

Until the next time,

Mark Killion
Real Estate Broker
Century 21 Affiliated
5200 S. Harper Ave
Chicago, IL 60615
24 Hour Voice Mail: 312-242-1822
Send me a note!

Visit me online: www.773property.com