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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High Cap Rate Chicago – 7 property package

Calling all investors!
This package is a money maker!
7 properties, 9 units total.
The properties are rented to Section 8 voucher holders.
Guaranteed Income!
Asking $270K with annual NET income of $56K!
Contact me for more info!

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

EQUAL HOUSING OPPORTUNITY

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

EQUAL HOUSING OPPORTUNITY

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

EQUAL HOUSING OPPORTUNITY

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

Chicago Multi-Family Apartment Building Analysis 2012

Let’s take a quick look at the sales for multi-family
properties in 2012. Multi-family properties have 5 or
more units. The demand for this property type has increased
over the last few years.
Rental demand is strong in Chicago and rents are increasing
about 3% to 5% annually in many areas.

This analysis is based on multi-family sales for the period
Jan 1st 2012 through Dec 20th 2012.

Here are some key metrics:

* Total properties sold: 233

* Average Selling Price: $479,480

* Average # of Units per property: 8.66

* Average Cap Rate: 10.26%

* Average Cost Per Unit: $55,367

* Average Gross Rent Multiplier: About 6

Hopefully, you found this information useful. I believe that this sector will
experience steady growth for at least the next 5 years.

If you have any questions about buying or selling multi-family apartment buildings
in Chicago, please send an e-mail to mark@markkillion.com

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

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