Chicago Cap Rate – Heat Map

Hello to all my blog readers out there!

Here is a heat map of Chicago Cap Rates by neighborhood.

Neighborhoods with a darker shade, have higher cap rates.

If a neighborhood has a lighter shade, it means the cap rate is lower in that area.

If a neighborhood has no shade at all, it means there were no multi-family sales for the time period.

This sales data was taken from the Multiple Listing system.

The median cap rate in Chicago is about 6.8%.

I spent a lot of time putting this heat map together,

so I hope you find this information useful.

If you have any questions, please 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

Office: 312-939-5253

Visit me online today: www.buybronzeville.com

Equal Housing Opportunity

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

EQUAL HOUSING OPPORTUNITY

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

EQUAL HOUSING OPPORTUNITY

SINGLE FAMILY HOMES:

Bronzeville Home

There are currently 54 Single Family Homes on the market in Bronzeville Chicago.
The median asking price is $358,000.
The asking price ranges from $50,000 to $599,000.
Out of these 54 properties, 31 are already under contract.
“Under contract” means that the owner has already accepted a written offer.
The median asking price of the properties under contract is $389,900.

To view available listings for Single Family Homes in Bronzeville, click here.

CONDOS:

Bronzeville Condo

There are currently 152 condos on the market in Bronzeville Chicago.
The median asking price is $100,000.
The asking price ranges from $24,900 to $495,000.
Out of these 152 properties, 31 are already under contract.
The median asking price of the properties under contract is also $100,000.

To view available listings for condos in Bronzeville, click here.

TWO TO FOUR UNITS:

Bronzeville 2 To 4 Unit

There are currently 30 “Two to Four Unit” properties on the market in Bronzeville Chicago.
The median asking price is $249,900.
The asking price ranges from $99,000 to $575,000.
Out of these 30 properties, 12 are already under contract.
The median asking price of the properties under contract is also $194,000.

To view available listings for “Two to Four Unit” properties in Bronzeville, click here.

MULTI-FAMILY (5+ Units):

Bronzeville Multi-Family

There are currently 8 “Multi-Family (5+ Unit)” properties on the market
in Bronzeville Chicago.
The median asking price is $770,000.
The asking price ranges from $250,000 to $1,899,999.
Out of these 8 properties, 2 are already under contract.
The median asking price of the properties under contract is also $250,000.

To view available listings for “Multi-Family (5+ Unit)” properties in Bronzeville, click here.

VACANT LAND:

There are currently 35 Vacant Lots on the market in Bronzeville Chicago.
The median asking price is $65,000.
The asking price ranges from $15,000 to $1,475,000.
Out of these 35 properties, 5 are already under contract.
The median asking price of the properties under contract is also $45,900.
To view available listings for Vacant Land in Bronzeville, click here.

RENTALS:

Bronzeville Rental

There are currently 44 Rentals on the market in Bronzeville Chicago.
The median asking price for a rental is $1,450.
The asking price ranges from $675 to $3,500.
Out of these 44 Rentals, 7 are already under contract.
The median asking price of the rentals under contract is also $1,150.

To view available listings for Bronzeville rentals, click here.

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 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

Shops and Lofts at 47th – Bronzeville

More building permits were given out in October 2013 than in any other month during the
past five years! This is a great sign for the real estate market. Hopefully this
momentum will carry over into 2014.

This spike in building permits is being driven by the demand for multi-family housing.
Permits for multifamily units surged 15 percent in October 2013. I suspect that the
multi-family or apartment building segment will be the fastest growing segment of real
estate for the next several years.

It is also interesting to note that according to the respected Case-Schiller index,
Chicago Home prices are also up. The year over year change in single family home prices
in Chicago is almost 8%.

So things are looking up for the Chicago Real Estate market!
If you have any questions about the Chicago Real Estate market,
please feel free to 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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