Chicago Investment Property – S Indiana

Today I’m analyzing a 3 bedroom Chicago investment property. Take a look at my analysis of this property and let me know if you agree.  You can also send me an email with additional questions or to learn more about this property.

CHICAGO INVESTMENT PROPERTY OVERVIEW

  • Market: Metro Chicago Area
  • Listing Price: $25,000Chicago IL S Indiana
  • Rehab Estimate: $5,000
  • Address: S Indiana, Chicago, IL
  • Beds / Baths / Sq Ft: 3 beds / 1 bath / 1,473 sq ft
  • Property Description: Property is currently rented out on a  month to month basis for $1,050.00. Seller is ready to sell. Being Sold As Is.

NEIGHBORHOOD GRADE: D

  • Median Income: $37,472
  • Poverty Rate: 29%
  • Unemployment Rate: 24%
  • % with Bachelor’s Degree: 17%
  • % of Renters: 43%

The zip code 60628 is below the average for the Chicago metro area on key economic factors including median annual income and the poverty rate.

RENTAL PRICE EXPECTATIONS: $1,050/MO

The vast majority of rental properties in this area are 3 bedrooms. These homes generally rent for $1,200-1,400 per month with a median of $1,250.  This investment property is slightly larger than the average 1,400 sq ft home in the area, we have assumed rent of $1,050 per month. 

$1,050/mo is fairly affordable, when compared to the area’s median income which is 35.7x the monthly rent. We have assumed a monthly rent equal to the current tenancy and the average terms for the area.

ANNUAL EXPENSE EXPECTATIONS: $7,820 (62% OF GROSS RENT)

  • Property Taxes: $1,782
  • Insurance: $1,050
  • Property Management: $1,838 (assumes 1.75 x monthly rent)
  • Vacancy: $1,050
  • Maintenance: $1,050
  • Other: $1,050

The expenses for this property are generally in-line with industry standards with the exception of property taxes, which are below the typical 2x rent.  Since this is a D – level neighborhood I have a assumed one month of vacancy every 12 months and one month of cushion for unexpected expenses.

Property management is set at ~ 1.75 monthly rent.  This factors in regular monthly management fees along with various other new tenant and lease renewal fees that companies may charge.

FINANCIAL SUMMARY

At Listing Price

  • Purchase Price: $25,000
  • Rehab:$5,000
  • Closing Costs: $750
  • Total Investment: $30,750
  • Financed Amount: n/a
  • Cash Investment: $30,750
  • Annual Revenue: $12,600
  • Annual Expenses: $7,820
  • Interest: n/a
  • Net Income: $4,781
  • Annual Return: 16%
  • Annual Appreciation: $250
  • Total Return Potential: 16%
At Recommended Price

  • Purchase Price: $21,500
  • Rehab: $5,000
  • Closing Costs: $645
  • Total Investment: $27,145
  • Financed Amount: n/a
  • Cash Investment: $27,145
  • Annual Revenue: $12,600
  • Annual Expenses: $7,820
  • Interest: n/a
  • Net Income: $4,781
  • Annual Return: 18%
  • Annual Appreciation: $250
  • Total Return Potential: 19%

MY RECOMMENDATION

I have analyzed this Chicago investment property assuming a financed purchase.  With a neighborhood grade of D , I would normally target a minimum annual return of 15% with an additional 3% margin of safety.  I think 1% annual appreciation of ~ $250 is a reasonable expectation.  Here the listing price of $25,000 is fairly attractive although I would start with an offer of $21,500 to boost the annual return to 18% before adding appreciation.

Note that this property will also benefit significantly from deducting annual depreciation of $952/yr.

Want to place an offer or learn more about this property?

 

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