Chicago Investment Property – S Yale

Today I’m analyzing a 5 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: $29,500Chicago investment property S Yale
  • Rehab Estimate: $8,000
  • Address: S Yale Ave, Chicago, IL
  • Beds / Baths / Sq Ft: 5 beds / 1 bath / 1,800 sq ft
  • Property Description: Beautiful home on a large, fenced lot. 5 spacious bedrooms, great kitchen with lots of cabinets and space for a table, bright living room and dining room with classic hardwood floors and high ceilings. Full, unfinished basement provides extra living space or extra storage. Currently rented month-to-month and tenant is willing to stay or go. Conveniently located near food, shopping, schools and the highway. Priced to sell quickly..

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: $1,400/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 substantially larger than the average 1,400 sq ft home in the area, we have assumed rent of $1,400 per month. 

$1,400/mo is at the high end of affordability when compared to the area’s median income which is 26.8x the monthly rent. We have assumed a monthly rent based on square footage of the property and the number of bedrooms(5) as well as the average terms for the area.

ANNUAL EXPENSE EXPECTATIONS: $9,571 (57% OF GROSS RENT)

  • Property Taxes: $1,521
  • Insurance: $1,400
  • Property Management: $2,450 (assumes 1.75 x monthly rent)
  • Vacancy: $1,400
  • Maintenance: $1,400
  • Other: $1,400

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: $29,500
  • Rehab:$8,000
  • Closing Costs: $885
  • Total Investment: $38,385
  • Financed Amount: n/a
  • Cash Investment: $38,385
  • Annual Revenue: $16,800
  • Annual Expenses: $9,571
  • Interest: n/a
  • Net Income: $7,229
  • Annual Return: 19%
  • Annual Appreciation: $295
  • Total Return Potential: 20%
At Recommended Price

  • Purchase Price: $25,000
  • Rehab: $8,000
  • Closing Costs: $750
  • Total Investment: $33,750
  • Financed Amount: n/a
  • Cash Investment: $33,750
  • Annual Revenue: $16,800
  • Annual Expenses: $9,571
  • Interest: n/a
  • Net Income: $7,229
  • Annual Return: 21%
  • Annual Appreciation: $295
  • Total Return Potential: 22%

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 ~ $295 is a reasonable expectation.  Here the listing price of $29,500 is fairly attractive although I would start with an offer of $25,000 to boost the annual return to 21% before adding appreciation.

Note that this property will also benefit significantly from deducting annual depreciation of $1,184/yr.

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

 

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