I'm simply obsessed with Chicago

[InlandEmpire]

I'd imagine Chicago is warming in general.... kind of like how it doesn't rain in Seattle for weeks on end anymore.

Another advantage that Chicago and the midwest in general have over the western third of the country - access to huge volumes of fresh water. Even here in western Washington, some communities cannot built any more housing due to lack of fresh water resources.

[Steely Dan]

20% of the planet's surface freshwater literally at Chicago's doorstep.

I don't know how much it will really move the needle on anything, but at the very least, it's certainly not a liability for the cities of the great lakes.


Source: https://theitalianguest.com/reaching-for-the-sky-skydeck-chicago/

[mhays]

Originally Posted by InlandEmpire

I'd imagine Chicago is warming in general.... kind of like how it doesn't rain in Seattle for weeks on end anymore.

Another advantage that Chicago and the midwest in general have over the western third of the country - access to huge volumes of fresh water. Even here in western Washington, some communities cannot built any more housing due to lack of fresh water resources.

Seattle has always been extremely dry during the summer. Annual rain hasn't changed much. We get less snow than we used to however...often one dusting a year that doesn't last the morning.

[InlandEmpire]

Originally Posted by mhays

Seattle has always been extremely dry during the summer. Annual rain hasn't changed much. We get less snow than we used to however...often one dusting a year that doesn't last the morning.

True - it must just be my perception; when I initially moved to Seattle a couple decades ago I recall endless gray drizzly days in winter/spring - just seems like it's not nearly as constant as it used to be. Maybe I'm just used to it!

Last time I was in Chicago there were some pretty impressive T-storms going on, I personally love that. Wish we had some real weather once in awhile in the PNW.

[destroycreate]

I’m considering buying a condo or apartment in Chicago in the range of $200k-$300k, ideally in one of the better North Side neighborhoods. I could put down about $200K, rent it out, and let it (hopefully) appreciate over the years. The modest passive income would go toward savings, but my bigger motivation is long-term housing security—just knowing I’d always have a place that’s mine if shit really hits the fan economically or hell, AI replaces my job prospects. Call me a nihilist, but between all that and climate change, the future feels bleak at times.

In SoCal we know buying is so expensive—my mortgage here would be 40–70% more than my rent even if I put the same money down on a $600K 1 BDR, so I’m not interested in purchasing locally.

On Reddit, I’ve read plenty of takes that condos in Chicago aren’t great investments and that appreciation is slow, but I’d like to hear from people with real-world experience.

[mhays]

Experience means little when it comes to future appreciation. They could describe what it's like to be a landlord however. Absentee landlording sounds risky to me...you might need to hire a local management company.

Chicago prices might never rise that much. It's easy to build there, and the population pressures aren't huge.

[Steely Dan]

Originally Posted by destroycreate

On Reddit, I’ve read plenty of takes that condos in Chicago aren’t great investments and that appreciation is slow, but I’d like to hear from people with real-world experience.

If history is anything to go by, appreciation will likely be very slow.

Not only does Chicago real estate in general have slow appreciation, but small condos are like the slowest of the slow here. People who bought SFH's in trendy Chicago hoods 10 years ago have done well for themselves, but thats largely because there's so few of them where people want them, but the supply/demand curve for small condos seems to stay in a pretty relative stasis.

I would recommend buying a small condo in Chicago to live in. I would not recommend doing so as any kind of investment, especially because property taxes here are very high relative to home value.

[iheartthed]

It's always crazy when person from big coastal city where "price always go up" tries to extrapolate that onto place where "price not always go up" lol.

[SIGSEGV]

Appreciation for condos is not super high in Chicago and that probably won't change until it is impossible to build/convert more. High interest rates certainly don't help.

There are a number of absentee landlords in my condo building. They seem to do fine as far as I can tell. Supposedly rents are $3k/month for a similar unit to mine (probably around $300k, with probably around $1.5k/month in HOA + property taxes + insurance).

Watch out for HOA and rules against renting, obviously.

[destroycreate]

Originally Posted by iheartthed

It's always crazy when person from big coastal city where "price always go up" tries to extrapolate that onto place where "price not always go up" lol.

Well, nobody wants to buy a place and not at least break even or at worst, see it depreciate. Apologies for being an old millennial who has dreams of not being an eternal renter. I'm being realistic that I know I won't ever see LA styles of appreciation, but again, I can't afford anything here right now.

And yes, I'd work with a property manager if it came to that.

[sentinel]

Originally Posted by destroycreate

Well, nobody wants to buy a place and not at least break even or at worst, see it depreciate. Apologies for being an old millennial who has dreams of not being an eternal renter. I'm being realistic that I know I won't ever see LA styles of appreciation, but again, I can't afford anything here right now.

And yes, I'd work with a property manager if it came to that.

Prices are great, relative to other big cities with lots of comparable inventory.
Definitely buy a 2bed/2bath (which you could find in your price point easily enough, in a neighborhood you want to be in). Once you find one you like, check with the building association to confirm that their bylaws allow renting/subletting, once you want to move onto something else and you still want to keep your place instead of selling it.

[twister244]

I would also add the type of condo you own can also impact how it values over time.....

If you buy an old condo with high HOA fees on the North Side, it's gonna be slow to appreciate. But if you buy a condo in a smaller building with a relatively small HOA in a neighborhood that is on the upswing, then it actually may pencil out a bit in your favor.

I'm experiencing this over in Logan Square where my new construction condo I bought over here is actually showing some modest appreciation compared to where it was at in 2022 when I first purchased it. I would not expect the same had I bought something on LSD in one of those mid-century high rises.

[sentinel]

Originally Posted by Steely Dan

20% of the planet's surface freshwater literally at Chicago's doorstep.

I don't know how much it will really move the needle on anything, but at the very least, it's certainly not a liability for the cities of the great lakes.


Source: https://theitalianguest.com/reaching-for-the-sky-skydeck-chicago/

I think this factors for some people now, absolutely. I think it will be a bigger factor in the future, especially coupled with weather pattern shifts making the Great Lakes region milder, and also when many other parts of the country, specifically in the SE and SW will become year round swamps, and quite difficult for many to live in because of overwhelming weather events (severe droughts, hurricanes, extreme humidity lasting for months, not days or weeks).
The proof is already here, because:
- Winters in Chicago have become increasingly mild since 2019 (the last major “deep freeze” that last for more than 4 days (there were a few really cold days this past January, but not nearly as bad as 2019).
- more significantly, last year, the USDA started recategorizing vegetation hardiness zones, which means that many plants that were previously not able to grow and thrive in the Chicagoland area because of cold winters, are now able to do so because of climate change shifts. That also introduces the opportunity for new invasive species to creep up north as well, unfortunately.

[InlandEmpire]

Originally Posted by destroycreate

Well, nobody wants to buy a place and not at least break even or at worst, see it depreciate. Apologies for being an old millennial who has dreams of not being an eternal renter. I'm being realistic that I know I won't ever see LA styles of appreciation, but again, I can't afford anything here right now.

And yes, I'd work with a property manager if it came to that.

As someone who has owned several single family and condos, I'll tell you - especially in Chicago but even hotter markets....condo appreciation is pretty abysmal compared to SFR. My current condo close to DT Seattle has not really appreciated in the last 5 years.
Another thing to look out for and I found when I was looking at condos there (Lincoln Park, Gold Coast), the price of the condos seem super reasonable but double check that HOA! I see $250k condos there but your HOA is another $1400/mo. Just something to look out for. If one is able to buy the condo in cash and just pay HOA + property tax it's a good deal compared to the coast.

[ardecila]

The HOAs are very high in highrise buildings because those buildings are very expensive to operate and maintain. The lake views are awesome but the pricetag not so much. As other have noted, move a few blocks inland to get the best of both worlds with a condo in a low-rise building and lower HOAs.

[The North One]

I mean yeah, a condo in Chicago sounds like a not so great investment to impulsively jump into. Just considering the basics.

Property taxes are very high and they're not locked in like other states, appreciation is going to be mild and rental income is the same deal, both the city and state are dealing with insane amounts of debt which will start eating into services and none of the leadership has any idea what to do about it.

Also visiting Chicago and actually living in it are two very different things. If you're serious about moving there on a whim I'd say at least rent a place for like a year, try to make friends and see if you even still like it.

[Crawford]

Originally Posted by destroycreate

Well, nobody wants to buy a place and not at least break even or at worst, see it depreciate. Apologies for being an old millennial who has dreams of not being an eternal renter. I'm being realistic that I know I won't ever see LA styles of appreciation, but again, I can't afford anything here right now.

And yes, I'd work with a property manager if it came to that.

What would be the point of buying an investment property in a faraway market?

I doubt you'd lose your shirt, but you likely wouldn't make much money either. Some management company will take a big cut, and you'd have to deal with all the landlord hassles.

My brother-in-law is good friends with some of the partners at CMK Development (built a bunch of glassy condos in early 2000's) and he used to own a bunch of Chicago condos he got at insider pre-construction prices. 235 W. Van Buren was one of the buildings, but there were others, I think in River North or Streeterville. Most ended up kinda like dorms for 20-somethings, and were more trouble than anything, and he ended up selling all. I think a university bought a huge block of condos in one of his buildings.

I guess if you really know what you're doing, and you target your portfolio carefully, it might be good business, but there are way easier ways of making money. Just put it all in a low-cost index fund.

[Crawford]

Also, I'm pretty sure (Chicago formers correct me here) that Chicago family-sized condos in residential hoods generally have much better appreciation than the core city condo boxes for singles/couples.

So something family oriented in, say, Bucktown, or West Lakeview would generally be a better investment than some highrise in the South Loop. A lot of the latter are just held for a few years and then turn over, and have significant monthlies. I'd also feel more comfortable about a young family paying on time than some 24-yo dude.

[Steely Dan]

Originally Posted by Crawford

Just put it all in a low-cost index fund.

This x1,000,000.

I bought my first real estate back in 2007, a small 500 SF studio condo in Marina City for $165K.

Then 2008 happened, and I was underwater on it for ages.

After a LONG slow slog of being a forced landlord, I was finally able to unload it on the plus side for $195K in 2023 (and that was after a $12K bath reno).

16 years and only $30K of overall appreciation (+18%).


If only I had stuck that $35K down payment in an index fund back in 2007, and continued renting for my bachelorhood!

Oh well.

Originally Posted by Crawford

Also, I'm pretty sure (Chicago formers correct me here) that Chicago family-sized condos in residential hoods generally have much better appreciation than the core city condo boxes for singles/couples.

That has certainly been my experience. Reference the above with our current family-sized 3-flat condo in Lincoln Square (3 bed 3 bath, 2,300 SF). We bought it 8 years ago, and we're currently up 53% in value (which is solid for slow growth Chicago). SFH's in trendy nabes have typically done even better over that time frame (every family wants one, and there ain't nearly enough to go 'round).

[mhays]

The big variables I'd look at are:

--Are local rents substantially higher than the condo payments + dues + taxes + insurance -- by enough of a margin to also cover the management company? Will this be revenue positive or negative, at least before the mortgage is paid off?

--Will appreciation be likely to outpace inflation at least? You're betting not only the money you put in but the entire value of the property. (Vs. the non-leveraged bet by simply investing the money in mutual funds...that would have a lower upside but probably beat inflation if you leave it in a while.)

--Related to that, is the neighborhood going to substantially improve, raising your property values? An area that's already gentrified might have little upside. Look for signs that the area is likely to be next to gentrify, like being on the fringe of the prosperous areas, seeing lots of new investment, etc.

--Are you sure you want to keep the property long-term? Selling costs a lot of money, starting with 6% for realtor fees. It only pays off when you hold.

--Will the property need a lot of additional investment, whether by you or imposed on you by a condo board? Older, cheaper condos might be more likely to have current and/or upcoming issues.

--Consider the risk of renter damage, vacant periods, or non-payment. What are the local laws? Some cities overdo renter protections vs. landlord protections.