Should I Rent or Buy in Downtown Chicago?

Are you moving and wondering whether to rent or buy a downtown Chicago apartment?  Our clients often ask us to walk them through the process of renting versus buying.

Chicago Magazine’s Deal Estate reporter, Dennis Rodkin, was recently asked this same question and turned to Luxury Living Chicago’s managing broker, Aaron Galvin, for an expert opinion (see Dennis’ video at the end of this post).

In answering this question, we always advise our clients to look at this decision qualitatively and quantitatively.

BUYING

Lets say you want to buy a $275,000 condo and you have $25,000 you are able to put down.

• The approximate cost to borrow $250,000 for a condo is $1200 per month (depends on interest rate, length of loan and whether the property qualifies for FHA financing).
• Factor in $300 for assessments and $300 per month in taxes.
• Add on any miscellaneous fees and utilities.

The result – a monthly cost of around $2000 to purchase a condo.

RENTING

What does $2000 per month in rent get you in three of Chicago’s mot popular neighborhoods?

River North:  $2000 will allow for an 800-850 sq ft one bedroom in a full amenity building.  You will have all the amenities of a full service building including 24 hour door and maintenance service, on site management, workout facility and pool.  The level of finish in the apartment will be very nice but not brand new.  Parking will not be included.

Lakeview/Lincoln Park:  For $2000, you can rent a 1000 sq ft 2 bedroom in a 4 flat building in a great neighborhood.  You will lose the amenities you would find in a luxury highrise building but you get an extra room and more of a neighborhood feel.  You should be able get upscale finishes including hardwood floors, granite counter tops and stainless steel appliances, as well as two updated bathrooms.  You can park on the street with a permit.

Lincoln Square:  As you move further north or south from the epicenter of the city, $2000 per month in rent allows for more space.  $2000 in Lincoln Square should pay for a highly upgraded 3 BR around 1800 square feet.  The finishes throughout the unit will be top notch and you should even have some outdoor space such as a large deck or backyard.  You may even be lucky enough to find a single family home or certainly a duplex up or down.  Garage parking or a spot in the back will be included.  Some Chicagoans prefer to be a bit away form the hustle and bustle, but if you work downtown, the commute can be taxing.

SO WHAT SHOULD YOU DO?

There are so many factors that go into deciding if a condo is the right buy.  While we can’t predict what’s going to happen to the housing market, here are two questions we always ask people when deciding to rent or buy:

1.  How familiar are you with the city/neighborhoods?  If you have lived in an area before and know you love it, it makes the buying decision much easier.  You can have the nicest place in the city, but if you don’t love what you see when you step outside your door, you will not be happy in the long run.  If you are new to the city or trying out a new neighborhood, it’s always best to rent first.

2.  Where do you see yourself in one year, three years and five years?  If a client cannot answer those questions, they are not ready to buy.  Buying is a long term commitment and there is a high likelihood the Chicago condo market will not turn around in the next 3-5 years.  The only properties breaking ground right now are rental buildings.   Condos are not being built because very few people want to buy them.

Our feeling is that the market is not going to be much different one year from now or even two years forward.  There is little incentive to buy right now and be tied down to a property unless you have long term plans of becoming a landlord.  Owning real estate is still a great plan long term, but you have to be in it for the long haul.

Rent right now and keep your eye on the market.  Renting allows the flexibility to move if needed, but the security to know you aren’t committed long term.

Downtown Chicago Apartment Hunting During the Winter

Photo Courtesy of Chicago Tribune

The early winter months are filled with holiday shopping, family vacations and accepting the fact that you can’t wear shorts anymore.  If you have to move in the middle of the Chicago winter, you know it’s a difficult time to find a great apartment to live.   You would think there are exceptional deals but the winter of 2011-2012 is proving a bit more difficult.  Here are a few reasons why the Chicago apartment search in November and December this year is a tough task:

1.     Apartment prices are still high.  If less people are looking, why are prices so high?  Landlords and property management companies still think they can command summer prices because summer wasn’t that long ago.  Their buildings are still very occupied and with few people moving at this time of year, they remain full throughout the beginning of the winter.   It’s after January that you’ll start to see some good move-in incentives.  This is because people start to move after the first of the year, causing occupancy to rise and the specials to kick in.

2.     Anybody looking in the dead of winter, has to move.  Most people that move in the winter months are coming to downtown Chicago for a new job or school.  They are being relocated and must find housing quick.  This is another reason larger management companies can keep prices high.  They have a captive audience.  Note that if this section applies to you and you do have to move, Luxury Living Chicago is very much in tune with the best options available and can assist in helping you find a great apartment at the best value for this season.

3.     Availability is low.  There just aren’t a lot of apartments available this time of year.  Most of the good ones went at the end of the fall leasing season and current tenants are less likely to move if they don’t have to.  Larger luxury Chicago apartment buildings are willing to do shorter term lease renewals that allow tenants to extend their lease into the busy Spring/Summer leasing season.

4.     Many of the newest downtown luxury Chicago apartment buildings are for sale.  This is a unique situation also contributing to high prices this year.  Many of the newest buildings are for sale or under contract and they have promised investors a certain rent per unit.  If they started to give mass concessions and lowering rents, investors may back out and the buildings won’t sell.

While I don’t expect the newest luxury buildings will be giving away the house come late winter/early spring, I can pretty much guarantee it will be better pricing than what you see right now.  Hang in there.  Make it through winter and look forward to renting that brand new luxury apartment this spring.

Why Square Footage Should Not Be Top Priority in Your Downtown Chicago Apartment Search

What is the square footage?

It’s one of the most common questions people ask when inquiring about an advertised apartment. People like to hear a number attached to the space they are considering. Moreover, everyone has a number in mind that is “about what they are looking for.” Whether you are moving from a studio in Lincoln Park or just sold your home in the suburbs, there is often a per-conceived notion of what is enough space.

My suggestion: don’t worry about the square footage. Rather, focus on the layout of the unit and what you need/want to put in the apartment. This is why I always ask at least three questions to help narrow down a search:

1. Who will be living in the apartment? This question helps me understand what kind of storage space you will need. The reality is that couples and roommates have more stuff than singles. Closet space becomes important. Also, many of the newer buildings offer lofted second bedroom options. Developers did this so they could market properties as two bedrooms. These simply do not work for roommates or couples with children. While the lofts are cool and trendy, they may not always be the right fit.

2. What furniture do you have? If you have a gorgeous 12 seat dining room table that you “can’t possibly live without,” then downtown Chicago high rise living is probably not for you. However, there are plenty of apartments that can accommodate a small bistro table or provide built in breakfast bars with ample room for seating so you can still entertain with the best of them.

3. How do you plan to use your living space? This can be a tricky question but people tend to have an idea of how they want their apartment to function. For example, if you are looking for a one bedroom plus den, chances are you, or someone in the apartment needs a home office set up. There are 1,000 square foot one bedroom plus den layouts where the den is simply a nook off the living space with a slab of granite serving as a desk, versus an 850 square foot one bedroom plus den that has a dedicated small room perfect for providing office privacy. But if you ruled out the second one based on square footage alone without every seeing it, you may have just passed on the perfect place for your needs.

For the two bedroom client, the second bedroom is almost always for “guests.” Downtown Chicago luxury two bedroom rentals cost about $500 more per month than one bedrooms. The common space is often times very comparable. So for the ten nights per year that you may have guests, you are spending and extra $6000! I’m sure your in-laws would be more than happy to stay at The Elysian or Peninsula, spa service included, for that price. Not to mention, most buildings offer on site guest suite accommodations; a fully furnished apartment for around $150-$200 per night. If you can, cut the second bedroom.

I’m not saying square footage is not important in selecting your apartment home. But there are many other factors to consider before ruling out a property based on that number. Square footage alone does not dictate how your apartment will serve your lifestyle. Luxury Living Chicago will be sure to ask you those questions to find the perfect place to call home.

The Importance of Updated Pricing

It happens all the time.  I’ll speak with a client that says they have seen the same property advertised multiple times on Craigslist with varying prices.  This occurs for a few reasons:

The Bait & Switch – Bad brokers/apartment locators often pull a bait and switch with their advertising.  Clients will see a pretty ad for an apartment for a very low price and call the broker about the specific property only to find out that the unit has been “rented,” but there are similar units available at a much higher price point.  This is very bad business and a waste of time for everyone.  If it looks too good to be true, it probably is.

Lack of Commitment – Often times, brokers/apartment locators will get lazy and forget or put off changing the pricing of their advertisements.  Pricing and availability changes on a daily basis, sometimes hourly in the busy season, and everyone needs to do their homework to best service their clients.

Outdated Pricing – This is different than a broker/apartment locator misleading the consumer or not updating their pricing.  Sometimes pricing is wrong because partner buildings and apartment management companies do not regularly share their latest pricing and availability.  A key component for the apartment rental buildings to understand is the importance of real time pricing for those helping to bring qualified prospective tenants to their buildings.

I recently met with David Vivero, CEO of RentJuice, a new online marketing tool available to apartment management companies that creates real-time hot sheets sent to marketing partners and apartment locators.  I think this tool and similar products, could be very effective in the downtown Chicago apartment rental arena, as it would clear up pricing confusion and make the process of renting an apartment more efficient.  Efficiency is what Luxury Living Chicago is all about.

If a leasing management company is not ready for such a tool, a simple, regularly distributed email with updated pricing goes a long way!

How Do Locators Get Paid? And What Makes a Good Locator?

A lot of people ask how locators get paid. There is a misconception that if you work with a locator or apartment finder, you wont get a good deal because the property or landlord needs to pay out a commission.

This is not the case. And if you find a good locator, you even have a chance of paying a little less in upfront fees. A good locator will have positive relationships with properties and landlords and might be able to work a better deal.

Typically a locator will earn a one month’s rent commission for their services. This is paid by the property or landlord.

A Chicago apartment finder should never charge a client for their services. It is 100% free to the consumer.

How can you tell if a locator is worth the commission they make? It’s all about your initial conversation.

Do they ask you any questions about your search outside of your move date? Or do they simply schedule a showing and figure they will get the information when they meet you.

The types of questions a locator asks are very indicative of the service they will offer. A locator that asks extensively about your search criteria, price range and motivation for moving will probably have several properties lined up to show you that match exactly what you are looking for.

A locator that asks nothing except the time you are available to tour will end up showing you what they want you to see, not what you want to rent.

Don’t be hesitant to work with an apartment locator, but be selective about the type of locator you are touring with.

The ABC’s of Being a Professional Apartment Locator

This past weekend I received emails from the leasing staff at two different properties with the same theme. The emails were addressing recent issues with the lack of professionalism amongst the apartment locating community. I know these are not the only two buildings currently facing these difficulties.

Unfortunately, in the leasing industry, there are those that bring a bad name to the profession. I’ve been in this business for six years and have seen it all. When I first started out, there wasn’t nearly as much competition as there is now. It seems a new locating company starts up every day. This means there are a lot of newbies entering into the profession who don’t always know the proper etiquette and protocol for working with a property’s leasing staff. They are not always to blame, there are plenty of seasoned locators who have gotten complacent as well.

The number one issue the properties we partner with face is the constantly changing pricing and availability of their units. This can cause inaccurate and misleading advertising from the outside locating companies, thus causing general confusion amongst consumers. Consumers will talk to several different locating companies about the same unit and each will have a different price point.

The reality is, the building sets the pricing. Whatever the property’s leasing staff has on file, is what is available. Outside brokers and agents should regularly read the property hot sheets and communicate with the in-house leasing staff to obtain the most current pricing and availability. In turn, the property’s leasing staff should regularly send out hot sheets to keep the industry as up to date as possible.

Another hardship for a property’s leasing staff is that locating companies will not schedule an appointment with the property leasing staff and will just show up with their clients unannounced. This puts the leasing staff in a very bad position. If they don’t accommodate the locating company and their client, it could reflect poorly on the building. It’s always wise for a locating company to schedule an appointment with the property leasing staff. Providing detailed information on the client prior to the appointment is helpful as well as it will allow the in-house leasing staff to be fully prepared for the appointment with pricing and availability specific to the client’s needs.

In turn it is always helpful for the in-house leasing staff to answer phone and email showing requests by locating companies. This way there is no confusion and will limit the amount of locating traffic stopping by and trying to squeeze into the schedule.

And if a locator is not going to make the appointment they have scheduled – they should always call to cancel.

Dress professionally too! No one was ever at fault for dressing nicely.

Chicago Spring Apartment Rental Pricing

Spring has arrived in Chicago. With the change in season comes a change in apartment pricing.

The downtown Chicago luxury rental properties are moving the last of their winter inventory, offering just a few deals on a few units in an effort to ramp up for the Spring/Summer rental season.

What this means for the person currently searching for an apartment for an April thru May move date – jump on it! What you see now won’t be there in a week (or even in a few days).

If you see your dream apartment now – rent it!

For example, one of the newest properties in River North has been offering convertible apartments for $1475. This week, prices for those same units have jumped up to $1660.

Another popular property in Lakeshore East has been offering all one bedrooms for a flat rate price of $1495. Those will be going up to $1600 by the end of the month.

At Luxury Living Chicago we strive to make our clients feel confident in selecting an apartment.

Search our inventory of luxury apartments today and take advantage of the last opportunity to rent that amazing convertible apartment for $1295 instead of $1450.

Why Renting To Own Isn’t Always the Best Option

Many of our clients ask about “rent to own.” It sounds like a great deal but the reality is that the current real estate market doesn’t support a “rent to own” option.

Here’s why: Let’s say you rented a place for $2000 per month and negotiated with the landlord a 25% “rent to own” credit. (That is, at the end of the lease, you would get 25% of your rent back towards the purchase of that particular condo.) After one year, you would have “earned” $6,000 “rent to own credit.”

That credit is nothing when you consider that a typical luxury one bedroom Chicago condo sells for at least $300,000.

Plus, when you “rent to own” you often establish the purchase price at the start of the lease, not when the year is up. Things can change in the year and the value of property could drop below the established purchase price.

Assuming you want to purchase the property, you would be better off negotiating the price after your lease is up. In fact, most condos are selling at 15-20% lower than two years ago.

If you have been a quality tenant, paid your rent on time and been easy to work with, the landlord/owner is going to be more than happy to sell you their condo rather than hire a Realtor, market the property and deal with showings.

Bottom line, lease what you want to rent and buy what you want to buy. The real estate market is just too volatile right now for “rent to own.”