According to Red Eye Chicago, landlords in my neck of the woods are doing quite well. I’ve been thinking about buying a new home in the city. I figure it’s the perfect time to buy, considering how great home prices are right now. But after seeing the following statistics, I am also thinking I might want to buy a property to rent out. There’s a lot to consider, but I’ve put together the following strategy guide to keep me motivated and on-track.
Chicago’s average rent prices for a 2 bedroom apartment (according to Red Eye Chicago)
- Lincoln Park: $1,660 – $3,000
- Lakeview/Wrigleyville: $1,300 – $3,000
- Wicker Park/Bucktown: $1,250 – $2,600
- South Loop: $1,800 – $3,200
- River North/Gold Coast: $2,000 – $4,000
- Lincoln Square/Ravenswood: $1,000 – $1,800
- Logan Square: $900 – $1600
- Bronzeville: $800 – $2,000
- Uptown/Sheridan Park: $950 – $2,000
- Hyde Park: $850 – $2,100
Rents are incredible right now, and it seems to me that if I find the right rental property – in the right neighborhood – I should be able to make some money. But, is the money worth the time and labor commitment? I think so, but let’s break down exactly what I’ll need to acquire and do before I can rent out a unit.
- Clean the unit; and make any necessary repairs/updates.
- Read up on landlord/tenant laws, and figure out if I want to make things like renters insurance mandatory or voluntary.
- Either hire a property manager, or generate my own rental agreement, application, etc.
- Decide how much I’m going to ask for rent
Am I going to manage this rental property myself, or hire someone else to do it? Paying 6-10% off the top seems expensive, but will it be worth it?
How much am I going to charge for rent? Do I want to ask top dollar from the start, or come in lower and try to rent it quickly to my choice of tenant?
How much are maintenance and repairs going to cost me? Do I want to put in any upgrades to make the property more attractive to potential renters?
I can’t answer these questions until I’ve narrowed down my property by choosing a neighborhood and, eventually, a building, but I can speculate. I’m definitely leaning toward managing my rental property myself, at least in the beginning. Down the road, if I find that the rental property requires more time than I can afford, I’ll look into hiring a manager.
Rent isn’t so easy to determine. I’m not even sure what neighborhood I’m going to pick; although, I’m leaning toward South Loop. I think I can get a good deal on a house there, and the high rents are definitely a bonus.
I can’t really speculate how much maintenance and repairs are going to cost me because I haven’t seen the property yet. I can assume I’ll definitely have to do some spending up front, for things such as updating light fixtures, painting, and cleaning. I plan to make the apartment a little greener, so I’ll have to plan for adding low-flow toilets and shower heads, as well as some other green updates. Unfortunately, I can’t say how much managing the apartment will cost me in the long run…Only time will tell…
Well, how much I make ultimately depends on the property I buy and the neighborhood. But beyond the cash flow, there are also tons of tax benefits for landlords. Here’s what I have down so far as potential tax benefits:
- Real estate depreciation
- Home Office
- Insurance premiums
- Legal and professional services
It seems to me there are a lot of positives involved with owning rental property, and I will continue to explore the option further. At the same time, I’ve heard plenty of horror stories about being a landlord as well. Most of these bad experiences, though, revolve around bad tenants. I really think that if I do a great job at finding the perfect tenant, I should be able to avoid most of the negatives. That being said, I’ve never been a landlord before, so I’d love to hear first-hand what it’s like. Please feel free to share your experiences with me in the comments section.