Sunday, June 10, 2018

Considerations For Investing In Chicago Condo Rentals

By Pamela Wilson

Real estate has for long been used as a secure form of investment by those looking to hedge their funds against uncertainty. The boom is also attributed to the fact that most banks are quick to finance individuals looking to own homes. This article takes an exploratory look at the condominium market. It expounds on the options that an investor has when it comes to making money out of Chicago condo rentals.

Buying a condo and opting to rent it out is an almost certain way to earn a steady supply of income. However, a number of variables will determine when you get to break even or if the investment is a white elephant. To establish the economic feasibility of your investment prospect, there are numerous calculations that you ought to make.

To begin with, some of the things to look at include insurance costs, maintenance expenses and taxes against the projected annual rental income. These costs are liabilities and are poised to eat into your profit, if any. Other expenses to bear in mind include legal assistance when carrying out evictions and advertising. It is important to note that in US law, both tenants and landlords have their rights.

If you are looking to purchase directly in cash, you may not have much to worry about thereafter. The same cannot be said of those looking to finance their ownership using mortgages. In case you fall in this category, you will still have to factor in interest. Most banks use standardized interest rate margins when giving their clients mortgages.

The most heartbreaking thing about using a loan to buy your unit is the fact that you will have to service it using your rental revenue for a substantial period of time. If your projected revenue appears significantly low to use in repaying your loan on time, you should consider opting for an entirely different kind of investment. Remember the longer your repayment window lasts, the more expensive your mortgage gets.

A good way to cushion yourself against getting a bad yield would be to finance your mortgage upfront by between 25 to 50 percent and let the bank do the rest. This lowers the liability on your side and gives you ample room to make repayments within the expected servicing period. The rule of thumb is that any investment that has a positive cash flow is a good investment.

Before you finance your investment, you might want to find out if there will be any hidden fees during your period of ownership. Unforeseen charges usually come from assessment and association fees. Assessment charges usually cover shared areas within the condo compound. This includes garage maintenance, building improvements in the exterior section, landscaping, parking lot, hallways and the main lobby.

The final major thing to look at is location. You want to purchase your property in an area that has good demand for rental space. Fortunately, most of the places in Chicago are good options. The area has a wide range of clientele, with many of them being college students and working class people. As long as you do your research patiently prior to purchasing, you should have nothing to worry about.

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