Class A Apartments: Large apartment complexes less than 10 years old in the most favorable locations. These buildings frequently have any amenities like roof decks, business centers, fitness clubs, doormen, dog runs, concierge service and party rooms. These properties attract upper class white collar renters who are renting as a status symbol. They are inevitably owned by large institutional investment corporations.
Class B Apartments: 10-25 years old, or older structure with a newly renovated interior and high-end finishes. Well-maintained with a decent cluster of amenities and security. This type of property attracts middle class residents from a combination of blue collar and white collar professions, and are generally stepping stonees on the path to homeownership. These properties are generally owned by big institutions or larger Real Estate Investment groups. (Classes are used as shorthand by Multi-Family Investors.)
Class C Apartments: Built at least 25-30 years ago or earlier, attracting blue collar workers, lower income residents and first time renters like students and new grads. Usually owned by private investors (individual landlords or small partnerships).
Class D Apartments: Very old buildings in dangerous or blighted neighborhoods. Most of these buildings have no amenities at all, are functionally obsolete, and may be on the verge of being condemned due to unsalvageable maintenance problems.
CRLTO: The Chicago Residential Landlord-Tenant Ordinance. Set of laws pertaining to the rights of landlords and tenants in non-owner-occupied apartments (and some other rental scenarios) within the city of Chicago. Addresses matters like security deposits, livable conditions, terms for breaking a lease, and timeframe for repairs. Does not address noise, maximum occupancy, maximum rent increases, or whether bedrooms have to have doors & closets. The Ordinance can be viewed online here.
Deposit, Security Deposit: An amount of money paid by a renter at the time they move in to be used by the landlord at the end of their lease to repair any major damages they may cause to the apartment. Normally held in an escrow account. In Chicago the account must be interest-bearing at a rate set by either the city or state depending on the size of the building and whether or not the owner lives on-site.
Down Payment: An amount of money paid by a property buyer up front to show that they are ready, willing and able to make the purchase. Not to be confused with a Deposit, which is used for renting apartments.
Escrow: A bank account funded by one party as an assurance to a second party and held by a third party until a particular goal has been met. None of the parties may touch the money in the escrow account until that goal is achieved or cancelled. For example, a bank may hold a tenant’s security deposit in escrow as an guarantee to the landlord that they will keep the apartment in good condition.
Keating Memo: Issued by the federal department of Housing and Urban Development, the Keating Memo addresses the minimum number of occupants in an apartment that can be rejected for overcrowding without incurring a fair housing violation. It specifies a maximum of one tenant in a studio, and two people per bedroom if the apartment has bedrooms.
MLS: Multiple Listing Service. A centralized database shared by all Realtors within a specified area that permits them to view and show each others’ listings regardless of their brokerage, with a guarantee that the listing brokerage will cooperate on commissions. The Chicago area MLS is called ConnectMLS by MRED, LLC and includes listings for homes, apartments, commercial space, land, and multi-family property.
Multifamily: Investing term used to refer to a property with at least 5 apartment units inside. Normal folks refer to a multifamily investment as an “apartment building.” In the Chicago area, multifamily listings are considered to be commercial property. Single family homes, condos and buildings with four apartments or less are considered residential.
Pro-ration: A partial payment for use of a property for less than a standard billing time period. For example, tenants who move in to an apartment before the lease starts may pay pro-rated rent. Since property taxes are paid in arrears, home sellers have to pay pro-rated property taxes for the amount of time they spent in a home during the year that it sells.
Shadow Inventory: In the real estate sales market, this refers to properties headed to but not already in foreclosure. It’s comprised of properties already in the court system, trying for a short sale, and those where the owners are over 60 days past due on their loans – past the point where they have any likelihood of catching up without a major windfall. Not to be confused with…
Shadow Market: In the rental market, this refers to rentals that are normally owner-occupied and do not belong to the normal rental inventory in a city. They are temporarily being rented out until the sales market recovers, at which time they will be sold off and removed from the market competition for tenants. They tend to mess up the stats and analysis of Property Managers. In Chicago, renters know them as “dude, you mean we could rent a place with in-unit laundry? SWEET!”
YPS: Your Personal Starbucks. Your main source of wasteful spending. Figure it out at “What’s Your Personal Starbucks?“