Tag Archives: planning

The First 10 Things You Should Do After Closing

So you’re about to close on your first house. Congratulations! You’ve come a long way and it’s probably been a big hassle to get here. Saving money, filling out paperwork, viewing house after house… now that it’s over, what’s next?

There’s bound to be a lot of silliness that comes with getting your first house. You can dance around in your new empty living room and call up all your friends for a housewarming party, but there’s a few very important things you’ll want to take care of before you pop the cork on that champagne.

Make Copies of your Closing Documents. If you’re a first time buyer, the documents handed to you at closing are probably the most expensive pieces of paper that you have ever encountered in your life. The first stop you make after closing should be your local copy shop. While all the documents are still together and in order, take at least one copy of everything.

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Dear Piggy: Help! My new apartment isn’t ready!

pig writing

I was recently contacted by a renter who had lined up an apartment for March 5, or so he thought. On March 1, his new landlord contacted him with a sad confession: they had misinterpreted when the outbound tenant was leaving. His new apartment would not be ready until April 1. He wanted to know his options. This is a situation that occurs more often than you’d think in Chicago. It may not be a 27 day gap like this poor fellow encountered, but a whole lot of renters face at least an overnight gap between when they have to be out of one place and when they can get access to the next.

Not every delay is caused by clerical errors, like the one faced by the poor fellow above. You probably want your new apartment to be clean and fresh for you when you move in. Doing so takes a lot of work, and few large-scale landlords have enough staff members to get every apartment turned over in less than 24 hours as it is. If you want your apartment to be in good shape, you really do need to allow enough time for turnover in between tenants.

Some tenants get unreasonably angry about such delays… and then unreasonably angry all over again when their new apartment isn’t spotless. They wouldn’t fault a fancy restaurant for a little delay while the staff turns over the tables. They generally accept a hotel’s check-in and check-out times if it means that the bedsheets get changed. But when it comes to apartments? The minute a landlord is tardy with the keys, tenants are off to rant about it on Yelp.

Regardless of how you react to the situation emotionally, though, there are five basic routes you can take from a practical standpoint to resolve the issue. If you’re facing a similar situation, here they are, roughly sorted from worst to best.

Break the Lease and Find Another Apartment. (more…)

Buying in 2013? Here’s what to expect.

I don’t really spend much time talking about the home buying market. There’s plenty of folks who write well about that side of the business. I feel that renters and landlords are somewhat under-served, so I focus on them. However, the changes occurring in the Chicago residential market are going to affect everyone this year. It’s time that we have a little talk about what to expect if you are moving from renting to buying.

You’ve probably heard a lot over the past several years about the depressed housing market. If you’re renting, you may have thought you still had some time to take advantage of the lowest home prices and mortgage rates seen in decades. Guys, you’re running out of time. Prices are climbing, inventory is short, and rates are starting to move up again. While the prices aren’t likely to spike back up to 2006 levels any time soon, the bottom of the market has passed you by. (more…)

Cook Eviction Stats Part 8: Lawyers and Juries

We’re talking about lawyers and juries and how they affect the eviction numbers today, along with some interesting data that I picked up along the way. This article is deviating a bit from the its predecessors in the series, in that I’m not going to be relying too heavily on the numbers I got from the Cook County Clerk. I’ve had to reach beyond to do some additional research. Instead of footnoting everything like I usually do, I will instead provided a bibliography of sources down at the bottom so you can read all of the reports at your leisure, if that’s your thing.

You can fit a couple of eviction hearings in the time it takes to cook Ramen.

You can fit a couple of eviction hearings in the time it takes to cook Ramen.

I want you to imagine a scenario with me for a moment. You are a landlord. A tenant moved into your apartment in October. It is now February and you have not seen a rent check since the first month. The tenant has moved in a whole crew of additional occupants, and a pit bull. They have also apparently spent their rent money on a big screen TV, because you can see it on the floor of their apartment, leaning against the wall underneath the big hole that it left when it fell down.

You filed to evict in after the 2nd missed rent payment, in early December, like any good landlord. Due to the wait and the holiday season, your court date was scheduled for early February. You arrive in court. You’re ready to tell your whole story.

Talk fast. You’ve got 90 seconds in front of the judge. You have to split that with the tenant if they decide to mount a defense. Better know your stuff. (more…)

PSA for the Accidental Landlord: Profit is Not Guaranteed

The alternative of renting your home in a slow market has become increasingly viable in the past few years. I’ve worked with a number of buyers lately who have mandated that their new home be viable as a rental further down the road. Even though the market is improving, there are also still sellers out there who don’t want to short sell and turn to rental as an option. I call it “accidental landlording.” As one of the few Realtors in my office specializing in rentals I pick up several of these each year as referrals from my peers. With at least a quarter of the accidental landlords I meet, I have to have the following conversation:

Me: “Based on the current market, I’m thinking we could get $X per month for renting this property.”

Client: “But my monthly expenses are $X+500!!! We have to ask at least $X+600 so that I can turn a profit on this rental.”

Me: “I wish I could say it worked that way.”

Me, internally:

Logo from an indie film that failed to get funding. So Sad,Analogy Time!

So let’s say you’re 25 and you are living in Rogers Park without assigned parking. Poor you. You need a car, though, so you buy a little 5 year old Jetta second or third hand. You can parallel park anywhere and not pay too much. It serves your purposes. You have your brother paint it purple so you can pick it out in the mall parking lot. You cover it in bumper stickers. It’s unmistakeably your car, through and through.

10 years pass. You’re still driving that Jetta, but now you’re working for a catering business in Elk Grove Village, and you have two kids. You finally have to bite the bullet and give up your beloved compact. The folks in town don’t look kindly on your old John Kerry ’04 bumper stickers and there just isn’t room for your life in your car anymore. Back when you were 25 you never thought you’d be in this situation. You didn’t consider if the Jetta would suffice if you wound up in a situation where you had to haul a lot of stuff and small people around.

I had a lot of trouble finding pictures of VWs covered in bumper stickers. Lots of Toyotas, but not a lot of stickered VWs with an acceptable reuse license. VW owners don't like to share their pics.

I had a lot of trouble finding pictures of VWs covered in bumper stickers. Lots of Toyotas, but not a lot of stickered VWs with an acceptable reuse license. VW owners don’t like to share their pics.

A single-purpose purchase will not necessarily serve well when faced with new tasks. The more something is customized, the harder it is to make it change gears (pun intended).

The same thing goes for your home.

Why did you buy your home?

If you’re currently a homeowner, chances are that you didn’t give much though to the rental value of your home when you bought it. You might have thought a bit about resale value, but not about whether or not it would make a good apartment. Likewise, if you took out secondary loans on the property you probably didn’t think about having some poor renter cover that cost on your behalf further down the road.

You probably considered how you could customize the house, the caliber of the kitchen appliances, the color of the wood floors and the size of the yard. You ensured it would suit your particular needs for light, space, and storage. You thought about whether it fit within your monthly budget. You probably didn’t consider whether or not it would generate positive cash flow 8 years later.

There’s a lot of investors out there who won’t purchase a property until they’ve analyzed whether or not it will generate positive net cash flow. They think about what will appeal to the largest number of renters. How long those renters will stay. The cost of gas to drive back and forth to the property. The breakdown rate of the appliances. The value of parking spaces. The depreciation. And when it comes to apartments, there are more owned by investors than by “accidental” landlords. Investors set the market rent rates.

A purchased home should be like the cast of "Star Trek" - very good at playing their specific roles.

A purchased home should be like the cast of “Star Trek” – very good at playing their specific roles.

Meanwhile, a good apartment needs to be like the Saturday Night Live cast: able to do a decent impersonation of any type of home for a short period of time.

Meanwhile, a good apartment needs to be like the Saturday Night Live cast: able to do a decent impersonation of any type of home for a short period of time.

Going back to the car analogy, let’s suppose you tried to lease your 10+ year old Jetta for $180 per month when you were done with it. Laughable, right? Who on earth is going to sign a fourth hand lease on a heavily customized car? And who on earth is going to pay the same for it as they would for a new 2013 Jetta at the dealer?

Why should you expect that your home, bought for and customized to suit your needs, will work well when repurposed as a means of generating ongoing income?

Agents Can’t Force the Market.

If I’m trying to list your home as a rental, I want to list it for as high a rent as I can possibly get. I’m working on straight commission here. Your profit is my profit. However, “possibly” is the real operative word in that first sentence. If it’s priced too high, your home will not rent. Nobody will even see the ads.

Most renters don’t care about your monthly expenses. The general opinion of a landlord is that they’ve got bottomless pockets full of money, especially if they own a fancy condo with granite counters and stainless steel appliances. After all, you have two homes and they have none.

If I deliver a number that’s lower than your cost of ownership, the question should not be “can I find some idiot renter who’s willing to pay $500 over market rates.” After all, that type of renter is not likely to remain financially solvent for long in any respect, and an insolvent renter is a renter headed for eviction court. Rather, the question should be, “which will cause less damage to me in the long run?”

Short selling your home has its problems. It affects your credit, your tax returns, your buying power, and your self esteem. You may face long market times. You’re at the mercy of the banks. Renting frees you from all of that. For some it may be easier to write off a $500 loss each month than a $300k loss all at once. The market times will probably be shorter. The banks don’t have to get involved.

However, renting doesn’t free you from the property itself, and you may find that dealing with tenants and the Chicago rental laws for a year is far worse than dealing with a bank for 60 days on a short sale.

The better approach is to expect both the sale price and the rental price quoted by your agent to be below what you paid for the property, especially if you bought in during the 2000’s. Rather than weighing just the money values, think first as to the benefits of the entire scenario before making your decision.

Could the scenario from ‘Rent’ really happen in Chicago?

The musical “Rent” was a seminal piece of theatre for me and a lot of my peers when we were in college in the 90’s. For many of us, it colored our perspective of landlord-tenant issues for years to come. The actual plot of the musical doesn’t really depend on the apartment issues – the characters could have the same conflicts and growth without the framing device of the rent scenario that gives the show its name. However, as a framing device to drive urgency and establish the setting, the choice to focus all of the action around a particular apartment building in New York serves as effective shorthand for establishing a villain and the low-income, counter-culture status of the main players.

Today I want to take a look at the various problems in the landlord-tenant relationship and living situation portrayed in “Rent” from a perspective of the Chicago market. Is there any way that this could come to pass in Chicago? How can it be avoided? What parts of the assorted conflicts do we take for granted as likely to occur in a renting situation, and how can a landlord structure their business to keep it from arising?

Before we get started, though, I want to see how far we’ve come since you started reading this blog. If you’re familiar with the plot of “Rent,” see how many potential problems you can identify if those people were renting in Chicago. If you’re unfamiliar with the show, I’ve included a video of the final Broadway cast performing the first 7 minutes, which should give you a good idea of what’s happening. Then come on back and we’ll go through them together.

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Mistakes on a Plane (or, When Pigs Fly)

Some travel errors could have a far bigger effect on your life than this movie ever did.(image via Wikipedia!)

Some travel errors could have a far bigger effect on your home purchase than this movie ever did.
(image via Wikipedia!)

So as my regular readers know, (Hi Mom! Hi Dad!) I recently took a vacation to California. A splendid time was had by all and I’m feeling nice and refreshed. However, I did have to spend quite a bit of time in airports and on planes, and couldn’t help but notice all of the potential hazards that await a prospective home buyer who’s trying to save for a down payment and get a loan. Since I know a lot of you will soon be traveling through the holidays, I figured a few warnings might be of use so that you don’t return from your trip to a nasty surprise.

Protect your savings (more…)

Six Homes, One Payment

It’s been a while since I’ve gone and done some real math for you guys. Let’s fix that. It’s easy to look at the sale price of a home and have that be the deciding factor on what sort of house you buy. However, your monthly payment is what will dictate if you can stay in that house once its yours. Today we’re going to calculate the average affordable monthly payment for a Chicago homeowner, and look at six different types of homes they could afford with wildly different purchase prices.

Step 1: Establish the monthly payment.

We’ve used the American Housing Survey (AHS) data from 2009 before. It’s a little dated at this point but it’s the only trustworthy survey that has numbers for the City of Chicago. Within that survey we discover that the median income for a Chicago Homeowner’s Household was $56,200 per month. Divide that by twelve months and you get a monthly income of $4683.

Many lenders use 33% as the percentage of your income that should go towards housing costs. For today, we’ll consider those housing costs to include your mortgage, your property taxes, your homeowner’s insurance, assessments, and utility bills. 33 percent of $4683 is just over $1545, which is the number we’ll shoot for.

Step 2: Determine some scenarios.

For this exercise I wanted six different scenarios, all for the same monthly payment. I chose three single family home options and three condo/co-op options.

  • A 5 bedroom single family home in Austin
  • A 3 bedroom single family home in Lakeview
  • A 3 bedroom LEED-certified single family home in North Center
  • A 1 bedroom condo in a high rise building with doorman & pool in the Gold Coast
  • A 2 bedroom condo in a vintage courtyard building in Lincoln Park
  • A 2 bedroom condo in a small co-op in Lakeview

Step 3: Source some utility, insurance and property tax rates.

For utility rates I went back to the same AHS data. I discovered that on the low end a homeowner would pay about $115. The median was about $350 and the high end would be way up around $700 per month for a big drafty house with a deluxe cable package and super fat internet bandwidth.

For the monthly insurance I used a ballpark figure that insurance would be the sale price divided by 3500.

Property tax numbers were sourced from actual listed 2011 taxes for properties similar to the ones I’m describing that have sold within the past four months in Chicago.

For all purchases I’m assuming an interest rate of 3.5% (the current national average on BankRate.com) except for the co-op, as those tend to be tougher to fund. For the co-op I’m using an interest rate of 3.625%. I’m also assuming a down payment of 20% of the purchase price. If you’d like to play with the interest rate, down payment and other financing aspects, you can check out the mortgage scenario calculator I wrote a few months ago.

The monthly homeownership cost consists of many smaller pieces.

Step 4: I do math for you.

The first scenario is the big single family home in Austin. This area has low property taxes but high insurance rates. Since it’s a big, old house the utility usage is about as high as it can possibly get.

5 bedroom Single Family Home in Austin
Monthly Property Tax Escrow $125.00
Monthly Homeowner’s Insurance Premium $80.87
Monthly Utilities (Heat, Power, Stove, Water, Cable) $700.00
Monthly Mortgage Principal & Interest $636.29
Total Monthly Payment  $1,542.16
Initial Loan Balance  $139,521.58
Maximum Home Price  $174,401.98

The next scenario is for a smaller single family home in Lakeview. Property taxes are much higher here than they are out in Austin, as are list prices. However, the insurance premiums would be a little lower here and for the smaller house it would cost much less in terms of utility bills.

3 bedroom Single Family Home in Lakeview
Monthly Property Tax Escrow $750.00
Monthly Homeowner’s Insurance Premium $32.88
Monthly Utilities (Heat, Power, Stove, Water, Cable) $350.00
Monthly Mortgage Principal & Interest $405.00
Total Monthly Payment $1537.88
Initial Loan Balance $90,191.47
Maximum Home Price $112,739.34

So, moving in from Austin to Lakeview means you can afford $61,000 less house if you want to keep your monthly payment consistent. Now, what if we scaled back our neighborhood choice to something nice but not outrageous in terms of property tax, and cut back those utility bills with a LEED-certified Green home?

3 bedroom LEED Certified Single Family Home in North Center
Monthly Property Tax Escrow $350.00
Monthly Homeowner’s Insurance Premium $80.57
Monthly Utilities (Heat, Power, Stove, Water, Cable) $115.00
Monthly Mortgage Principal & Interest $992.43
Total Monthly Payment $1538.00
Initial Loan Balance $220,982.46
Maximum Home Price $276,228.08

So moving just a few blocks north from Lakeview to NorthCenter and focusing your search on green homes can more than double how far your monthly budget will stretch for the same size house. Pretty cool.

Now what about condos and co-ops? Our first condo is a little one bedroom in a building full of amenities. Let’s figure that the building has a full-time doorman, an exercise room, party room, roof deck, elevators, business center, receiving room and a dry-cleaners on site. These buildings tend to include most of your utilities, and the insurance premiums are really low. The assessments, however can be quite pricey. The number I’ve chosen for assessments in this case is far from the lowest in the Gold Coast area, but leaves at least a little room for a mortgage payment on top.

1 bedroom Condo in Amenity High Rise, Gold Coast
Monthly Property Tax Escrow $183.33
Monthly Homeowner’s Insurance Premium $25.78
Monthly Utilities (Power, Cable) $115.00
Monthly Condo Assessment $900.00
Monthly Mortgage Principal & Interest $320.89
Total Monthly Payment $1,541.61
Initial Loan Balance $70,705.66
Maximum Home Price $88,382.08

Wow. What a difference those assessments made. But not all condo buildings have ridiculously expensive monthly dues. In fact, the median condo assessment in Chicago according to the AHS was $325. A big condo in a smaller development will have higher property taxes, but much lower condo fees.

2 bedroom condo in small development in Lincoln Park
Monthly Property Tax Escrow $487.38
Monthly Homeowner’s Insurance Premium $41.33
Monthly Utilities (Heat, Power, Stove, Cable) $350.00
Monthly Condo Assessment $150.00
Monthly Mortgage Principal & Interest $517.03
Total Monthly Payment $1545.75
Initial Loan Balance $113,371.02
Maximum Home Price $141,713.78

So. Suddenly another $50k to spend. Kinda neat, don’t you think?

Now, I’ve been neglecting co-ops and one of my clients yelled at me for doing so lately, so I’m going to make a point to include them more. So, our last option is a co-op. Because the co-op pays taxes as a single entity, your property taxes in this case would be rolled into your monthly payment. However, since many major lenders won’t finance purchases in co-ops you’d have to settle for a higher interest rate than normal on your loan. Your insurance premiums would also be higher, as many insurers avoid writing policies on co-ops. In this case I’ve chosen a real co-op that includes heat, water and cable in the monthly membership fee. I should note though that the listed amount of $548.80 is on the lower end for a co-op monthly payment.

2 bedroom in Modestly Priced Lakeview Co-Op
Monthly Property Tax Escrow $0.00
Monthly Homeowner’s Insurance Premium $80.57
Monthly Utilities (Power, Stove Gas) $115.00
Monthly Co-op Membership, Incl. Taxes & Remaining Utilities $548.80
Monthly Mortgage Principal & Interest $781.00
Total Monthly Payment $1527.47
Initial Loan Balance $171,252.66
Maximum Home Price $214,065.83

So Why Do We Focus on Price?

So with six wildly different prices all leading to the same monthly payment, why do we talk about price at all? Well, while there’s a massive gap between the low end and the high end of buying power outlined above, we do need to consider what’s realistic in the areas I specified. While the last two condo prices are within range of a short sale, the other four are pretty much non-existent in the neighborhoods I chose unless you’re a cash buyer working the foreclosure market. You can muck about with the assorted components of the monthly payment all you like, but if you can’t afford to purchase the property in the first place it’s all academic.

The point of all of this isn’t to say that the price should be totally neglected. Rather, it hopefully will serve to give you an understanding of how lifestyle choices can affect your buying power. After all, if you knew that your choice to live in a high rise was going to knock $125.6k off of your price point, would you still want all of those amenities? If going for a new, green home could more than double the amount of house you can afford, would you still want that lovely old Victorian?

On the other hand, if you’re comparing the monthly cost of owning a home with the cost of renting, it is worthwhile to consider the whole scenario. The monthly rent for most of these properties would be between $1800 and $2400 per month and you’d still have to pay utilities on top.

This Friday we’ll have a guest post for the landlords. I’ll see you guys Monday.

A Way to Remember the Essential Services

If you’re a Chicago landlord or tenant in an apartment covered by the CRLTO, you’ve got two levels of problems that can possibly arise. One type is your standard, run of the mill maintenance issue. For most of these, the landlord has 14 days from the time they are notified in writing of the problem to fix the issue before the tenant can invoke the law. Other problems are considered “essential services” and must be repaired within a much tighter timeframe: 72 hours.

True facts: “Aardvark” is the Afrikaans word for “Earth Pig.” This here is a baby aardvark. This will make sense momentarily.

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Let’s Talk about Parking.

Oink if you love Bacon!

Guys, I can’t believe I’ve spent nine months writing this blog and haven’t done any posts about parking! Major oversight. Fixing that right now. Today is rental parking day, all day. Tasty crunchy numbers that you’ve come to know and love, but this time for your car. I’m excited. But first…

What We Will NOT Be Doing Because CNT Does It Better…

First of all, if you’re looking to assess the total cost of transportation in Chicago, this is not the place. We’re talking about parking here. However, the fabulous Center for Neighborhood Technology has two apps that will serve you nicely. Abogo will tell you, by location, how much you can expect to spend per month on transportation. And yes, it’s location-sensitive for you people on smartphones. There’s also the Housing + Transport Affordability Index, which allows you to compare neighborhoods by the full combination of home prices and transit costs.

I ♥ the CNT. You should too. This is their logo.

Oh and while we’re on the subject, PublicTransportation.org has calculators that can help you compare the cost effectiveness and carbon neutrality of driving vs taking the CTA.

If you’re looking for the cost of getting from place to place, those guys are doing an excellent job of spitting out the numbers, and they’re getting grant money to do it, so more power (and less carbon) to them. However, they don’t talk about what happens when you’re done driving about and have to plonk your car down, preferably in a place where the city’s parking elves can’t trim it with orange.

Looks just like Christmas. If, y’know, orange was a Christmas color. (via theexpiredmeter.com)

So You Want to Rent a Parking Spot.

The phrase “EZ street parking” or something similar shows up in a whole lot of apartment ads. You can always try to park on the street, but this is Chicago. We’ve got meters, curb cuts, residential parking zones, alleys, driveways, disabled parking zones and snow routes to consider, not to mention our supercritical mass of hydrants that seem to multiply at an exponential rate. On many streets, tiny puddles of shattered glass bear silent witness to the car windows that have gone before you. I don’t blame you for wanting to stow your precious vehicle somewhere off of the streets.

A vision from the future. This is how a Chicago sidewalk will look in 2022.

The first question, of course, is how much you’re going to pay for parking at your apartment. Therefore, I have taken a glance through the MLS to see what the rates have been for off-street rental parking in seven different neighborhoods over the past year. I counted the printed rent rates for any parking spaces listed as available with apartments that successfully rented. I also took a quick average of the rents paid for the apartments so that I could get a rough ratio of what it costs to house people as compared with their cars.

Average Parking RentParking Rent RangeAvg Parking as percentage
of Average Rent
East Rogers Park
Uncovered$60.10$1-1505%
Covered$102.08$50-1759%
Albany Park
Uncovered$88.46$75-1507%
Covered$93.33$60-1257%
Hyde Park
Uncovered$95$50-1456%
Covered$137.50$100-1759%
Lakeview
Uncovered$135.81$1-2607%
Covered$157.88$75-2758%
Wicker Park & Bucktown
Uncovered$157.14$100-2507%
Covered$171.43$100-2508%
South Loop
Uncovered$161.84$75-4007%
Covered$197.05$150-4009%
Near North Side
Uncovered$209.50$100-3008%
Covered$230.09$100-437.509%

I chose three neighborhoods that are, in my opinion, underserved by the CTA – Albany Park, East Rogers Park and Hyde Park. All three have bus service but very little train service. I also chose Lakeview and Wicker Park/Bucktown, two popular but lower-density neighborhoods with good CTA service. Finally I also chose two luxury, high-density neighborhoods with lots of high rises and 3rd party garages, but not a lot of street parking.

As you can see, pretty much across the board you can expect to pay an additional 5-8% of your rent for uncovered parking spaces, and 7-9% of your rent for garage parking. It’s remarkably consistent across all of the neighborhoods I studied. Personally I went into this thinking that parking prices were pretty arbitrary, but it looks like there’s a method to it.

So if you want to avoid street parking, be ready to up your housing budget by 7-9%.

But Can You Even Get One?

Parking prices are lovely to know, but what sort of availability are we looking at? Do you have a one in ten shot at finding an apartment with parking, or is it pretty much guaranteed? And what if you can’t increase your rental budget by another 7-9%? Well, if you’re working with a Realtor to find an apartment in these neighborhoods, chances are pretty good that you’ll find an apartment with parking. However, chances of finding one with free parking vary more widely from neighborhood to neighborhood. Check it out.

NeighborhoodUnits with free garage ParkingUnits with any free parkingUnits with any assigned parking at all
East Rogers Park10%27%53%
Albany Park21%32%55%
Hyde Park14%29%41%
Lakeview18%30%70%
Wicker Park & Bucktown41%62%81%
South Loop45%49%94%
Near North Side19%20%83%

Once again we’ve got those same seven neighborhoods, and for the sake of comparison I’ve even included them in the same order. I was surprised to see that in all but one of the neighborhoods I studied, over half of the apartments rented this year had some sort of parking available. Not a lot of parking for rent in Hyde Park, but given the demographic makeup and more insular nature of the neighborhood, plus an abundance of university parking lots, I don’t find that too surprising.

University of Chicago Logo

U of C. 215 acres from which you will never depart for your entire four years of undergrad.

What I did find interesting is the breakdown of free parking vs. paid parking. The most expensive neighborhood, Near North (including tony districts like Streeterville, River North and the Gold Coast) offered nearly universal parking availability, but the lowest percentage of free parking out of the seven districts. In other words, if you’re living around there you’re going to have to pony up extra for parking. Meanwhile, South Loop has even greater parking coverage with 94% of the rented units offering at least one parking space, but almost half of them were free garage spots.

Most impressive was the showing put forward by Wicker Park & Bucktown, two areas that always make me pull my hair out trying to find parking when I’m down there for a night out. With 81% of the apartments over the past year offering some sort of parking and 62% of them offering free parking, this area offered what might be the best scenario for renters with cars. (Of course, finding an apartment in these two trendy neighborhoods is a challenge, but if you survive the Thunderdome of Wicker Park apartment hunting at least your car will be safe, right?)

Vision from the future. Wicker Park apartment hunting competition in 2022 will involve gladiatorial combat.

What Did I Forget?

Hopefully that answers some of your questions about parking. If you want me to crunch the numbers for your neighborhood just drop me a comment or use the contact form.

All the Single Renters!

From the cover of “Living Alone and Loving It” by Barbara Feldon. I haven’t read the book but I liked looking at the pictures.

Does the size of rentals shift in the Chicago off-season from larger units to smaller ones? Most of my rental clientele in the wintertime are singles and smaller groups. Even Snopes, that bastion of truth, verifies that January is the worst month of the year for breakups. With all of those newly single people getting forced out of their homes, I wondered if they would have any statistical impact on the traditional winter slowdown in the rental market.

Going into the research for today I was pretty much certain that I’d more small units available in the winter than I would larger units. As it turns out, from a supply point of view I was very wrong. However, in terms of demand my anecdotal evidence was proven to be pretty accurate. Single renters drive the off-season rental market in Chicago. It probably doesn’t make you feel any better to know that your heartache is serving to line the pocket of a landlord. But if it’s any consolation, at least now you know you’re not alone, and you can plan accordingly!

Seasonal Supply

The paramount dogma of economic theory is that of supply & demand. If a market is truly balanced you’ll see supply and demand rise and fall in sync with each other. My original hypothesis going into this was that the market for smaller units wouldn’t see as substantial of a drop-off in the winter as would be seen in the market for larger units. I started by looking at the supply.

Below is a chart showing the number of small (studios & 1 bedroom) apartments that came on the market as compared with the number of larger (2-3 bedroom) apartments on a month by month basis reaching back 3 years. If my hypothesis was correct, the two lines on the following chart would be vastly different in the winter months. You’d see the blue line get much higher than the red line in the winter every year.

Obviously, I was wrong at least on the supply side. The landlords who are listing their properties in the MLS are definitely aware that there’s a seasonal slow-down in late autumn. However, if there’s more single people than families looking for apartments in the wintertime, the trend hasn’t affected the inventory of available apartments. Small or large, the number of units on the market is consistent even if it varies wildly by season.

Note: there are actually a lot more 2-3 bedroom units in the MLS at any given point than there are studios & 1 bedrooms. I’ve normed the data to make the chart easier to comprehend. My methods are explained in the methodology section below.

Seasonal Demand

So, I was wrong on the supply side. And I’m into the science so I’m OK with being wrong. But it did make me wonder if my anecdotal evidence of seeing more singles looking for apartments would bear out on the larger scale. I went back and did some more digging to figure out the comparative demand for those apartments.

Demand via MLS statistics is a little more difficult to gauge. The best metric I can think of for figuring it out is how long each listing spent on the market. High demand means short market times. So I pulled the average market times per month using the same size breakdown – studios & 1 bedroom apartments for the single folks and 2-3 bedroom apartments for the families & larger groups.

You have to read the next chart a little bit backwards. The lower the line, the higher the demand. In this case, if my hypothesis was correct, we’d see substantially lower market times in the winter for the smaller apartments (the blue line) than we would for the bigger ones (the red line).

… and I was right. Look at the huge gaps between the lines towards the later part of each year. Science or not, I feel much better now.

The demand for studios and 1 bedrooms does weaken in the off-season, but nowhere near as badly as the demand for 2-3 bedrooms. We can also see depicted here the overall increasing demand as the market times get shorter and shorter over time. But the wintertime difference is pretty shocking. In fact, it looks like last winter the single folks snapped up their apartments before the landlord lost a full month of rent, while their bigger cousins sat empty for nearly 2 months on average. For a landlord looking to maximize cash flow, that could make a big difference in your business model in regards to lease break policies and structuring of lease expiration dates.

The Surprise: Small Apartment to Large Apartment ratio is very consistent!

The most surprising little factoid to emerge from this research is bundled up in the norming of the numbers for the first chart above. I knew there would be more big units than small units in the MLS. Realtors work on commission, they will spend more time pursuing the bigger, more expensive listings. What amazed me, though, was how consistent the gap was between the bigger and smaller units over the past three years.

On average there were 1.61 times more 2-3 bedroom apartments coming on the market in the MLS in a given month than there were studios & 1 bedroom apartments. The standard deviation on that was just 0.17, or 10%, across the entire 3 years of data that I pulled. This means that if you’re working with a Realtor to find an apartment at any point in the year, you’re between 3.2 and 4.8 times more likely to find a big place to share with a roommate or two than you are looking alone. If you really just want a studio or a 1 bed – especially a high end one – you can certainly still try work with a Realtor but be prepared to make up your mind quickly.

Methodology

To calculate the available supply, I pulled the number of apartments that came to market in the MLS for each month going back to October of 2009. I counted the studios & 1 bedroom units available separately from the 2 and 3 bedroom units in order to determine what might be within reach of a single renter as opposed to a family.

Calculating demand was a lot more labor-intensive. I had to download all of the rented units in 3000 unit chunks, as that’s the maximum I can export from the MLS in one shot. I then used Excel’s subtotaling functions to get the average market times for all the units rented each month.

Questions? Comments? Fire away! I’ll be back Monday with something a little spooky.