Tag Archives: saving money

Quality Control Week #2: Recognizing Low Quality

Hey all! Sorry about the silence last week. Between business and the recent floods in my neighborhood it was absolutely frantic. As always, my clients come first.

So when we left off we were talking about the factors that make for a high quality home. Today we’re going to talk about how to spot symptoms of poor construction and quality when you’re in a showing. After all, a home with even medium quality construction will suffice for many of you, especially for renters who are only going to be living there for a short while. Poor construction and materials, however, can be dangerous and costly. You would not want to purchase a cheaply-made home without budgeting time and cash for major capital improvements to occur before you move in.

Sometimes it's easy to spot a cheap knockoff. Here's how to spot them when you're looking for real estate.

Sometimes it’s easy to spot a cheap knockoff. Here’s how to spot them when you’re looking for real estate.

Preparations

You’ll want to do a little research before you get started.

Learn the names of the current specialty appliance lines.

I recently worked with a buyer who rejected all homes with American appliances. If the kitchen had Maytag, GE, Whirlpool or Frigidaire appliances it was immediately off the list. He was only interested in imported labels like Bosch, LG and Samsung. In truth, every manufacturer has different lines of appliances with varying levels of quality and warranty. For example, GE currently has it’s basic line, as well as the Cafe, Profile and Monogram lines. Whirlpool Corporation owns the Amana, Maytag and Whirlpool labels, each label having multiple lines of appliances. There’s a big difference between a regular GE fridge and a GE Monogram fridge – a difference of several thousand dollars and several years of longevity.

The seller of a kitchen full of Amana (budget line) and no-name appliances will expect you to replace them when you move in. They’re basically placeholders. However, a seller who’s sunk a lot of money into top of the line gear will expect you to recognize their taste and pay more for it.

The same goes for IKEA. Yes, they’re known for cheap furniture, but some of their lines are well-respected for durability.

Take a trip to Home Depot

Home Depot is not known for their contractor-grade supplies. If you see a home that’s been outfitted with nothing but Home Depot fixtures, you can be pretty sure that the owner has been skimping on quality. It’s worth taking a look around to see what the cheaper stuff looks like, especially the lighting fixtures, bathroom fixtures and kitchen cabinets.

Oh, and if you watch a lot of HGTV, remember that their main purpose is to drive business to their advertising sponsors. They can make crappy cabinets look nice, but a TV show won’t show their durability over time.

Your Testing Kit

Appliances and cabinets are easy to test, but testing the structural quality of a home is the toughest thing to do. Here’s some things you should bring with you that won’t draw a lot of attention.

A scarf

You’ll want to make sure that door frames and walls are straight and not sloping or bowed. A slightly heavy winter scarf will do as well as a plumb-line to accomplish this test. Hold it up to the wall or door and make sure it stays flush all the way down.

A marble

Uneven floors can indicate foundation problems. You don’t need a level to tell you if the place is sitting pretty, though – a simple marble is enough. Lay it on the floor and see if it stays put.

A ballpoint pen

Any basic ballpoint of normal barrel size will do. That’s about the minimum size hole that a mouse could fit through. You want to make sure that baseboards and floorboards meet with no gaps larger than the tip of your pen. You’ll also want to make sure that any gaps around pipes are smaller than your pen. Pay particular attention to the areas under sinks and in the mechanical room.

You can also use your pen for listening tests. Tap it against things to get an idea of their interior composition. If you’re tapping against something solid and well-insulated, you shouldn’t hear anything at all. If you’re tapping something cheap or hollow, it will sound much louder. (Don’t forget to try it on the floors, too.)

Things to Look For

As many of my physician friends like to warn me, symptoms don’t always indicate the same disease. However, if you spot a large number of these problems in the same property it’s probably best that you move along.

Air

When it comes to the components that make up your home, you want as little air as possible. Window frames and doors are the main places where a seller, landlord or developer can get cheap on the materials by installing lots of air. Hollow-core doors and hollow-frame windows are simply not as durable. You want windows and doors to serve as insulators as well as security features, and air just isn’t as good at either as something solid.

A well-built window frame will be chambered and filled, not hollow. (Image from wikipedia.)

A well-built window frame will have many chambers, like this one, and be filled with insulation. (Image from wikipedia.)

Too much air in the walls – in other words, insufficient insulation – is also a problem. On a sunny day, head to the side of the house closest to the sun and hold your hand up to the inside of the walls. (Or on a snowy day, hold your hand up against the inside of any exterior wall.) If you feel too much of the outside temperature through the wall, you could be dealing with an insulation problem.

Stopgap measures and concealers

This one only works if the home is still occupied, but it’s definitely worth considering. Don’t get me wrong – I love duct tape and WD-40 as much as any other geek, but they’re still stopgap measures. A truly “fixed” item will not use either one. Pest control items scattered throughout the house are also a temporary fix that should really be remedied through more thorough means.

A lesser known fact is that the Chicago city inspector will fine a landlord who’s got visible damage to the sills and lintels that hold windows in place on the outside of a building. However, if the damaged sills and lintels are covered so the inspector can’t see them, they will escape the fine without solving the problem. Those sills and lintels are what keep water OUT and heat IN – you really want them to be intact, not just covered up to hide a deeper problem.

Systems with single Points of failure

When it comes to major fixtures in the home, you really don’t want any system to have a single point of failure. For example, the recent flood in Albany Park demonstrated the problem with sump pumps – many of them were hooked to the electrical grid without battery backup. During the flood, power was cut to many homes, rendering their sump pumps useless.

Of course, when your street looks like this even a sump pump can't help you much.

Of course, when your street looks like this even a sump pump can’t help you much. (Albany Park 2013, photo by me, unfortunately.)

Similarly, a furnace should have a manual cut off switch attached in case the thermostat fails, and outlets close to sources of water should have breakers built in.

Lack of Detail

While a simple aesthetic is certainly valid, complexity can in some cases be equated with quality. As we discussed last week, moving parts add to the usefulness and the expense of something like a kitchen cabinet. High levels of detail in trim indicate custom builds and considerably more care invested in the installation. Basic cabinets and plain walls will look frumpy by comparison. It isn’t just the visual impact that matters, either. While you certainly want your home to make your guests say “wow,” you also want it to last for a good, long time. Lack of detail can imply lack of quality – plain cabinets can be nice and sturdy, but you’ll definitely want to take a closer look at them than ones with lots of crown molding and heavy detail.

You should also pay attention to items that seem out of place. If you spot a contractor-grade ceiling fan in a home otherwise furnished with custom-grade decor, it may be a sign that the wiring behind the fan is faulty, resulting in multiple replacements over time.

Lastly, it’s worth considering how the moving parts, well, move. Do drawers and doors slam shut or do they quietly glide closed? Do faucets and drains open and shut fully and smoothly?

We Need to Go Deeper.

These tests are all quite superficial, and failing any one of them alone is not reason to walk away from a house. If you decide to put in an offer on a home, your inspector will be able to more thoroughly test everything so that you’re aware of major problems. Unless you’re planning on gutting the place, you definitely need to probe deeper than this before you get all the way to the closing table. However, basic awareness of quality and some quick on-the-go tests can save you from getting under contract on a clunker.

I’ll be back Friday (I promise!) with a special take on quality for folks who are looking for rentals. See you then.

Quality Control Week #1: What Affects Building Quality?

You probably know that there are different grades of quality when it comes to food. The USDA has three different grades for poultry, eight for red meat, and hundreds for fruits and vegetables. Similarly, building materials come in four different official grades: building, quality, custom and ultra custom. I would add “commercial grade” to those standard four. As the quality goes up, so does the cost; in some cases it increases exponentially. Homeowners must always walk a fine line between material quality and cost, but many are unaware of the differences and how they affect the bottom line.

Condo boards also face tough decisions when it comes to major capital improvement projects. Expensive materials will last longer – in fact, they may well outlast the current residents’ tenure in the community. Convincing condo residents to take on large special assessments for maintenance that they won’t be around to use is a difficult task. (more…)

Three Little Pigs Get a Windfall (Or, Mortgage Discount Points FTW)

Once upon a time there were three little pigs. (I’m surprised I haven’t done this in the past year.) The pigs have a grand adventure in store for them involving building supplies and poached wolf, but for today we’re starting at the beginning of their story, and that means it’s math time.

Yay math time!

Yay math time!

They were each sent out into the world to make their fortunes. When it came time to buy housing, their mother gave each of them a surprise gift of $5000 in addition to the money they’d already saved.

Now, let’s say that they’d each saved up the same amount of cash, had similar credit scores, and all bought $300k townhouses in the same development using FHA loans with 3.5% down. (I know that isn’t how the story goes, but I’m not talking about construction materials today.) However, each one chooses to do something different with their $5000 gift from their mother.

Pig #1: $5000 on new appliances.

The youngest pig spent the extra $5000 on new appliances for his kitchen. He got a new Fridge ($1300), a new stove ($1300), and a new washer and dryer ($1200 each). Ten years later when he sells the property he’ll have spent $154837 in debt service on his mortgage. His appliances would be close to the end of their useful lifespans, so they won’t contribute much to the value of his home. In fact, he might have to replace them all again in order to sell the property.

Maybe he got something awesome like this modular stacking refrigerator.

Maybe he got something awesome like this modular stacking refrigerator.

Pig #2: $5000 towards the down payment.

The middle pig was quite content with the appliances that the developer provided, so he chose to add $5000 to his down payment. This lowered the amount that he had to borrow from the bank. When he sells his property ten years later, he’ll have paid $152163 in debt service. This means he’ll have saved $2674 over his younger brother. He’ll still have to replace the appliances before he moves out, but he’ll at least have saved a nice bit towards the cost.

I should note here that given the same 3.44% interest rates on their loans (which happens to be the current national average), it doesn’t matter what the down payment was nor what the cost of the property was. Over 10 years, the savings will always be $2674 if you add $5000 to the down payment.

Ok, so it's a pug, not a pig. Still, if you saved $2674 you'd be saying "neener neener" to your brother too.

Ok, so it’s a pug, not a pig. Still, if you saved $2674 you’d be saying “neener neener” to your brother too.

Pig #3: $5000 towards 1.5 Discount points.

We’ve talked about mortgage discount points before. Basically, for a fee equal to 1% (one “point”) of your loan paid up front, your interest rate lowers by a specific amount, usually 0.25%.

The eldest pig used the $5000 to purchase 1.5 discount points on his mortgage, lowering his rate by 0.375%. His brothers got loans at 3.44%, but he came in at a cushy 3.065%. Over the next ten years he will spend $147686 on his loan, saving $7151 compared to his youngest brother. This means he’ll actually make a profit on his mother’s gift! (Thanks, Mom.) He’ll also have accrued $3055 more in equity on his townhome than his younger brother, meaning he can replace the appliances and still walk away with a nice $5000 in savings.

Needless to say, the eldest pig made the smart move here.

You bet it feels good, little piggy.

You bet it feels good, little piggy.

The moral of the story is that cash at closing can be spent in many different ways, and that bulking up your down payment is not always the best way to go. First time buyers rarely think about mortgage discount points. In fact, residential buyers often don’t consider points at all, unless they are required to pay them in order to get a loan in the first place. However, if you have the cash to spare and today’s already ridiculously low rates aren’t good enough for you, spending some extra dough to push the rate down even further can have a very good effect on your bottom line. Of course, your mileage may vary and you should always run the numbers yourself after a hearty conversation with your lender.

We also learn that an extra $5000 can go a very long way. When saving cash to purchase a home, every bit helps.

See you Monday.

Apartments: Is Bigger Really Better? (Tenant Version)

I used to work for a theatre company that did most of its work in a very large performance hall. It had 25 rows and stadium seating, and the stage was 25 feet wide and three stories tall. (That’s the width of a standard Chicago lot – pretty substantial for a city perfoming space.) It would have been a fantastic hall for big musicals, operas, and large scale events. The problem was, this company was a tiny one. They were not doing big shows, but in order to fill that huge space they had to spend tons on scenery and sound amplification in order to make it work for them. In this case, the bigger space was definitely a detriment.

When it comes to apartments, you can have one or the other but not both.

When it comes to apartments, you can have one or the other but not both.

So let’s say you and your roommate have $1600 to spend between yourselves for an apartment. You have the choice between a 1000 square foot high-end, loft style condo in Lakeview with two bedrooms, and a 2000 square foot vintage unit with a basic set of appliances and four bedrooms in Irving Park. There are a large number of renters out there who would automatically say that the four bedroom unit is the better deal, even if they don’t pick up extra roommates to fill the additional rooms. Bigger = better, right? I have five reasons here to help you explain to your roommate why this is not necessarily the case.
(more…)

Resolutions for Chicago Real Estate

So it’s 2013. Funny how that happened. World didn’t end, although for some of us we were wishing it might have done after the New Year’s Eve parties. I’m sure some of you already have resolutions that found you duking it out over a treadmill this morning. A few more never hurt, though. Here’s a few that you might want to consider if you’re thinking of moving or buying property this year.

For Renters:

Try communication before confrontation. It doesn’t matter if you talk with your landlord directly or with the office staff of a big property management corporation. It doesn’t matter how badly things escalated last year over assorted issues with your apartment. This is a new year and time to start over. If you’ve had big problems, schedule a time to sit down calmly with a decision-maker for the property and review how both sides can resolve problems in an efficient and effective way. Don’t go for the big guns like lawyers and unions until you’ve tried to talk it out first.

Seriously? Always around?

Seriously? Always around is the nicest thing on the list?

Likewise, make a point of warning your landlord if you know there are problems on the horizon. Whether it’s money problems or crowds of house guests, it’s better to notify ahead of time and work out a game plan than it is to sneak around and hope they don’t notice.

Remember, moving is more expensive than you think. (more…)

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.

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.

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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.

So You Want to Change Your Apartment’s Paint Colors.

PS if you think this looks good, you may want to skip this article. (via uglyhousephotos.com)

Do you want to change the colors of your apartment? I encounter a lot of renters who do.  Standard issue “Landlord White” is a pretty boring and sterile color. Many renters these days are coming back from being homeowners, while others have grown up watching HGTV decorating shows and want to assert their own style in their living space.

Some landlords, especially the larger management firms, may allow you to pick from a palette of soft, neutral colors when you move in. Others just go with the “any color you like as long as it’s white” route. Either way, if your tastes run towards bold colors you’re probably not going to find much love in the apartment market. White paint is cheap and gives apartments a nice, clean look, so it’s become the industry standard for new apartments. Unfortunately, landlords learn quickly that tenants love to use funky colors but vanish when it’s time to put them back to normal. It may be difficult to find a landlord who’s willing to cooperate with you in achieving your decorating ideas.

Even so, if you want to try and change the colors, here’s the route to take: (more…)

The StrawStickStone Mortgage Scenario Analysis Calculator

This is my new favorite entry EVER.

Let's Play!

I've spent the past week explaining why it's so important to do serious comparison shopping and saving up before you apply for a loan. On Monday we investigated how you could save up to 35% over the life of your loan by working with discount points and down payments. On Wednesday I used a salad dressing analogy to explain APR and how it affects your bottom line. For today I've gone back to my nerdy coding roots and have made a pretty hefty calculator so you can play with the numbers yourself.

(more…)

Balsamic Vinaigrette, Buttermilk Ranch & Your Mortgage.

So I was at McDonald’s today. (Bring it on, indignant foodie brigade! You’ll pry my french fries out of my cold, greasy, dead hands.) I was confronted at the palais de graisses saturées with the “Under 400 calorie” menu that they’ve rolled out to go with the 2012 London Olympics. A copy is below in case you’ve not sullied yourself with such things lately.

The McDonald’s “Under 400 Calorie” menu. This will make sense in a moment. Click to super-size me.

It was the salads that caught my eye. Maybe not for dinner, but for the purposes of explaining this article. Because salads – or rather, salad dressings – make a wonderful analogy for explaining APR and interest rates.

Salads are Kind of Complicated.

So, you get your basic side salad and it’s 20 calories. You nibble, you gain very little weight, you feel full, end of story. But a salad of just iceberg lettuce, cucumber slices and a couple of cherry tomatoes won’t get you featured in Time Out Magazine. People start getting creative. The good folks over at “Cooking Light” explain in a nifty slideshow how a restaurant salad can quickly rack up over 1500 calories, not to mention the fat & sodium involved. The more stuff you put on your salad, the more time you’ll have to spend at the gym later to work it off. But it’s so easy when you’re ordering the salad to say, “OK, I can have these croutons now, it’s no big deal.”

We’ve been doing this for so long that it’s become a cliché – “a minute on the lips, a lifetime on the hips.”

If you’re working with a weight loss deadline – say, swimsuit season or trying to squeeze into a fancy halloween costume – suddenly the amount of exercise you’ll have to do to neutralize the ranch dressing gets compressed into a far shorter time period. 500 extra calories is a lot harder to work off in a week than slowly over a few months. You start giving some thought to your order. Hold off on the croutons, swap out the buttermilk ranch dressing for a low-cal balsamic vinaigrette.

From Our Lettuce to Your Cabbage.

So when you go to buy money from a bank or a mortgage broker, you’re faced with a situation very similar to ordering a salad. Every lender will offer you a different base interest rate – that’s like every restaurant offering you a different combination of vegetables on a bare, undressed salad. Some banks will be small local ones, others big national ones, just like some salads are organic & locally grown while others are covered in pesticide & imported from Mexico. It’s your choice as to which way you want to go.

Beyond the basic lettuce, though, there’s all of the extras consider. When dealing with salad, you’re talking about dressings, croutons, and maybe those tasty little sesame sticks. In the case of the other green stuff – borrowed money – it’s all of the lender’s assorted fees & commissions. And in the lending world, all of that stuff found in the difference between the interest rate and the APR.

Lenders charge to give you a loan. They are selling money. They have to turn a profit. They may say it’s a “no-fee” loan up front to get you talking to them, but the fees may actually be wrapped up in your monthly payments instead. The government has recently started requiring restaurants to disclose the calorie content of their dishes. Similarly, the Truth in Lending act requires lenders to disclose any hidden fees that you will be required to pay, either at closing or folded in.

I’ll give you an example.

This image brought to you by lots of pounding on Excel very late at night.

That chart above explains it nicely. But there’s a problem. See, the APR they disclose to you is based on the thought that you’ll be in the place for the entire life of the loan. Most people are not planning on staying in their home for 30 years even though they get a 30 year mortgage. So while it’s all well and good that the banks are disclosing their APRs to us, it doesn’t really matter if you’re planning on taking off much earlier.

Shorter-Term Loans are Kinda Complicated, Too.

Remember when I started talking about dieting on a deadline up above? That’s coming back now. Just like that 1500 calorie salad is a lot more of a challenge if you’re trying to drop 20 pounds in a short time, the actual APR that you would be taking on will be much higher than the quoted amount of you’re planning on paying off the loan in, say, 7 years.

You’re still borrowing $50k plus $2k in finance charges. You’re still going to have to work off those extra calories – the finance fee salad dressing, if you will – but you’ll have less time to do it. Remember, you still have a loan for $50,000 at 3% interest. But with the finance fees included you’re suddenly paying off the balance plus the fees in a shorter amount of time. $2000 spread out over 84 months is a lot tougher than $2000 over 360 months.

Let’s take a look at what the real APR would be for someone who leaves after 7 years. I’ve done another handy chart below.

If you’re planning on staying for a short time, the quoted APR that the bank has to give you will not mean a whole lot. This chart explains why.

In Monday’s article, the savings from paying discount points and a higher down payment at closing increased with a longer stay in the property, from 9% after 5 years to 35% over the life of the loan. This is also true for APR. The longer you stay, more fully distributed those fees will become, and the closer your real-life APR will get to the numbers quoted by your lender. It will take you less time to get to your break-even point.

Wrapping it Up to Go.

It’s best if you can find a mortgage broker with no difference between the actual interest rate and the APR. However, if the best interest rates you get are quoted by lenders that are going to charge you fees, make sure you calculate your own actual APR or talk with your Realtor, accountant or a neutral and mathematically gifted individual to figure out if the cost in fees will be more than the difference in quoted rates.

Let’s look at another handy chart to help explain what I mean.

Don’t get all excited about a low interest rate if you’re going to be paying through the nose in financing fees. Give some thought to how long you’re planning on keeping the property before you start shopping for a loan.

So next time you see APR don’t be confused and don’t mentally check out of the conversation. Lenders are going to rely on you being both a) confused by the term and b) too ashamed to ask what it means. For a high-cost lender to voluntarily explain APR to you in a clear manner would be shooting themselves in the foot. Just remember when the term comes up that it’s like figuring out what to get on your salad. High APR is like high-fat dressing. The best thing for your financial health is to stay away from the extras and find the most basic, low-fat loan you possibly can.

(Aren’t you proud of me? I made it all the way through that without a single “bacon bits” pun!)