As an investor looking for residential properties in Chicago, can I find a property that cash flows?
For quite a long time, it has been nearly impossible to find a rental where “cash flows” in the trendier parts of Chicago (same in other major cities). A building “cash flows” if its income (rents) pay all expenses—and hopefully even provides a monthly “profit”.
The true fact is that usually the owner will have to “subsidize” his property for a time by kicking in some extra money each month, until rents rise over time to cause the building to cash flow. Why is this true? The reason is that for several decades purchase prices in world-class cities like Chicago, New York and London have escalated faster than achievable rents. However, investors both large and small find there are many advantages of owning rental property that often outweigh the fact that rental income may not initially fully support the property.
First of all, there are motivated sellers and substantial inventory right now, meaning you can purchase at a good price and finance at a low interest rate. Then, the investor/owner benefits from a) the major tax advantages provided by depreciation, b) the fact that all mortgage interest, real estate taxes, insurance premiums, maintenance, etc. are tax deductible, and c) upgrades and improvements to the property are tax deductible—all of which can off-set the owner’s taxable income and tax bracket. Last but hardly least, there is the wealth-building component due to the overall rapidly rising value of Chicagoland real estate (yes, this will return strongly over the coming years).
Posted at 09:38AM Sep 21, 2009 by Bob Billimack in Buying Comments[2]
Posted by BILL ROBACK on September 23, 2009 at 12:19 PM CDT #
Posted by Office Space Chicago on October 14, 2009 at 08:16 AM CDT #