For long, many people have relied on real estate to hedge their liquid assets against the unforgiving uncertainties of the global economy. The boom in real estate is also as a result of the willingness of financial institutions to finance aspiring homeowners. This article explores the various dynamics surrounding the investment prospects of condominiums. It offers valuable advice to investors looking to exploit the Chicago condo rentals market.
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.
An investor using a mortgage basically has to calculate how long it will take to repay it based on the projected income of the rental. If the income will be too little to service the loan within the shortest time possible, it may be a bad investment. Interest rates appreciate as one takes longer to service a mortgage.
It is only advisable to apply for a mortgage if one has the means to finance between a quarter and a half of the total amount upfront. This helps lower the repayment window and amount. The general consensus in loan financed investing is that if the expected cash flow is not negative, the investment is viable.
Before proceeding to finance your ownership, it is important to ascertain if you will have to spend extra for certain services as an owner. Association and assessment charges are the two most common charges in condo ownership. Assessment fees basically cater for services in common areas within the property. Examples include landscaping and works on the hallways, lobby, exterior, garage and parking lot.
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.
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.
An investor using a mortgage basically has to calculate how long it will take to repay it based on the projected income of the rental. If the income will be too little to service the loan within the shortest time possible, it may be a bad investment. Interest rates appreciate as one takes longer to service a mortgage.
It is only advisable to apply for a mortgage if one has the means to finance between a quarter and a half of the total amount upfront. This helps lower the repayment window and amount. The general consensus in loan financed investing is that if the expected cash flow is not negative, the investment is viable.
Before proceeding to finance your ownership, it is important to ascertain if you will have to spend extra for certain services as an owner. Association and assessment charges are the two most common charges in condo ownership. Assessment fees basically cater for services in common areas within the property. Examples include landscaping and works on the hallways, lobby, exterior, garage and parking lot.
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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