When buying investment property in Chicago, the cost is a key concern for investors. The location, property type, size, age and amenities will all impact the purchase price. However, there are also additional expenses to consider beyond just the sticker price. Investors need to factor in closing costs, insurance, property taxes, maintenance and repairs when evaluating the total cost of a Chicago real estate investment. Being aware of all these elements will enable wise decision making when searching for profitable rental properties or fixer-uppers in the Windy City.
Purchase price depends on neighborhood and property specifics
The purchase price of Chicago investment properties can vary greatly depending on the neighborhood, property type, square footage, age, condition and amenities. For example, a studio condo in an older building far from downtown may sell for under $100k, while a luxury apartment in a new high-rise on the Magnificent Mile could sell for over $1 million. Investors should research sales comps in their target area to determine realistic pricing. Working with an experienced local real estate agent is advisable to identify properties priced appropriately.
Closing costs add 8-10% to purchase price
On top of the purchase price, investors need to budget for closing costs. These expenses include title insurance, recording fees, loan origination fees for financing, appraisal fees, inspections, attorney fees and more. Closing costs typically add about 8-10% to the total purchase amount. First-time homebuyers in Chicago can receive a $5,000 grant for down payment and closing costs through the City’s Neighborhood Purchase Assistance Program.
Property taxes are high in Chicago
Chicago has some of the highest property tax rates in the country. Taxes are calculated as a percentage of the home’s assessed value, and run 2-3% in the city. The median annual property tax bill for Cook County homeowners is about $5,000. Investors should account for this significant recurring expense when evaluating rental income.
Insurance costs vary based on property type and location
Investors must also budget for building insurance. For a rental property, landlords insurance will be required to cover liability risks. Premiums range widely based on factors like the property type, age, location and claims history. Ballpark costs are 0.3-0.5% of dwelling value.Chicago rental properties may also require flood insurance depending on the flood zone.
Maintenance and repairs should be budgeted for
Owning rental real estate also involves ongoing costs for maintenance and repairs. Things like appliance replacements, plumbing leaks, HVAC tune-ups, roof repairs and more will come up periodically. Investors should factor in a maintenance budget of 8-10% of gross rental income when evaluating Chicago investment property.
Chicago real estate can offer attractive returns, but investors need to carefully evaluate all costs including the purchase price, closing costs, insurance, taxes, maintenance and repairs. Understanding the full cost picture is key to finding profitable investment opportunities.