The role of a buyer’s agent is much different than that of a seller’s (listing) agent.  The amount of time it takes to find properties, research them, present to clients and conduct showings doesn’t compare to managing a listing.  Buyer’s agency is more difficult; however, it can be much more rewarding. 

I located an available brick four flat (multi unit) near the Western Blue Line Stop for which I have three potential buyers.  In this case, instead of scheduling a showing, I previewed the property first.  This tactic is used often.  I found that the property was in good shape overall.  The hard part with a property like this is it was built around the late 1800s.  Properties built around this time typically have a layout deficiency resulting in small bedrooms.  Further, it was mostly empty which adds a ton of risk to your cash flow.  Throw in a couple other questionable things and I have a property that I can’t present to my clients. 

Ultimately I saved my clients a ton of time by not presenting the property or scheduling a showing.  However, at a much lower price point I will present this listing to my investors. 

I have written this post in response to commentary written by a national broker who sells large apartment buildings.  In reading his post, you will gain some current confidence as to why the apartment building sector may be positioned for recovery.  His basic premise is that home ownership is dwindling causing folks to become renters. 

He also suggests the lack of new supply of apartment buildings will cause a new imbalance between renters and available units.  I won’t argue with him here, but I think there is something much more significant to consider for Chicago apartment building investors.  The number one reason these investors should be optimistic is so many buildings have been converted to condos.  A recent review of the Eastern part of Logan Square revealed that more than thirty percent of these buildings had been converted.

Think about it!  Thirty percent of your competition has been eliminated.  Additionally, the replacement cost of these buildings provides a barrier to entry that will protect your investment from future competition.

Please see Richard Donnellan’s of ARA commentary:  http://www.globest.com/commentary/179495-1.html.

Apartment building owners on Chicago’s North and Northwest sides have not been hit hard by the distressed real estate market.  It is hard to say where prices are today because there is a lack of sellers and more specifically distressed sellers.  Many of the listings are priced at a capitalization rate of 6% which at a minimum indicates a lack of motivated sellers. 

One of the most important things to consider is today’s price compared to tomorrow’s rents.  I recommend that most of my investors have at least a ten year horizon for holding their buildings.  By following this advice, you will very likely see a meaningful increase in your property’s value and cash flow because you are locking in today’s price with your eye on tomorrow’s increasing rents. 

Please remember that when you buy correctly you can start making money from day one, but it will not compare to years nine or ten.