Not so fast. As banks look to restore their balance sheets they have been able to hold off on unloading investment property at 12 caps in Lincoln Park. We all have been waiting for that killer deal but I have yet to hear about it. Yes, it's true that investors are buying notes/bricks and mortar for pennies on the dollar. Does that mean the investor has made a killing? Not always. I recently received a listing to sell a 87 unit in the South Shore neighborhood of Chicago. The loan is over $3MM. We have it listed for $600,000. Even if somone paid asking price that would amount to .20 cents on the dollar. It sounds like a good investment but lets dig deeper. The entire building needs to be rehabbed which would cost a minimum of $1MM. It's a 2 year project which means carrying costs are high. Now you are into the building for $25,000/unit and you still need to find tenants.
My experience is that banks follow strict guidelines when it comes to chicago commercial investment property dispositions. They receive BPO's and appraisals and the bank is required to hit a certain percentage of that BPO/appraisal. If it's below that number then no deal.
Just Because you're buying a building for pennies on the dollar does not mean you're getting a great deal.
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Peter Lynn & Dan Rosenberg |
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Building Equity Chicago Commercial Real Estate |
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