We’ve been talking a lot lately about second-home buyers and investors in Chicago. Slower appreciation and daunting market times lead some investors to rent their condos, a practice sometimes frowned upon by a building’s owner-occupants.
“A renter doesn’t have the financial stake in the building that a homeowner does,” says Dorrie Freiman, sales manager at Teng & Associates’ ultra-luxury downtown development, Waterview Tower. “If investors who buy units to flip get themselves into trouble, they need to get out fast, so they’ll sell at almost whatever price they can get, and they could hurt the building’s economic reputation.”
Many second-home buyers at Waterview, Freiman says, are “snowbirds,” people with Chicago connections who live in warmer climates during most of the year. Others favor hotel condos, which are available at the Shangri-La in Waterview Tower and a handful of other downtown developments, “because they know they’re only going to be here a couple weeks or so, and they don’t mind it being rented out when they leave,” she says.
With only one condo hotel up and running in Chicago, The Raffaello, in Streeterville, the investment potential of these hybrid units (owned like traditional condos but with the option to rent them as hotel suites when owners aren’t in residence), is at best unproven. “For someone who wants to diversify their portfolio, who’s very well positioned financially, buying a hotel condo could be a very interesting investment,” market analyst Gail Lissner says.
Another segment of the second-homes market, according to MCL Companies‘ Michael Maier, is made up of parents buying homes for their children while they are attending downtown colleges. Parents also purchase “kiddie condos,” as Lissner calls them, for sons or daughters just starting jobs in the city. Seeing some price appreciation along the way is an added bonus and, of course, mom and dad get to drop by for weekend visits.
Investors of various stripes can make up 15 to 20 percent or more of the buyers in a downtown building, Lissner says. These days the happiest ones probably aren’t in it for the money.