StreetAdvisor Question this week:

Can a couple live affordably in Chicago’s Loop?

In order to answer the question, we need to know how much it costs to live there, and then based on the current interest rates, determine monthly costs. From that, we can figure out how much income one needs to purchase this mythical condo.

If the couple lives in a One Bedroom condo in Chicago’s Loop, Near North, or South Loop Neighborhoods….

I did research on 1,2, and 3 bedroom condos in Chicago’s Near North (8008), Loop (8032) and Near South (8033) neighborhoods, and I discovered the following:

  • One bedroom sales have increased between 20% and 36% in the 3 neighborhoods
  • Average taxes range between $ 3364 and $ 3723 per year.
  • Average assessments range between $ 445.39 (South Loop) to $ 590.26 in the Gold Coast.

Cost to Live in a One Bedroom Condo

Let’s determine the monthly cost of one of these one bedroom condos.

Assumptions:

  • Purchase Price:  $ 230,000
  • Down Payment: $23,000
  • Interest Rate: 4.5%
  • Taxes:  $3500/year
  • Assessment:  $500/month
  • Debt Ratio 28% of Gross Income

Monthly Payment Resulting from these assumptions:

  • Principal and Interest:  $ 1841
  • Taxes:  $291.67 (or, $ 292)
  • Assessment: $500
  • Gross Monthly Payment: $1841
  • Annual Tax Savings for Federal and Illinois:  $3254 (from Bankrate.com)
  • Net Monthly Payment (not including property tax savings):  $1569

What do you have to Earn To Afford This Purchase?

Lenders usually allow for more debt than this, but when I first became a Realtor in 1987, the 28% rule was always followed. (Part of why we got into trouble in 2008 was our relaxing of this 28/36 debt ratio.)

28% debt ratio means that the gross monthly payment can be no more 28% of the gross monthly income.

For this example, $1841 / 28% = $ 6575 per month.

Annual Income Required:  $ 6575 x 12 = 78,900.

Two Bedroom Condos –

Loop, Near North, Near South

Three Bedroom Condo Prices –

Loop, Near North, Near South

 

 Want to Learn More about condos in the Loop, Near North, or Near South Neighborhoods?

Are you ready to begin the first steps toward owning a condominium in Chicago?

Contact Anne Rossley

of Baird & Warner today!

 

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