Thinking About Buying An Apartment In Downtown Joliet, Illinois?

If you've ever considered buying an apartment building in downtown Joliet, Illinois, then you may want to read an article published this morning in the Chicago Sun-Times.

According to author David Roeder:

Falling property values in Cook County have put about $13 billion in multifamily mortgages at risk of default, about 30 percent of the total debt. Most of the risky loans are tied up in buildings with six units or fewer.

Foreclosures of apartment buildings fall heaviest on poor neighborhoods. For the 2-6 unit buildings, the foreclosure rate in 2009 was 13.9 percent for poor neighborhoods vs. 4.2 percent for regions with high incomes. For larger buildings, the comparative foreclosure rates were 7.8 percent and 2.1 percent last year.

Granted the article on deals with Cook County, but the same circumstances apply to apartment buildings in downtown Joliet, Illinois: primarily 2–6 units, poorer neighborhoods.

The MRED MLS shows 69, 2+ unit properties for sale in Joliet, but I looked at the 6 that were 4+ units or more. From the information I can find, none of them appear to be in foreclosure, but from the limited financial information available I was able to determine the cap rate (NOI/Asking Price). All 6 were above 7.5% with a couple near 10%.

That tells me that at least a few sellers are pricing their units attractively for cash flow purposes. That is something that we weren't seeing 3 to 6 years ago and the reason why some apartment owners are now facing foreclosure.

A broker, quoted in the article, put it perfectly:

"It's often because they paid too much and when the market turned on them, they didn't have the free cash flow."

If you are looking at buying multi-family in Joliet or elsewhere in Illinois, give me, Tim Soper of Realty Executives Success, a call at (815) 439–5051. We can discuss your goals for multi-family investment, target potential properties, and draw up a financial analysis on each.