Luxury Income Property

Let me start by saying that luxury income properties generally do not make sense for non-owner occupants looking for a cash flow investment.  Market pricing for lavish, well-located assets often do not provide enough income potential to cover debt service and other housing expenses – though there may be an opportunity to produce a positive return on investment at disposition after a long-term hold period.

That said, for owner occupants looking to buy into a premier location with great schools while maintaining a lower cost of living, a multi-unit luxury building is a great option to consider.  george st

Let’s examine a current market listing in Chicago:  1336 W George Street is currently listed for a cool $1.8 MM, and boasts a recently renovated 4 bed, 3.5 bath single family home PLUS a 2 bed, 2.5 bath coach house (which you can’t build anymore in Chicago – and there are some enviable coach houses out there).    The coach house can bring in a potential $36,600 per year in net income, which over a 30-year period of ownership adds up to over $1.09 million.  The below example assumes insurance costs 20% higher, and uses recently rented comps for 2 bed, 2.5 bath apartments in the area to benchmark rental income.  Shown here, this luxury income property owner actually pays 34% LESS every month because of the boost in rental income.  Further, these back of the envelope figures do not take into consideration any of the post-tax benefits of operating a rental property such as expense deduction and depreciation expense.

20% Down Payment $1.8MM Single Family Home $1.8MM 2-Unit Building Difference
Principal, Interest, Taxes and Insurance $8,954 $9,004 $50
Coach House Rent $0 ($3,100) ($3,100)
Total Monthly Cost $8,954 $5,904 ($3,050)


For a recurring-expense-conscious, luxury-home-seeker looking to purchase a showcase home in Chicago – be on the lookout for unique opportunities to acquire luxury real estate with income potential.  You’re bottom line will thank you!  Contact us to hear more!

This entry was posted in Blog and tagged , , . Bookmark the permalink.