How we purchased a studio and converted it to a one-bedroom unit
We purchased our second investment property in downtown Chicago in July of 2022. It was my first official investment property as the first one was my wife's old residence. It was exciting as I had lived in this building just two years ago renting a studio pre-pandemic. I moved out in the summer of 2020 when my wife and I purchased our townhouse in the West Loop together.
The entrance to this high-rise is on Michigan Avenue so there are ample amount of CTA busses right outside, and all the restaurants in the River North are within walking distance. Also, being just a few blocks away from the loop where most of the corporate offices are, it was perfect for young professionals like myself commuting to the office in the Loop, or for professionals attending graduate schools in the city.
The unit that I came across was exactly what I was looking for in the building, studio, city-facing, and higher floors. This unit was also wider than a traditional studio which was longer and had fewer windows. This provided more sunlight and had the potential to convert the unit into a one-bedroom unit.
Before I pulled the trigger on buying this property, I listed the unit to make sure there really was a demand for the unit and at the price range.
Sure enough, I received over 20 inquiries and already submitted applications within two days. So I decided to go through with the purchase. I informed the potential tenant of the situation that I am currently in the process of purchasing but she was understanding and willing to wait as she really liked the unit.
The listed price was $189,900 but my initial offer was $172 as the average studios in this building were much lower at $150-160K. We all knew this was a nicer unit so I was okay paying a little bit of premium. But I had to make sure it was not too high as it would be harder to rent the unit without paying part of the mortgage with my own money.
However, the owner barely budged and countered with a $187K, barely a $2000 decrease. I knew this would be a hard bargain, so to save everyone's time I told my agent that my best offer would be $180,000. When the seller refused to go lower any lower, I had to sadly walk away. It was disappointing as this was the second time in the past two months that I made offers for something and not coming to an agreement.
However, as the seller was a motivated seller and they did not receive much interest in the past week, they finally agreed to my final offer. I submitted my Ernest money and signed the agreements to purchase. I submitted a slew of paperwork to finalize my loan as well as meet the homeowners association requirements.
During this time, I had inspections completed as well as met several contractors to get a quote on different repair and renovation projects that I had planned.
Everything was going well until we received the appraisal report from the lender saying that the appraised value was only $156K. We were all shocked as we all knew that this unit was a nicer unit with a higher floor, an unobstructed view of the city, and slightly more SqFt than the traditional studio units.
Regardless, this was a wrench in our deal as the lender would not approve the original amount of the loan, and I would have to come up with the additional difference of $24K. The seller could have also dropped his price by that amount, but I knew this was an unlikely scenario. We all wanted to make this work, so I agreed to come up with an additional $20,500 and meet them at $176,500.
With all the delays in the negotiation, we had to schedule the renovation to begin just a day after the rescheduled closing date in order to allow the tenant to move in by mid-month.
It was going to take a week to build the drywall and I was originally going to paint the unit afterward to save some money. However, the contractor wanted to upsell his service so he agreed to paint the unit for a little less than what he originally offered.
I was relieved as it was going to be a hectic weekend with my daughters 100 day birthday supposed to happen in the morning and I had to paint in the afternoon.
On the first day of the renovation, I stuck around to make sure everything was okay. I biked to the unit each night after work to see the status and clean things out, throwing things out, and bringing supplies.
The Dry was built in three days by Saturday and we were scheduled to paint for a couple of days on Monday and Tuesday. In the meantime, I was completing other repairs like installing the door knobs on the French door, changing the halo lightbulbs, unclogging the drainages, and just cleaning the unit simultaneously.
One of the hazardous concerns I had was the bathroom fluorescent light which was located next to the shower with no coverings. Fortunately, the contractor I was working with over the past week offered to help me change it if I brought him a new vanity light.
Once we pulled out the fluorescent light fixture, there was a hole that we covered with leftover panels and we re-routed the wires to the top of the bathroom mirrors. I was relieved that we were able to complete another major project thanks to my new friend.
Upon completion of the renovation on Tuesday, I used the next few days to clean the condo and we were done in just seven days after the close. Even with the delay in the appliance delivery due to strict condo requirements, I was able to have Best Buy deliver and install new appliances on the morning of the move-in date and the tenant moved in the afternoon.
It was a whirlwind of a month and a half from the negotiation, closing, and renovation but I learned a lot and felt accomplished. I left two days later on a family vacation to Nashville as a much-needed break.
This experience made me realize nothing is impossible and that there are always experts who can get the job done. I could not have done it without them and made many new friends during this process that I would work with again including the handyman, inspector, agents, and attorneys.
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