Chicago 4-bed at $465,000 and $1,421/month: does the yield work?

D

DeepLane

Real estate agent
My budget leaves little room for an expense estimate to be wrong. The property is a 4-bed serviced apartment in Chicago priced at $465,000, with projected rent of $1,421 a month and a stated gross yield near 3.7%.

I have recalculated using eleven months of rent and deductions for management, ordinary repairs and a reserve for larger work. The building looks sound, but its reserve position and possible shared expenditure are still unclear. Before deciding whether the remaining net cash flow is adequate, I need to know which figure deserves the closest verification: the actual property-tax bill, insurance, association charges or tenant-change costs. I also need to confirm whether $1,421 covers the whole apartment and exactly what the servicing fee includes.
 
At eleven months, your collected rent is $15,631, so the effective gross yield is only about 3.36% before property tax, insurance, management, maintenance or building charges. That is extremely little room for error. I’d investigate the actual property-tax and insurance figures first, then any association fees. Unless there is another strong reason for buying, the rent looks too low relative to the price.
 
Is the $1,421 for the entire 4-bed apartment, or is it a per-room figure? And what does “serviced” include here—utilities, cleaning, furnishings or more frequent tenant turnover? Those details could change the calculation more than adjusting the repair reserve by a few percentage points.
 
I also wouldn’t assume property tax is automatically the main danger. In a shared building, weak reserves or a large future assessment can overwhelm several years of ordinary maintenance savings. I’d ask for whatever budget, reserve information and assessment history are available, while separately confirming who pays utilities and turnover costs.
 
The $1,421 is the whole-apartment monthly income I used, not per room. I had treated the serviced costs as separate expenses, but the comments have exposed the bigger issue: the starting rent may simply be too low for a $465,000 purchase. I’m going back to verify the rent assumption, property tax, insurance, association charges and exactly what services are included before refining the reserve.
 
That is the right order. Before financing, a 3% net yield would require $13,950 a year of net income. With only $15,631 from eleven months of rent, all operating expenses combined could be no more than $1,681, which seems like an implausibly narrow allowance. Even a 2% net yield leaves only $6,331 for every expense. Then test financing separately, because modest changes in borrowing cost could turn thin cash flow negative.
 
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