City condos as second-homes?

City condo for vacation? Suburban, out-of-state buyers enjoy Chicago, watch values climb May 02, 2005 By Dan Rafter Gold Coast getaway: Randy Papp of Beverly bought a "second home" condo. Photo: Howard Chen The surging popularity of downtown condos has reached yet another market segment: the second-home buyer. Though single-family properties are the traditional second home of choice, buyers looking for a second home in Chicago more often than not snap up city condominiums. The reasons are many. A condominium in the right neighborhood comes with a view of Lake Michigan or Millennium Park. It may provide the amenities of a high-end hotel. And it's almost certain to appreciate steadily. "We are seeing people from Naperville, from Oak Lawn, from the Near North Side all purchasing condominiums in the heart of the city to use as their vacation homes," says Dick Greenwood, director of builder marketing for Coldwell Banker Residential Brokerage. "Chicago offers anything in the world that people could want. You have the lakefront, boating, world-class theater, opera." South Sider Joan Papp stays at her Gold Coast condo one or two nights a week. Photo: Howard Chen Joan and Randy Papp, who live in Beverly full time, bought a Gold Coast condo last year. One or two evenings a week, they stay downtown to enjoy the views of Lake Michigan, attend a show or dine at one of the countless restaurants dotting the area. If their second home should appreciate while they enjoy it? All the better. "We bought this because there is so much to do here," says Mr. Papp. "I'm pretty sure our condominium will appreciate in value, though right now, we're not too concerned about it. We're just interested now in enjoying everything there is to do in Chicago." continued below Advertisement The National Assn. of Realtors breaks the second-home market into two categories: vacation homes, primarily used for pleasure, and investment properties. According to a study by the association, 83% of vacation homes purchased in 2004 were single-family detached homes, as were 79% of all investment properties. But in the Gold Coast, Lincoln Park and South Loop, where second homes will appreciate and buyers can take advantage of entertainment and dining, condos are far easier to find and purchase than single-family residences. "These are good investment opportunities," says Jane Field, a real estate agent with the Gold Coast office of Koenig & Strey GMAC Real Estate. "Most of my second-home sales are on the lakefront. They are in a prime zone, one that packs in the promise of good appreciation." Desired but rare in nearby areas Even outside Chicago, condominiums are increasingly a lure for second-home buyers. The maintenance is minimal, an important factor for owners who may live hundreds of miles away. They're easier to rent out. And they're usually more affordable than single-family homes in the same communities, while still appreciating at a good clip. Maury Reed, a real estate agent with Rubloff of Michigan, sells homes from New Buffalo, Mich., north to Holland, about 170 miles from Chicago. She estimates that 95 percent of her clients are Chicago-area residents looking to buy second homes. "A lot of people are looking for condos here. The problem is, there are not many available," Ms. Reed says. "A lot of developers have tried to put condos in over time in our lakefront areas, but the zoning often prohibits it. It makes sense to want to turn to condos as second homes because they're such easy things: You use it, leave it and it's pretty carefree. There just aren't as many as people anticipate." There are some in New Buffalo; a few more in St. Joseph, a busy town located about 100 miles from Chicago; some in South Haven, located about 140 miles from Chicago; and one set in Holland. In Northwest Indiana, beyond the industrial towns of Hammond and Gary are beachfront communities in Porter County, and towns such as Beverly Shores, Dune Acres, Ogden Dunes and Michigan City, all less than an hour-and-a-half drive from Chicago. As in southwest Michigan, though, lakefront condos are scarce. David Jones, 35, of Lexington, Ky., bought a second-home condo last June in 732 W. Bittersweet Place, in Uptown near Lakeview. He wanted an investment that would rise in value while he enjoyed big-city attractions. "I knew this area well before I bought here, and it seems like the housing prices here are going up," Mr. Jones says. He targeted his new condo because of its price: At 600 square feet, it cost about $163,000, and he sees plenty of room for appreciation. "This will be a great buy for a single person looking for a first place," Mr. Jones says. "You always have a market for that." David Hehman, president and CEO of EscapeHomes.com, a Web-based listing service specializing in vacation homes, said it's little surprise that city buyers choose condos as second homes. "Buyers don't have to worry as much about property management," Mr. Hehman says. "In cities like Chicago, New York or San Francisco, condos are by far the most desired type of second home. You can walk out the door, lock it and know that everything else is taken care of." There are no local statistics to determine how many buyers of city condominiums are purchasing their properties as second residences. But Ms. Field and other city agents say the market is strong and diverse. Consider some sales Ms. Field has recently made. Some of her buyers purchasing second-home condominiums live in other states and use their city properties on occasional weekends. Two such buyers live in California. Ms. Field has also sold second-home condos to buyers who live in suburbs and use their properties nearly every weekend. A smaller category of buyers purchases condos because their children are attending college in or near downtown Chicago. These buyers aren't purchasing the condominiums for their children, but rather as home bases for their own weekend visits. Whatever the reason, such purchases have shown strong appreciation. The Chicago Assn. of Realtors reported that the median sales price of condominiums in Chicago rose nearly 5.5% to $268,000 in 2004. City condos have also sold well, with the local association reporting sales increased 12% in 2004. There are hazards, though. Pat Cullen, a real estate agent with the West Loop office of Century 21 Sussex & Reilly, recommends that investors avoid condominiums with high monthly assessment fees. "You'll pay for amenities such as a doorman or swimming pool — if you are not taking advantage of those items on a daily basis, you still have to pay the assessments for them," Mr. Cullen said. "Those assessments can be $600, $700 a month, and you can't write them off. If you're not going to be there weekly, you might want to try a smaller building without a doorman.">