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Chief
Buying a condo in the city isn’t exactly an investment. With HOAs, property taxes, etc - the amount of money not going towards home ownership is astonishing.
HOA's are more reasonable in three flats or mid-rise buildings. But if you want to live in a high rise on the lake or downtown the HOA can be over 50-80% of the mortgage payment which is insane (also partly due to cheap interest rates).
Uncertainty
1) The opportunity cost of what your down payment could be earning is worth paying attention to
2) HOA and Property taxes aren't fixed and could increase over time
3) Home appreciations in most of the desirable Chicago neighborhoods has been poor over the past 10 years unless you're willing to move into a place that's only starting to gentrify
4) Potential taxes on any eventual sale, along with the closing fees, take away some of the investment return benefit.
I'm all for home ownership and own a property in another city, but Chicago is a rough market to make the math work
Don’t have the cash to put down
Moving abroad so no need to sink money into property.
Transaction and upkeep costs are significant; if you plan to move, or if you're not very sure about being in the same place 5 years from now, the financial benefits of homeownership may be outpaced by related transaction and maintenance costs when you want to move.
The cost of borrowing (rent) tends to be significantly lower than the cost of ownership. You can then allocate more of your net worth to higher returning assets.
Don’t fall into the fallacy that home ownership generates wealth. Investing generates wealth and real estate is many times not the best asset for an investment
Are you young, OP? I ask because I rarely hear this sentiment from people in my late 20s age group anymore. People have already listed a number of reasons, but suffice it to say that most purchased properties take 5-7 years to actually start saving you money.
When you sell you have to plan on about 8% of the sales price going to the realtor, attorney, move in / out fees, etc. So you need the value to increase to cover that before you even break even and that typically takes a few years. Add in HOA, interest (the majority of your payment early in the mortgage), and property taxes and it really doesn't work in your favor unless you plan to stay about 5 years or more.
I prefer the comfort and ease of high rise city living, and the alternative for similar doesn’t make sense from an investment perspective (as others laid out). I also prefer the flexibility to move cities / countries as I choose. I have other investment vehicles and my attempt at making partner has higher upside than any other investment bet….so most everything else I decide is based on comfort and preference. I still save / invest roughly $50k-$70k per year so if the partner bet doesn’t pay off (let’s be real, that’s a long shot for most of us), I’m still ok
Rising Star
To try new neighborhoods
Chief
Cash - and not just down payment cash, but upkeep cash. I spent $20K in my first year in my condo on a new furnace, fridge repair, painting, etc. Renters don’t have to worry about that.
Think about it this way. When you buy a single family you’ll get (almost) everything back. Since selling your house for less than you bought it is extremely rare unless in a recession..except You won’t get back taxes and interest on your loans. You technically will get back renovations and lawn care since they factor indirectly increase the curb appeal and market for your home.
When you rent you best believe you’ll never see any of that back.
You’re getting a place to live so you can’t expect your house to bring you money unless it’s an investment rental property, but owning definitely will minimize losses exponentially.
I was looking at the burbs, and my wife has a high standard of living when it comes to apartments so we paid a lot .
Our model showed 3-4 years because we were renting high quality apartments. Unfortunately In the suburbs you have to pay top Dollar to live in a decent apartment building otherwise you’ll be living with the lowest class of folks in the area.
My Chicago HOA is more than my P&I and I only have 20% downpayment - buying a condo was the worst financial decision I’ve made to date