If the building has reached its rental cap, your future investment strategy might be on hold before it even begins.
The Rental Cap Nobody Told You About
There’s just one problem: Your building has a full rental cap.
A rental cap is a maximum number of units that can be leased at a time.
For example, a 100-unit building might limit rentals to 20 units.
If all 20 rental slots are occupied, you may have to join a waiting list before you’re permitted to rent yours, depending on the association’s governing documents.
And that waiting list?
It might move quickly. It might take years. There may be no reliable timeline at all.
Minimum Occupancy Periods
Other associations may require you to own or occupy the property for a minimum period before leasing it out.
That could mean purchasing a condo today and discovering that you’re required to wait one or two years before renting it out, depending on the building’s governing documents.
Other associations may impose additional restrictions, such as:
- Minimum lease terms: Requiring leases of six or twelve months, for example.
- Rental registration: Requiring owners to register tenants or submit lease documentation to the association.
- Leasing fees: Charging administrative fees associated with renting a unit.
- Tenant requirements: Establishing permissible screening procedures, move-in rules, or other tenant-related requirements.
- Restrictions on short-term rentals: Prohibiting Airbnb-style rentals or leases shorter than a specified period.
This is not to scare you from renting it out. It’s to inform you to ask these questions on the front of the purchase.
Why This Matters Before You Buy
A large number of buyers approach their first condo with a similar long-term strategy:
Buy now. Live there. Upgrade later. Keep the original property as a rental.
It’s a reasonable approach to building a real estate portfolio.
But that strategy only works if the building allows you to execute it.
And there’s an important distinction between a listing that says “rentals allowed” and a building that currently has rental availability.
ALWAYS ASK ABOUT THE RENTAL CAP.
Before purchasing a condo you might eventually rent, I want to know:
- Does the association have a rental cap?
- How many units are currently rented?
- Is the rental cap already full?
- Is there a waiting list, and how does it operate?
- Are there minimum ownership or occupancy requirements?
- Are there minimum lease terms or other leasing restrictions?
- What do the recorded governing documents actually permit?
Because the ability to rent your condo later isn’t something I’d want to discover after you’ve already purchased it.
It’s something I’d want to investigate before you make the offer.
Frequently Asked Questions
What is a rental cap in a Chicago condo building?
A rental cap limits the number or percentage of units that can be rented at a given time. For example, a 100-unit building with a 20% rental cap may allow only 20 units to be rented simultaneously.
How do I find out if a condo building has reached its rental cap?
Request the condominium association’s governing documents and ask the property manager or association for the current number of rented units, the rental limit, and whether a waiting list exists. Ideally, obtain written confirmation before proceeding with the purchase.
Can I rent my condo if the building has reached its rental cap?
Generally, not immediately if the applicable restriction prohibits additional rentals. You may need to join a waiting list or qualify for an exception, depending on the governing documents and applicable law.
Can a Chicago condo association require me to live in my unit before renting it?
Some associations have minimum ownership or occupancy requirements before an owner may lease a unit. The enforceability of a specific restriction depends on the association’s governing documents and applicable law.
Can a condo association change its rental restrictions after I buy?
Potentially, yes. Changes may require an amendment to the condominium declaration or other procedures, depending on the restriction and applicable law. Buyers should understand how leasing restrictions can be changed and whether existing owners receive any protections.
Are short-term rentals like Airbnb allowed in Chicago condos?
Not necessarily. Even when long-term rentals are permitted, an association may restrict or prohibit short-term rentals. Chicago also has municipal short-term rental requirements, so owners must consider both city regulations and association restrictions.
What happens if I need to move but my condo association won’t let me rent?
You may need to continue occupying the property, carry it while vacant, sell it, or explore whether an exception is available. The available options depend on the governing documents, your finances, and the circumstances.
Should I avoid buying a condo with a rental cap?
Not automatically. A rental cap may be perfectly acceptable for someone planning to occupy the property long-term. However, if your strategy depends on eventually converting the condo into a rental, the cap and current rental availability deserve careful consideration before purchasing.
Make Every Move Count. Ryan Lehrman
