how to determine a good neighborhood to invest in

17 Replies

Does anyone have general tips on how to determine a good neighborhood to invest in? I have a budget of under $40K and looking for my 1st deal. It appears that many of the properties that I'm finding within this range are in neighborhoods infested with crime. Any general tips especially from real estate flippers in Chicago? Thanks!

@Debo Ijiwola

Is $40k your budget for a down payment and then finance on top of it? Or is that your total include financing options?

As major US cities go, Chicago is still pretty reasonably priced. It still has a city economy, and I think 40k would be hard to move in the Chicago area. Couple ideas for you:

1) Have you thought about a live-in house hack? If you are financing, you will qualify for much better options by living in the home.

2) Have you considered partnering. Either finding an equal partner who can double your money, or a more passive partner you can work with. Everyone has something to offer. Many of the people who have money, lack time. 

3) How much extra money would it take you to get to properties that you know and with which you feel safe? When you know that number, I would run a projection on how long it would take you to earn it. If that's too long, consider cuts you can make in your budget, or consider taking on some extra work to cover the difference. 

In any of the three situations, you will have a net positive. Each forces you to innovate around the circumstance. 

Also, I grew up in Evanston. Still very fond of Chicago, so I love seeing folks do business there. Do reach out if you need anything else.

@Trevor Ewen 

Thanks for your reply!  Evanston is one of the nicer surburbs around the city and definitely pricier too. I particularly enjoy driving by the mansions there worth millions of dollars:)

My goal is to buy a property under $40K rehab it with about 10K - all with financing and then resell. I understand that there are better financing options with living in the property, but I cannot live in most of the neighborhoods that I will be buying in. It appears that the lower priced properties within my budget are mostly on the south. 

I am certainly open to partnerships with other investors who do not have the time but I know that it also takes some work to find them.

In terms of how much more I would add to feel safe, it'll probably be - baseline $100k and then an additional 20-25K to rehab and sell with a ceiling of 150-175K.

If this is your 1st deal, the perfect neighborhood will be within 2-5 miles from your own residence, if possible. This is because you know this neighborhood better than anyone else and it will be easy for you to manage. For your 1st deal, it is very important that it 'works' fine since this will build up your perception, confidence and overall experience towards REI (positive or negative) for the future deal. ......

good luck and happy investing... 

@Kumar Paj

Thanks for your advice. I totally agree. However, my neighborhood (Kenwood) is priced way higher than my budget, so I'm considering neighboring areas that are not priced as high.

I've been driving around the city a lot lately and you are correct about the prices in Kenwood. I will keep my eyes and ears open for you...

@Jerry Stanford.

Thanks. I appreciate any help!

I'm reminded of an episode of Northern Exposure where they performed a test by burying someones arm in the ground for 24 hours and then seeing what was in his hand when they pulled it out.  You might want to try something like that.  If you can stay there for 24 hours with one hand in the ground, it's probably an ok area.  Let us know what you find in your hand when you pull it out.

Originally posted by @Debo Ijiwola :

Does anyone have general tips on how to determine a good neighborhood to invest in? I have a budget of under $40K and looking for my 1st deal. It appears that many of the properties that I'm finding within this range are in neighborhoods infested with crime. Any general tips especially from real estate flippers in Chicago? Thanks!

It's only possible for you to flip a property w/ only $40K in Chicago if you combine the $40K w/ other people's money.  That could be hard money, private money, partnering.....  

@Debo Ijiwola With that budget, your only option would be to finance your purchase with a Hard money lender. Cheap neighborhoods in the southside of Chicago area Chatham & Auburn Gresham. You can find houses for under 50K, but I wouldn't choose any of these neighborhoods for a first flip. 

Calumet Park, Calumet City, Lansing, Country Club hills, Glenwood, hazel crest, Floosmoor, are other options as well. These are southside suburbs very close to Chicago (about a 30 min drive from downtown). 

@Crystal Smith

Thank you for your reply. I agree. I am looking to financing the capital i.e using other people's money. I just began to network so I don't have private investors yet.

@Daniel Moctezuma. Thanks for the list, it's really helpful. Yes, I'm staying away from the crime infested neighborhoods which happen to be lower priced. I'll begin to look at the south suburbs you mentioned. I'm currently using Redfin for my search. Any other recommendations for listings apart from MLS?

@Debo Ijiwola Make sure the"@" auto populates the name of the person you're trying to mention. 

I mostly use redfin but I also have the username/pass of a realtor that I work with. If you develop a good relationship with you're realtor, he can give you his username and you can pull comps and search properties on the MLS.

I'm also getting my license and you might want to consider that as well if you really see yourself doing this for the long term. You'll save 2.5-3 % of your commission costs when you sell a property.

Zion IL has some good options in that price range we have directed our focus up there for now away from NWI cause prices are going up over here! Take a look at Zion there are some real home runs! @Debo Ijiwola

Maywood/Bellwood is in the same price range as well. However, I'm not very familiar with the crime rate in those areas.

I personally judge neighborhoods by the quality of their schools. I have found that good neighborhoods tend to have good schools and vice versa. 

I lived in Chicago at one point and I do think 40k total is going to be difficult to find unless you go to really bad neighborhoods and find houses that need a ton of work.

@Luka Milicevic :

Thanks for the tip. I'll be sure to check out the schools in the neighborhood. CPS in general does not have a good history :(

Also, I'm realizing that my budget needs to go up. I am willing to go up to $120K for safer neighborhoods.

 @Account Closed :

Interesting you mention Zion, I totally agree. My family and I lived on Sunshine Lane in Zion for about 6 years and it's always been promising. My only challenge is that we now live in the city and Zion is kind of far considering that I would like to actively monitor the real estate projects that I will be working on.

 @Daniel Moctezuma :

Thanks for the tip on the autopopulate - one of the things a newbie has to learn on Bigger Pockets:)
I have a realtor that I'm working with who sends me property listings daily based on several criteria that I asked him to set up.
I'm in this for the long haul, God willing,  and I hope to get my license soon but for now, I would like to leverage on my realtor's knowledge and resources until I get more comfortable through experience.

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