Newbie Market Analysis, critiques welcome

9 Replies

Hello Bigger Pockets people.  I'm a newbie investor with zero rental properties to my name.  I've read both of Brandon's books (and listened to the audiobooks) and I'm also slowly working my way through the podcasts (#83 with Marcia Maynard is my fav).  

It seems like a big reoccurring theme is how important it is to know your market.  So, I've started looking for mine by driving around and doing some online market analysis. 

What I want:  A duplex or triplex within 30 minutes of my house that generates $200 per month per door in cash flow.   

My first target area is Downers Grove which is located in the western suburbs of Chicago.  Below is what I've found online.  My conclusion is prices are too expensive compared to the average rents.  I'm thinking it be a better use of my time to look at nearby less affluent towns.  

Please let me know what you think.  I would really appreciate any guidance/criticism you're willing to throw my way.

  • County: DuPage (evictions relatively quick based on my own prof exp).
  • Population: 49,715 (2014, 2% increase from 2000)
  • GreatSchools.org Scores: 10-7 (mostly 9s and 10s);
  • CrimeReports.com: 59 sex offenders; last month 25 violent crimes and 60 property crimes.  Most incidents in the southeast of town. 
    • City has 73 police officers 
  • Median Household Income: $81,000
  • Median Home Price $345,000 (2013)
  • Average Unit Price DuPlex/TriPlex: $222,205 (ouch that's high)
  • Median Gross Rent: $1,136 (from City-data.com).
  • Average Rents:  $900 for 1 bed, 1 bath; $1200 for 2 bed 1 bath; $1350 for 2 bed, 2 bath (based on postings on Craigslist & Trulia)
  • Median Real Estate Taxes: $5,650 (1.8%)
  • Unemployment: 3.6% (Sept. 2015, trending downward)
  • New Construction: 76 permits issues in 2014, average cost $402,300 (steady increase in permits over last 5 years)
  • 3 Starbucks in town (more in immediate surrounding areas)
  • 4 large hospitals in town

Yes, I agreed Downers Grove is too expensive are for rental market maybe for flipping it works.  You would have better luck go further away from Chicago like Aurora where you can get closer to the 1% rule.

I'd also take a look at Lagrange Park. Lower priced housing stock with good schools, proximity to transportation, etc. Good rents and quite a few rehabs happening..

Downers Grove is great for house flipping in my opinion. You can get great foreclosures, short sales, etc. at a good low price and get a great ARV and cash flow because you can rent out at about $2500/mo for a single family home rental and people are generally willing to pay that price for the area and the DG schools.

There's plenty out there in DuPage County if you are willing to look at towns that are not Downers Grove. What are your primary objectives? Cash Flow? Appreciation? What is your exit plan (at least for now)? It seems that you have done a good amount of research, have you lined up financing? Do you have any cash flow analysis spreadsheets that you are using to help you find properties? How are you finding properties? Have you engaged the services of a realtor?  Answering a lot of these questions I think will help you get to the next step. Let me know if I can help.

Good job!  Yes, good for flipping, not so good for rent.

@Edward Wodziak - Thanks.  I will check out Aurora.  Though to be honest, I'm not a huge fan of the area.  But maybe I need to just get over it.  

@Chris Carollo - Thanks!  LaGrange and LaGrange Park is on my list of possibilities, but it's in Cook County, which I kinda wanted to avoid for my first property.  I live in DuPage...so I kinda wanted to keep things simple for the first property.  Plus, I've heard some horror stories about Cook County evictions.  6+ months to get a tenant out...no thank you.

@Stephany Trombello - Thanks! I do love the area. And I'd be open to a BRRR type investment, but not for my first property. I want something that only needs basic cosmetic fixes (upgrade a kitchen/bathroom, new paint, etc.).

@Jeff Nobleza - All great questions!  I'm working on all of it.

@Justin Stanfield - Howdy! (I lived in Houston for a few years.)  Thanks for confirming my suspicions.  I appreciate your feedback.   

@Edward Wodziak - Thanks. I will check out Aurora. Though to be honest, I'm not a huge fan of the area. But maybe I need to just get over it.

@Chris Carollo - Thanks! LaGrange and LaGrange Park is on my list of possibilities, but it's in Cook County, which I kinda wanted to avoid for my first property. I live in DuPage...so I kinda wanted to keep things simple for the first property. Plus, I've heard some horror stories about Cook County evictions. 6+ months to get a tenant out...no thank you.

@Stephany Trombello - Thanks! I do love the area. And I'd be open to a BRRR type investment, but not for my first property. I want something that only needs basic cosmetic fixes (upgrade a kitchen/bathroom, new paint, etc.).

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