Chicago Market - Recent Successful 2-4 unit house hacks?

7 Replies

Hello everyone at BiggerPockets! I have been lurking on BiggerPockets for a few months now. I recently decided to get serious about changing my living situation from renting to becoming a home owner.  I am currently using a few realtors and lenders as I search for deals on the north side of Chicago. 

My question is simple, has anyone had any success in the year of 2020 with purchasing a multi-unit house hack on the north side of Chicago? Areas not including North Austin, Hermosa,or any other gentrifying areas. Is this possible in 2020 using an FHA loan for a three or four unit property? Conventional loans at 5% are impossible for a three or four unit property. Two flats seem to all net negative, though they are the only ones possible from a 5% DP perspective... even including a garden apartment.


Breaking even, were you wouldn't need to pay, would be a success. If you found positive cash flow, that's even better. Potentially paying a small sum, while the rest of your unit(s) pay the majority of your mortgage and expenses, would be positive.

The BiggerPockets rental calculator shows the market for the north side cash on cash returns on two flats as negative 100% of the time. Cash on cash for three flats properties are neutral or slightly positive, until you include FHA into the deal as a 5% conventional isn't possible. Deals that allow you to live in the property while renting the other units won't ever break even when you move out and rent that last unit. One would end up operating at a net loss once you exit the property for a better deal.

I would like to use my own capital and a lenders to purchase something to live in while generating some income, or at least reducing what I already pay in rent.

Is this is a pipe dream on the north side of Chicago?

Sorry to sound so negative on one of my first posts.  I assure you I am a happy and optimistic young man.  I would only like to ascertain if I am wasting my time in this market.

Thanks everyone!

@Jason Givens house hacking is a tough strategy right now. The death of the home possible 5% down loan really hurt young investors (ok it is only mostly dead). Most areas have seen incredible price appreciation, but rent appreciation hasn't happened. We have seen a handful of our clients have success this year, but we have had to re adjust expectations. The days of 15% COC returns with low/no money down in a solid neighborhood are gone. To be fair, if you buy with an FHA loan and pay the principle down to 20% over some time you still will get a cash flowing asset when PMI gets refinanced out. You will still get debt pay down, appreciation and depreciation in addition to the mortgage interest right off. I think there is still a case to be made for house hacking, but the expectations will have to change for sure.

@Jason Givens There is definitely a sweet spot when it comes to finding 2-4 properties that "make sense" if you are using FHA financing. Cant be too expensive since they wont comply with loan limits or pass the self sufficiency test (3-4 units only), but cant be too cheap/distressed or they wont pass FHA inspection. If you want to live for free (or close to it) in a C class or better area you will likely have to be comfortable with living in a non-conforming unit. If you want to get into a legal 3 unit you likely need to find something just ugly enough to pass FHA inspection as "live-able" then plan to apply some cash to rehab. You can find some still in the $400-500k range in W. Humboldt, Hermosa, Belmont Craigan - just make sure your agent knows how to pitch your FHA financing to seller side so they don't de-prioritize you against conventional.

The turn key properties will be too expensive unless you are willing to live in a fringe neighborhood  on west side or SW side like East Garfield, Austin, Little Village, Woodlawn, etc. 

Originally posted by @John Warren :

@Jason Givens house hacking is a tough strategy right now. The death of the home possible 5% down loan really hurt young investors (ok it is only mostly dead). Most areas have seen incredible price appreciation, but rent appreciation hasn't happened. We have seen a handful of our clients have success this year, but we have had to re adjust expectations. The days of 15% COC returns with low/no money down in a solid neighborhood are gone. To be fair, if you buy with an FHA loan and pay the principle down to 20% over some time you still will get a cash flowing asset when PMI gets refinanced out. You will still get debt pay down, appreciation and depreciation in addition to the mortgage interest right off. I think there is still a case to be made for house hacking, but the expectations will have to change for sure.

I believe you are 100% accurate in this assessment. After a few conversations in the past week, I'm thinking you are all too accurate. Seems like I can get an asset that I can only pay 1k a month for in a decent neighborhood at best. 2 Unit 5% conventional or 3.5% FHA at these rates might just be the best win I can get without thousands of dollars in my pocket.

Originally posted by @Jake Fugman :

@Jason Givens There is definitely a sweet spot when it comes to finding 2-4 properties that "make sense" if you are using FHA financing. Cant be too expensive since they wont comply with loan limits or pass the self sufficiency test (3-4 units only), but cant be too cheap/distressed or they wont pass FHA inspection. If you want to live for free (or close to it) in a C class or better area you will likely have to be comfortable with living in a non-conforming unit. If you want to get into a legal 3 unit you likely need to find something just ugly enough to pass FHA inspection as "live-able" then plan to apply some cash to rehab. You can find some still in the $400-500k range in W. Humboldt, Hermosa, Belmont Craigan - just make sure your agent knows how to pitch your FHA financing to seller side so they don't de-prioritize you against conventional.

The turn key properties will be too expensive unless you are willing to live in a fringe neighborhood  on west side or SW side like East Garfield, Austin, Little Village, Woodlawn, etc. 

 Thanks for the information and the call.  I will most certainly narrow my search for 2 unit properties with a non-conforming garden apartment.  This just seems like the most bang for your buck in Chicago

I have been exploring the same thing on the North Side and have found it to be pretty unrealistic with low money down on the North Side. I am in the Edgewater area and regularly search around for opportunities, but none of the numbers make sense for my short or long-term goals. I have started to look into the south-side and some of the suburbs. 

Originally posted by @Jameson Dixon :

I have been exploring the same thing on the North Side and have found it to be pretty unrealistic with low money down on the North Side. I am in the Edgewater area and regularly search around for opportunities, but none of the numbers make sense for my short or long-term goals. I have started to look into the south-side and some of the suburbs. 

My main issue is actually wanting to live there.  I'm a live long Chicagoan from the South Side and I have no interest in going back.  I am actually considering properties bordering hermosa and humbolt park now, as that is how far south west I am willing to go.  A gentrifying area with a 2flat may be the best you can get on the north side of Chicago.