Experienced Chicago Area Investors

24 Replies

I have been searching for multi family units around Chicago to buy my first rental property, but have found it to be quite a difficult task.

For investors familiar with the area, what neighborhoods have you found to have the best tenants?

I want to buy in a good neighborhood while still getting a decent return. This pretty much eliminates everything between Lincoln Park and downtown as they are too expensive. Because it is my first house, I am looking to buy a house ready to go and rent it out. I am not really looking to make repairs or fix anything and am willing to take a slightly lower return because of that.

Looking under 300k, but if the return is good don't mind up to 500k.

Obviously seems like once you start looking at above 300, the % returns start to fade.

I started looking in chicago recently and found that cap rates get as high as 15% the further south you go?

From talking to a local commercial broker it seems that vacancies and nonpayment of rent are the enemies especially in south chicago.

What kind of buildings are you looking at? Cityfeet.com shows that there is no shortage of apartment buildings 10+ in chicago?

@Samson Kay Yes, the further south you go you run into low income and high crime rate neighborhoods, so I'm trying to avoid those.

I'm looking at 2-4unit houses primarily. If you buy single condos or apartments, the HOA fees can get quite ridiculous to kill any decent return. If you meant buying the whole apartment building, I think those are a little out of my range in good neighborhoods. Plus it is probably a little too complex for me as a first buy.

I'm just looking for a simple multifamily purchase with around 15% cash on cash return first year.

@Ahmed H

15% is possible on the South Side more so than N Side. I think those numbers will be hard to meet now due low inventory and the fact you want it renovated going in. 8-10% gross I think is more realistic on N or NW side.

@John Weidner

Do you think 15% vacancies are accurate in general? How hard is it to get to 95+% in your experience.

@John Weidner

What do you consider North? North of the river?

I'm fine with looking at properties around UIC area. I can even go more south as long as it is not in a high crime rate area.

@Samson Kay

I'm not a South Side expert..I just know the rents are strong compared to acquisition cost.

@Ahmed H

I'm talking Albany Park, Rogers Park, Portage Park, Avondale etc. Far N and NW. Anything in River North, Gold Coast, Old Town will be around $1M+.

Certainly makes the south side numbers less attractive when you factor in vacancies like that!

Thanks @Brianna S.

What have other south side investors in Chicago found to be their vacancies across their portfolios. Please chime in with the neighborhood and your historical vacancy rates.

Thanks in advance

Medium logo 01Larry Smet, Boomerang Capital Group | 1‑800‑266‑6345 | http://www.boomerangcapitalgroup.com

@Larry Smet I am not a S. Side expert. But from what I have heard from other investors I was told to estimate 20% because our Landlord/Tenant ordinance is very tenant friendly evictions are not very quick

Maybe @Mike B. can chime in... he has done some S. Side if I am not mistaken?

Medium second city real estate logo   white close upBrie Schmidt, Second City Real Estate | [email protected] | http://www.SecondCity-RE.com | IL Agent # 471.018287, WI Agent # 57846-90 | Podcast Guest on Show #132

South side appreciation has been nonexistent. You can still buy houses at 1980's prices. At least in North side of Chicago, people make lots of money when they sell. Ask Lincoln Park sellers if they bought in 80's or even 90's will be multiplying their money.

Tell me about it @Brianna S. ! It took us over 3 months just for the Sheriff to show up after the court ordered eviction date.

Also, I'm calling out @John Hauser , I know he has some south side experience. Tell us what you know John! :)

Medium logo 01Larry Smet, Boomerang Capital Group | 1‑800‑266‑6345 | http://www.boomerangcapitalgroup.com

It's a good point @Atul Mohlajee

I think most people invest on the south side mostly for cash flow. Having said that, there are a number of people who think there's some chance of appreciation with money pouring into the area from the Lakeside development - e.g., in South Shore.

Medium logo 01Larry Smet, Boomerang Capital Group | 1‑800‑266‑6345 | http://www.boomerangcapitalgroup.com

There is no where else in the city where you can buy a property in be all in for $40,000-$50,000 per unit after repairs than on the south side and those same units will double in value in short time. Prices may be as low as they were in the 80s or 90s but they have had peaks and valleys multiple times since. Let's not forget current rents compared to 1980s which were 70% lower. Vacancy on the south side can be controlled by sticking to a CHA business model. In 5 years and many units we have yet to have a single CHA tenant move out after just one year and many we have the original tenants still. Any issue we have with tenants on the south side is market tenants. Market tenants are quick to not pay and quick to call the city on you so we do attempt to lease to CHA when possible.

There's better areas than others on the south side. There are areas we stay away from but there are also little better areas where you might be at $65,000-$70,000 per unit and be a little more south side conservative(lol).

South side appreciation is there every 10 years fueled by speculation and investors flipping and most recently (2004-2005)building new so there is appreciation, it just has to be timed right.

Heck you guys all see what these turn key companies are selling these two flats for in those exact neighborhoods we won't touch anymore and they are appraising out. In just 5 years that happened and those new levels were reached.

Medium untitledMark Ainley, GC Realty & Development LLC | [email protected] | 630‑587‑7400 | http://www.gcrealtyinvestments.com | Podcast Guest on Show #72

How is the area around Midway airport for rentals?

I agree wholeheartedly with @Mark Ainley . We bought a place for $69 k all in and now it is appraised at $135k. We are getting 2.5 percent per month return, and now that we are wise to the risks of market tenants, plan on doing better than that next year. Deciding where to buy down there is a block-by-block decision. In our case, we drove every block of South Shore to decide which areas were good and which weren't. And like Mark said, appreciation is a matter of timing down there because it's mostly investors who drive up prices and not owner occupants. How is that @Larry Smet? :)

@Larry Smet Personally, I would not bank on the LakeSide Development any time soon. Yea, the project was approved in 2010 and TIF (Tax) Dollars were earmarked for it. But Phase 1 has yet to get enough funding to break ground. In October the LSD extension was completed and they are hoping that will draw attention to enough people to complete funding but even then the project will take 20 - 25 years.

http://www.chicagomag.com/Chicago-Magazine/March-2014/power-lakeside/

http://en.wikipedia.org/wiki/Chicago_Lakeside_Development

Medium second city real estate logo   white close upBrie Schmidt, Second City Real Estate | [email protected] | http://www.SecondCity-RE.com | IL Agent # 471.018287, WI Agent # 57846-90 | Podcast Guest on Show #132

Southside appreciation does exist but shouldn't be the reason to purchase. The rent income is strong and the vacancies are low when places are taken care of, competively priced, and rented through a good screening process.

Does anyone hold any rentals in the Bridgeport neighborhood?

It seems to me like a better buy and hold than fix and flip kind of area, but I'm still researching.

From what I've seen, a vibrant "hipster"- like influence and community is growing there, ala Pilsen = better tenants and higher rents?

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