Experienced Chicago Area Investors

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Experienced Chicago Area Investors

Ahmed H
Chicago, IL · Member since 2014 · 5 posts · 0 votes

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.

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Brie SchmidtBusiness Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
12y

@Ahmed H I agree with the neighborhoods that @John Weidner suggested. If I were to look south I would invest near UIC or U of C (Hyde Park) and Pilsen and even South Shore

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    @Ahmed H - What type of budget?

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  • Ahmed H
    OP
    Chicago, IL · Member since 2014 · 5 posts · 0 votes
    12y

    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.

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  • Samson Kay
    Investor · Chicago, IL · Member since 2013 · 227 posts · 31 votes
    12y

    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?

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  • Ahmed H
    OP
    Chicago, IL · Member since 2014 · 5 posts · 0 votes
    12y

    @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.

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  • John Weidner
    Chicago, IL · Member since 2014 · 710 posts · 200 votes
    12y

    @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.

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  • Samson Kay
    Investor · Chicago, IL · Member since 2013 · 227 posts · 31 votes
    12y

    @John Weidner

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

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  • Ahmed H
    OP
    Chicago, IL · Member since 2014 · 5 posts · 0 votes
    12y

    @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.

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  • John Weidner
    Chicago, IL · Member since 2014 · 710 posts · 200 votes
    12y

    @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+.

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    @Ahmed H I agree with the neighborhoods that @John Weidner suggested. If I were to look south I would invest near UIC or U of C (Hyde Park) and Pilsen and even South Shore

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    @Samson Kay - for the vacancies what area are you talking about? On the North Side I have had 0% 3 years in a row - I think John is about the same. For the South Side I would estimate 20%

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  • Larry Smet
    Flipper / Rehabber / Real Estate Investor · Toronto, Ontario · Member since 2012 · 392 posts · 77 votes
    12y

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

    Thanks @Brie Schmidt

    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

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    @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?

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  • Atul Mohlajee
    Oak Park, IL · Member since 2014 · 285 posts · 114 votes
    12y

    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.

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  • Larry Smet
    Flipper / Rehabber / Real Estate Investor · Toronto, Ontario · Member since 2012 · 392 posts · 77 votes
    12y

    Tell me about it @Brie Schmidt ! 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! :)

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  • Larry Smet
    Flipper / Rehabber / Real Estate Investor · Toronto, Ontario · Member since 2012 · 392 posts · 77 votes
    12y

    It's a good point @Atul Mohlajee @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.

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  • Mark AinleyBusiness Member
    Property Manager · Roselle, IL (Chicago Suburb) · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    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.

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  • Mark AinleyBusiness Member
    Property Manager · Roselle, IL (Chicago Suburb) · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    Also keep in mind what Lincoln Park and Wrigleyville were like in the 70s and early eighties. For those of you who are old enough it was nothing like it is today and can be safe to say no safer than Bronzeville or East Woodlawn is today?

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  • Adam L.
    Chicago, IL · Member since 2013 · 49 posts · 12 votes
    12y

    How is the area around Midway airport for rentals?

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  • John Hauser
    Investor · Fairfax, VA · Member since 2013 · 126 posts · 28 votes
    12y

    I agree wholeheartedly with @Mark Ainley

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    @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

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  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    Also just saw this article:

    Here's How to Buy a City-Owned Lot in Englewood for Only $1

    http://chicago.curbed.com/archives/2014/04/07/how-to-buy-a-city-owned-lot-in-englwood-for-only-1.php

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  • Timothy Riley
    Investor · Chicago, IL · Member since 2013 · 451 posts · 96 votes
    12y

    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.

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  • Tim Davids
    Real Estate Broker · NW Indiana · Member since 2014 · 99 posts · 30 votes
    12y
    Originally posted by @Brie Schmidt:
    Also just saw this article:
    Here's How to Buy a City-Owned Lot in Englewood for Only $1

    http://chicago.curbed.com/archives/2014/04/07/how-to-buy-a-city-owned-lot-in-englwood-for-only-1.php

    Interesting article.

    Translation: take these lots off our hands and pay property taxes on them.

    Anyone know if this works to help a neighborhood?

    1Reply
  • Ana N.
    Investor · Chicago, IL · Member since 2014 · 110 posts · 33 votes
    12y

    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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