Looking for Strategies: Chicago 3–4 Unit House Hack With Today’s Rates

[Rochelle Fernando]

My goal is to purchase a 3–4 unit property in a B-class neighborhood in Chicago and house hack. Ideally, I’d like to focus on areas such as Logan Square, Bucktown, or Avondale. The challenge I’m facing is that with current interest rates and only 5% down, it’s been very difficult to find a property in the $800K–$900K range that even breaks even, let alone generates positive cash flow.

I’m concerned that by going with a higher purchase price, I’ll be locking myself into a deal that won’t cash flow for years. For those with experience in Chicago’s multifamily market, what strategies or alternative approaches would you suggest? Should I be broadening my search to other B-class neighborhoods like Pilsen, Ukrainian Village, or Irving Park that might offer better numbers while still providing strong long-term potential?

[John Warren]

@Rochelle Fernando you are correct that the delta isn't what it was three to five years ago. Most house hacks are more of a break-even situation when you find a "good" one, and you are mostly looking at the longer-term benefits of real estate like appreciation, depreciation and debt pay down. The main thing to remember is that real estate has always been a get wealthily slowly game. I think anyone who might move out of the area in a few years should not be looking as much at house hacking. If someone is from the Chicago area and has roots, it often times makes sense to buy a good building in an area you like versus renting. 

The neighborhoods you referenced are all great spots. The rents have been absolutely on fire the past few years. We own in Avondale and manage in Logan Square, and the rental increases have been fantastic. That NW side is such a good, long-term area to own in.