I'm a (relatively) young, single guy, moving to Chicago in a few weeks. I've been a renter all my life, and I'm considering my options here. I'm not sure how to proceed, so I thought I'd sign up and ask for some advice from the community here.
I can quite comfortably afford a 400k property on my own, and could probably stretch it to 650k (max) if it seemed like the right choice. I haven't talked to any lenders yet, but I have an appointment setup to start those discussions next week. I'll be working in the city center, so I was planning to live somewhere around there. I also figured I'd buy some property this time around, though I'm not sure about how the Chicago market is right now, and whether or not it's worth trying to time a purchase...
It seems like I have the following options, which fall into several categories:
1) Live alone
a) Buy a small condo. There are some reasonable looking deals in the 200-300k price range, but a lot of the condos in Chicago have very high HOA fees, upwards of 600 or 700, which I'd like to avoid.
b) Buy a townhouse. These are more expensive (and would probably be somewhat near my limit in terms of affordability, at 500-600k), but they have cheaper HOA fees, and it seems like the nicest option, to me.
2) Live with others
a) Buy a big condo, and rent out a room.
b) Buy a townhouse, and rent out 1 or 2 rooms.
c) Buy a duplex, and rent out a unit.
3) Buy two cheap properties, one to live in and one to rent out
I have been leaning toward options 1b or 2c, but I'm not sure I can get much within my budget. I would ideally like to be cash flow positive on any rental (goes without saying), but I'm not sure that the areas I want to live in are the best choices for rental properties, e.g. expensive and sometimes high HOA fees.
Also, I'm not planning to leave Chicago, but I'm also not sure how long I'll be there. It would be nice if my property could be rented out and given to a property manager without a monthly payment from me, if I decide to leave in 3 years.
Do any of you have any feedback or advice? I love the idea of having someone else pay off the mortgage, but the process is a little overwhelming for me. To be honest, most of what I've read is actively discouraging, e.g. lots of work being a landlord and very hard to have an actual good investment.
Hopefully that wasn't too much of a ramble. Thanks.
Most of the investors would steer clear of townhouses or condos. The HOA fees really can eat into your profit and be unpredictable in the long run.
I would consider a duplex.
Talk to a realtor and see what's out there.
Checkout this podcast. She is an investor from Chicago
If I were you, I'd buy a SFH in a neighborhood with good public transportation to get to the Loop. You can easily pick up a SFH or 2-flat n Logan Square for instance, for around $300k and be close to the blue line to get to work. I don't think you'll find a lot of value in a condo or townhouse. The nice thing about Chicago is there are a lot of cool neighborhoods all with their own vibe, all within easy access to downtown.
Thanks for the advice guys, I will check out the podcast and some more of the areas when I get to Chicago in a few weeks.
I second Daniel.
I have no business giving anyone investing advice, but I do know Chicago neighborhoods pretty well, and I live and work in the loop. And I can share with you the upshot of the advice I've been getting, which is to avoid condos if you can afford to do better, which it sounds like you can.
Good luck! And if you'd like any neighborhood/travel times info, I'm happy to help with that.
@Ben Mitchell First of all...welcome to BP! Second, I have to agree with what has been said above. I do not recommend looking into condos or townhomes. I have a friend with a condo just outside of Lincoln Park. He is not an investor, but purchased in that area because he wanted to have access to all that the city has to offer. However, the HOA fees that he pays typically run between 600 & 700...and there's always the possibility of a special assessment (aka - an additional lump sum of money that the HOA decides you need to fork over with no say in the matter).
I would strongly suggest that you find a 2-flat (duplex) or 3-flat (triplex) in a desirable area that fits your budget and live in one part while renting out the rest. The podcast referenced above was with @Brie Schmidt . She has already been dealing with the types of properties you're probably going to be interested in. Good luck to you!
I too would avoid condos or townhouses. I would rent for a year, get to know the neighborhoods, get a better understanding of what you want and what you need, then buy a 2-4 unit property and live in 1 unit
If you are looking to take on a rehab project, a brick 2-flat just went up for sale on a great block in Wicker Park (link below). You are basically getting it for land value at the list price of $450k, it is 203k eligible (rehab loan) plus it is not available to investors (like me) until 5/18/15.
I own a 3-flat one block away and can tell you it is a stellar neighborhood close to Blue Line, I-90/94 and great nightlife.
FYI I have no interest in this property, I believe it is REO.
I estimate $50k in rehab to make it livable, $250k to get top rents of $2,200 for 2BR and $3,500 for 3BR (includes duplexing up). Also mid-level finishes in between there can work too. These are just off the top of my head without viewing the property - but this is what I do. Be sure to have it inspected professionally for hidden defects.
It is an appreciation play to start but cash flow will be forthcoming if you hold for 5-10 years. Over time rents will generate substantial cash flow.
This is how I got started 15 years ago, a block away. I have since taken out all my equity via refi and the property is now generating $36k of profit annually.
Many other potential deals out there as well. Good Luck!
Brian Moore MBA, Division Street Capital, LLC | [email protected] | IL Agent # 475.164723
I'm not too sure about rehabbing, but thanks for advice. I would assume that it is very work intensive / time consuming? I am going to be living by myself and working full time, so I'm not sure I can take on that level of responsibility...
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