South Side Chicago vs South Chicago Suburbs for turnkey rentals?

Question

Hi!  I'm a new investor with around 500k cash to deploy and I've been looking at turnkey rentals in particular.  I spoke with Justin from ProfitFromRentals and he mentioned that they've been mostly transitioning to South Chicago suburbs like South Holland from South Side Chicago because there are too many turnkey operators in South Side Chicago these days and the competition for Section 8 tenants is high, so it can be hard to fill vacancies.

On the other hand, with the SFH in the suburbs, he says he's done hundreds in the past 3 years and has yet to have a tenant leave.  If true, this would be great for an out of state investor like me.  These SFHs are also rented out to Section 8 tenants and he says it takes 48 hours to find a tenant because the interest in these SFHs is so high.

I would love to hear what you guys think, thank you!

Larry Fried · Answer

@Zhou Ye I've got to agree with Darin on this, something doesn't sound quite right.  I know Justin and have seen some of those homes.  He does very nice rehabs.  He also told me that Section 8 demand far outstrips supply. I also know he uses third party property management, and there have been issues with them. Keep in mind, those properties also have very high tax rates, so if there is a vacancy, or non payment, you are going to need to cover those costs.  Dig deep, get references of investors who have bought these homes some time ago, and see if you get a more realistic assessment.

Darrin Carey · Answer

The first red flag I see is "I've done hundreds over 3 years, and yet to see a tenant leave."

With that volume and timeframe, you are certainly going to have some tenants leave for various reasons.

My rental turnover is very low, but it is still more than zero.

Zhou Ye · Answer

Account Closed It's possible that I may have misheard him so I will check with him again and see if I can get some references to check out as well, thanks for the advice!

Account Closed · Answer

Research, research, research! BP is a great place for insight! I do know a ton about Kansas City and Dayton but cannot help you in Chicago. Good Luck Zhou!

Steve Babiak · Answer

YIKES! First piece of advice in this thread should have been to never announce on the Internet how much money you have when you have a large sum. Now that the chum is in the water, the sharks will be circling, then closing in ...

If you do want to ask about a certain company, there is a forum here on BP for that - "Ask about a company" I think is what it is called.

Elbert D. · Answer

Hows it going @Zhou Ye I agree with @Darrin Carey especially if your into Section 8 housing in Chicago. I have questions for you, how many SFHs are you looking to acquire? Are you open to MFHs as well? Dont forget about Northwest Indiana being an extension of the Chicago suburbs.

As far as turnkey rentals. I never seen a house that didnt need a little work. Its very rare that I come across houses that need very light rehabs as well.  The south suburbs of Chicago SFHs are generally kept up more than the ones in the inner cities, but the taxes for the suburbs are generally higher as well. Which in returns kills the Cash on Cash return.

What CCR are you looking for?

Marco Santarelli · Answer

Hi @Zhou Ye -- Good to see you active in the forums.  :)

Just a point of clarification, our "project" is simply Private Lending.  It's not a fund or syndication.  You are nothing more than our lender, with your capital secured by the real estate we renovate and sell.

Continued success!

Michael Facchini · Answer

I would agree that South Chicago suburbs will have a bit less competition and perhaps slightly more stable tenants. I also agree that you should take a look at multi-family (2-4 unit) properties, as you often can get more bang for your buck here under a single roof.

Zhou Ye · Answer

@Marco Santarelli Sorry about that, I'm still getting used to all the terminology around here :D

@Elbert Dockery I'm looking to beat 12% with financing, any lower than that and there are other options which are more hands-off.  I'm open to MFH, but like I mentioned in the original post, I was told that the SFH in the Chicago suburbs seem to have a lower turnover.  Just wanted to come here and see if that's true.

I'm aiming to invest 500k in buy and hold real estate by the end of that year.  I don't have a specific number of homes in mind because it depends on the property value of the homes I'm buying.  Doing MFHs seems like a good idea in that sense because I won't need to get as many mortgages.

@Vivek Khoche Will do my best to research before buying anything, this forum has been a gold mine of information!

Vivek Khoche · Answer

@Zhou Ye -  You need to spend more time doing research and networking with the  fellow investors before you deploy $5. You have a choice to be intelligent or wise.

Good Luck

Vivek

South Side Chicago vs South Chicago Suburbs for turnkey rentals?

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