Chicago Newbie - buying 2-flat as owner occupied

10 Replies

Hello everyone,

I have been on BiggerPockets for a while, but only as an observer. I have been renting in the downtown area and now ready to buy something, but want an investment instead of just a condo. I'm looking at 2-flats. 

I know how to shop for a condo, but wondering what qualifications I should use for an owner-occupied property (house hacking). Is it the 70% rule? 

I appreciate any tips or suggestions. Thanks a bunch!


Welcome Natalie,

The 70% rule really is for flipping - it's a quick way to see what you would want to pay for a potential fix and flip property. 

If you plan to house hack what I would recommend is run the numbers on each 2-flat, or 3 or 4-flats if you're open to it as it's all residential, as if it were rented on both sides - not you living in one unit. That will tell you if it'll be a good property to hold on to after you move out which I would assume you will eventually. 

The best bonus of house-hacking to me is the low entry point so with less leverage if the numbers work it should cash flow even better if you refinance down the line. Now that's dependent on interest rates, PMI amounts, etc. etc.

Hope it helps and good luck!

Ah, I see and that makes sense. I was thinking this may be more complicated than I thought, but it's not. Thanks Nicholas for the input.

@Natalie Grimaldi 2 flats are hard, they property will likely not cash flow and cost you money.  You should be looking for 3+ units.

What areas are you looking in?

Hi Brie, 

Thanks for the input and I am looking in the Logan Square area. I've been looking for condos while knowing that I prefer to put my money to good use and came across the listing for the 2 flat. I think I did read a blog post about 3+ is the preferred number. Any suggestions on how to get in this game without being priced out in Chicago?

Good evening Natalie,

What neighborhoods of the city are you looking in? I would advise buying a three or four flat vs. a two flat being that if your tenant stops paying rent, you will be on the hook for paying the mortgage.

But she is buying in Logan Square, jumping from 2flat to a 3flat is a substantial leap in price IF she is quick enough to pounce on it and doesn't get outbid in multiple offers. 

Buy what you can afford so you at least get into the market, in the end your living in the property and want to come back to a home you're enjoying. That's my two cents

@Natalie Grimaldi you should look into FHA 203k loan...its great for house hacking..I just finished rehab in my 3 unit building with 3.5% down and rehab cost also included in the loan...The loan takes a bit longer and lot of process involved but if you can do it, its great...another option is 5% down conventional loan for 1st time buyers..


I'm in the very beginning stages and really appreciate all of your advice.

2 Flat is great because you buy on cap rate and not the high priced condo market. If your owner occupant unit was rented out (which will happen when you move out) what rent could you get? Then what would your NOI be and your expenses? What is your cap rate off of that?

March of this year made my 2 year owner occupied for a 2 flat. Now mind you I brought a rehab 2 flat, because everything I saw had to have major work done to them. So why not go new was my thoughts. So that may be something to think about. I did my due diligence on how to operate as a landlord and what to expect. So, if you don't have a tenant lined up then you are flipping the whole operating costs. Such as gas, light, water/garage city fee's. Until you put someone in the unit. So the money part. You do have to factor in cost to operate and what you receive as income. For me my  unit is currently a section 8, so the income is consistent. And it takes cares the mortgage. I have cash savings since I don't play rent and a business credit card of 10,000 and home warranty on both units. So that helps on major cost repairs that apartment sometime run into. I'm the landscape man and maintenance man, don't forget that as well. I guess the responsibility is about the same as a new home owner..  you're just taking it a step further.well Good to luck to you and much success. 

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