Investing in Chicago :: Good, or Bad?

13 Replies

I am considering a 1031 exchange of an investment property I have in Los Angeles (one of four) out of State to get better cash flow returns, as I have a lot of equity. I have been looking at Chicago, along with other areas. I travelled there last month to see the City (and a good amount of properties) in person. I also met with several brokers and prop. managers. I know that Chicago has it's fair share of economic and political issues, but it's also a big City with a lot of positive aspects. 

Wondering if anyone has invested in Chicago, and if so, how the investments are doing? 

Why Chicago?  If you are looking out of state for higher returns there are probably other faster growing markets with better returns.  Are there deals in Chicago? Sure but a lot of them will be in the outlying suburbs

@Aaron K. -- The properties I've seen there offer much better returns than LA, even in the City, but as you said, there may be better options. I'm partial to big Cities (as I live in one). I've looked at other markets (online) and the returns haven't been as good, or the properties are in the middle of nowhere, which is a little too risky to me. I'd like to stay as close to a big City as possible. 

@Dee Jay Understandable but keep in mind IL has some budgetary issues that they need to solve, take a look at city-data.com some cities are bigger than you think.  For example most people don't think of Columbus OH as a city of 800,000 people

@Dee Jay Chicago has quite a few issues and property tax increases seem to be one of their favorite ways to solve them.

In a city like that I would also be afraid of regulatory hindrances like rent control and the city just not being landlord friendly in general. Invading Mexico might be easier than evicting someone in Chicago from what I’ve heard.

@Jordan Moorhead You are correct about the prop. tax issue, and there are also ways around it (not that it's smart to even get involved in the first place). Not aware of any major rent control issues there. When I visited the City and asked the many brokers I met with about rent control, it seemed like a cakewalk compared to the rules that we have here in Los Angeles. 

@Dee Jay Chicago is a great city to invest but it can be hard for long distance investors to get their footing. Most of our good multi family properties are sold off market. You have to develop a network that will feed you the best opportunities.  You can still get a higher return on investment than most large cities in America.

Chicago is great for investing. We've worked with a lot of clients doing a 1031 exchange in Chicago. Really in Chicago it depends on the area. Chicago is a city of neighborhoods and each neighborhood has different ROI and values within the city.

Are you looking for muli units or single family homes? What are your goals?

@Dee Jay I hate when people who don’t invest in Chicago or live here, speak on Chicago investing.

Every Large MSA have several sub markets and not all move in the same direction and grow at the same rate.

Even within the city, folks tend to only know one side of the city as the area is so large and dense.

Plenty of great areas and inventory in Chicago!!! Yes the market is doing well but deals are there!!

@Ibn Abney nailed it on the head.  There's 200+ neighborhoods in Chicago.  I live here, invest here, and probably couldn't even name half the neighborhoods, none the less provide an accurate description of if you should invest in a specific pocket I don't currently interact with. 

One smaller note, Cook County just reassessed taxes and it's a pretty big bump (at least on my properties before I go to appeal).  Add a solid buffer to the current property taxes you're reviewing when calculating cashflow.      

 -Tom

Same here @Tom Shallcross , we have 1 SFH on the South Side and we had a large bump in assessed value. Our PM is filing an appeal as well to get it reduced but we'll see how successful they'll be.

I've lived in IL all my life (grew up in Southern IL and moved to Chicago area burbs for college and stayed).  I personally won't invest in IL because we're going to get taxed out the 'whazzoo' to get out of this hole the state Gov't dug for us.   I'm waiting for my last 2 kids to get out and then I'm looking to get out the state myself.  

My corp W2 job is based out of Cincinnati and I've been looking for multifamily's out there but the market is just insane as well....a 4 unit we looked at is selling for $60k more than the seller bought it for 1yr ago and only slapped a bad paintjob into the units and called it rehab.  I had a PM walk through with me and we found an estimated $20k to $30k in deferred maintenance that was going to hit me in the next 1 to 2 years and the seller's wouldn't budge on their price so we walked away.