Chicago market for multifamily???

Question

I have noticed alot of multifamily properties listed for sale and low prices. Just curious what is everyone's thoughts about this market.

Bob Solak · Answer

I think a lot of owners are trying to get out while they can from Cook County and the City due to skyrocketing commercial reassessments and very tenant-friendly laws.  The County Assessor is firmly of the belief that Commercial property has had it too good at the expense of residential and he's pounding reassessments (e.g. our non-MF commercial building saw a 30% increase in assessed value year over year).

The For Sale listings tell the tale - hundreds available in the City proper, hardly any in the surrounding suburbs and counties.  Anything in the suburbs gets snapped up in heartbeat.  The City, not so much.  Crime is on the increase. Neighborhoods that used to feel safe (relatively) are starting to feel less so.  The Mayor and the police are at odds.  School parents are held hostage to the whims of the teachers union.  A lot of the service jobs in the Loop haven't bounced back because the office workers aren't back fully yet.  And the politics of the City will not be small-business friendly for the forseeable future.  There're a lot of reasons to be pessimistic about commercial in the City.

But maybe that smells like opportunity to some?

Jonathan Klemm · Answer

@Freddie Williams - I'll be a little forward and say that's a pretty general statement. Chicago is a massive market. Is there a specific area that you are looking at that has low prices? Many of those less expensive neighborhoods are high crime and you may be paying a low price but will pay much more on the back end with property management, vacancy, and repairs.

Beware if you are out of state investor and network with some local boots on the group investors here in Chicago.

Steven Goldman · Answer

@kennethmendonca was spot on. So much multi family inventory exists in Chicago because national lenders are reluctant to lend money in that market due to existing significant challenges. I always recommend that you talk to a mortgage professional as part of your due diligence  to identify the challenges to entry in the market. A good mortgage consultant will be a wealth of information. Good luck!

William Costello · Answer

Hi @Freddie Williams alot of owners are looking to move out of Cook County ie Chicago because it is not landlord friendly and with rising taxes unfortunately. Chicago is a great city and hopefully one day it levels off with the mass exodus from Illinois. Have you thought about investing in Indianapolis or Indiana?

Kenneth Mendonca · Answer

@Freddie Williams This is a great question! How about the _______ market? I would like to offer a different approach to the opinions suggested above. Ask yourself:

• 1. How do lenders view the market?
• 2. Are the GSE agencies (Fannie, Freddie, FHA) lending here or are they running away? 
• 3. What market tier have the agencies classified _______ market as?
• 4. How much equity will I require to enter _______ market?
• 5. What are the typical expense ratios in _______ market?
• 6. What will my cash on cash return be if i invest in _______ market?

The list goes on and on. It's a great starting point to get BiggerPocket member opinions but at the end of the day, you'll need to analyze deals and hope your lender can support the valuation that the data (comps, recently closed transactions, etc.) supports!

tldr; use data to drive decisions, valuations, and investment decisions!

Paul De Luca · Answer

@Freddie Williams

What neighborhoods have you been looking at? Chicago has multi-family properties all over the place and there are 2-4 units in the suburbs but they're more concentrated in some than in others. Ex: Berwyn, Cicero, Elgin, Aurora, Joliet have more 2-4 units than most other suburbs.

Chicago market for multifamily???

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