Mount Prospect, IL · Member since 2016 · 2 posts · 0 votes
Hello, I am a 23 year old who works in the Loop but still commutes from parents house in the suburbs. While all my friends are moving into the city to rent in places like Lakeview, Lincoln Park, Olde Town and Gold Coast I am trying to find a duplex or small multi-family to househack. I am wondering about how to go about finding a property that would make a good deal for this. I have looked on websites like realtor.com and zillow and everything looks to be out of price range (600k and up for a worn down duplex) and I only have 20k saved. Is this enough? Also any tips on what first steps I can take in either the search process or beginning stages or what areas in the city would be best to look are greatly appreciated!
Higher-end neighborhoods in Chicago may prove difficult places to house hack. Doesn't mean it can't be done, but finding a property where the numbers make sense may be a challenge.
You'll almost certainly need to put down at least 3.5%, plus you'll need closing costs and cash reserves to pay the first few months of the mortgage, plus money for any repairs/updates.
While I would never discourage someone from house hacking, you might find it easier for your first deal if you buy a single-family and rent out rooms to cover your mortgage.
Please don't hesitate to reach out over PM, happy to help in any way I can.
Higher-end neighborhoods in Chicago may prove difficult places to house hack. Doesn't mean it can't be done, but finding a property where the numbers make sense may be a challenge.
You'll almost certainly need to put down at least 3.5%, plus you'll need closing costs and cash reserves to pay the first few months of the mortgage, plus money for any repairs/updates.
While I would never discourage someone from house hacking, you might find it easier for your first deal if you buy a single-family and rent out rooms to cover your mortgage.
Please don't hesitate to reach out over PM, happy to help in any way I can.
Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
9y
You would be able to get an FHA loan (3.5% down) but my question to you, if your renting out to friends you going to feel comfortable separating the line between friend and landlord. You don't want to let them slip and pay you late on rent.
I'm sometimes in the loop near Merch Mart, if you want to grab a coffee and talk some time just PM me.
Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes
9y
I hope you accomplish your goal. There are so many of the young analysts at my job who pay high rents to live in the city. I always recommend them to have other people pay their mortgage for them and they live for free. None of them are interested.
They also do a reverse commute (live in the city and drive to Northbrook)
You have a good start. $20K savings is decent. You will probably need to be way more north than the usual neighborhoods that the young college grads want to live in.
Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
9y
Congrats on this smart decision John! This is exactly what I did a couple years out of college and it allowed me to live close to free. I still own that property and it's one of my best real estate investments to this day. I suggest looking at some the areas that are on the "fringe". These are areas that are starting to turn over but aren't fully gentrified yet. I also recommend finding a fantastic real estate agent. In this competitive market, their guidance is invaluable in finding the right property, negotiating the contract, and bringing the deal to fruition. If you'd like some names, let me know.
As for doing research on your own, the problem with Zillow is it doesn't gold all the listings (typically 70%), can be outdated by 2 days to 2 weeks, and can be inaccurate at times. For 100% of the listings that are real time and accurate, and to avoid solicitation, I recommend downloading Home Scout in the app store. If you decide to do this, PM me and I'll give you a VIP code so it's free.
Congrats on this smart decision John! This is exactly what I did a couple years out of college and it allowed me to live close to free. I still own that property and it's one of my best real estate investments to this day. I suggest looking at some the areas that are on the "fringe". These are areas that are starting to turn over but aren't fully gentrified yet. I also recommend finding a fantastic real estate agent. In this competitive market, their guidance is invaluable in finding the right property, negotiating the contract, and bringing the deal to fruition. If you'd like some names, let me know.
As for doing research on your own, the problem with Zillow is it doesn't gold all the listings (typically 70%), can be outdated by 2 days to 2 weeks, and can be inaccurate at times. For 100% of the listings that are real time and accurate, and to avoid solicitation, I recommend downloading Home Scout in the app store. If you decide to do this, PM me and I'll give you a VIP code so it's free.
Hope this all helps!
I agree with looking on the up and coming areas. The OP is unlikely to find anything in Lincoln Park or Lakeview in his price range.
I'd look north to Edgewater and Rogers Park, west to Albany Park, Irving Park, Avondale, Logan Square, and south to Bridgeport and Pilsen.
Contractor · Chicago, IL · Member since 2017 · 21 posts · 7 votes
9y
Great post, @John Matthews!
I'm on the same boat with friends moving out to the inner city of Chicago just to pay someone else's mortgage. I've never rented from anyone before and I hope to never have to. I'm currently work with a remodeling contractor throughout the Northern neighborhoods of Chicago (Edgewater, Rogers Park, etc.) to save money for my first deal and am finding myself head turning at some of the areas I'm working around.
These northern neighborhoods are up and coming as some of the BP members above have stated. You'll pockets of nice restaurants, rehabbed homes throughout the areas.
I hope to find my first deal within these neighborhoods as a side note. I wish you the best of luck man!
I only have 20k saved. Is this enough? Also any tips on what first steps I can take in either the search process or beginning stages or what areas in the city would be best to look are greatly appreciated!
I recommend the following steps in your search process.
Work w/ a mortgage broker 1st to see how much you'll qualify for based on your income. What is the maximum PITI you can handle based on your income? The numbers should be run as if you do not have a tenant because there will be times w/ no tenants & you'll have to make payments on your own
With what you qualify for in hand start working w/ a real estate broker to start learning not only the price points of properties but the price points of rents in the different areas. You can also use a site like rentometer.com to start figuring it out.
You'll eventually have to decide whether your house hacking goal is just to reduce your monthly payment for a property; whether you want to be able to have a positive cash flow from one tenant, break even w/ one tenant, or only cash flow the property after you move on to your next house hack.
As your evaluating the different locations you're going to also have to evaluate if it's an area that you really want to live. Your friends are moving to Lakeview, Lincoln Park,..... for a reason. If you can't afford it would any of the other 77 areas in Chicago fit your lifestyle?
Regarding the $20K. Generally, I'd say it's not enough but it depends. Rule of thumb is you should have reserves in savings for emergencies, whether personal or business. So whether it's enough depends on what price point you settle on for your purchase.
Thank you for this valuable input. What are you thoughts on properties that do not cash flow from having other tenants can they still be valuable investments?
Thank you for this valuable input. What are you thoughts on properties that do not cash flow from having other tenants can they still be valuable investments?
My thoughts: If you're living in one of the units while the others are rented & the difference between a positive & negative cash flow is renting out the owner occupied unit then it's potentially a valuable investment. Especially if it's located in an area where appreciation is expected.