House Hacking in Evanston, IL?!

12 Replies

Hey BiggerPockets community,

I am a brand new to the real estate investing world and excited to start investing in some brick and mortar as opposed to more index funds. My wife and I love Evanston, IL and were wondering if anyone had any experience in the city with rentals and what that has been like for you?

We are still trying to nail down our desired city to start investing and have lived in Evanston in the past, so know the city fairly well. We would be considering a house hack using FHA loan on a $750k - $1.25million multifamily property, living it in for 2-3 year and then moving on to our next adventure as we turn all units to rentals.

We live in the Northern suburbs of Chicago and are also considering starting to invest in either Chicago or Milwaukee, although neither of those options would be a house hack.

Any opinions or experiences you can share about Evanston, IL would be much appreciated!

Thanks and happy fall,

Jonathan

Interested in following this topic. I hope you find something that matches. I have been looking to find something similar but haven't been able to find anything where the numbers make sense. Check this link out on FHA loan limits though: https://www.fha.com/lending_li... 

Hey @Jonathan Seyfert , what part of Evanston are you looking at? There are plenty of deals in and around the city. You just need to be sure the cap rate, total return, cash on cash return, etc. align with your investment strategy and goals. Doing a proper analysis on the property is crucial for short and long term cashflow. 

Also, if you have a good credit score, you will probably want a conventional loan. You'll get better rates and the down payment can be as low as 3.5% if you plan to house hack. Finally, you'll want to take into account anything 5+ units is considered commercial which consists of different lending requirements. Consult a good mortgage broker to know your options. 

Hey @Jonathan Seyfert , kudos to you for getting started in real estate investing! I happen to know Chicago, Evanston, and the surrounding burbs very well. Born and raised in Chicagoland, have been in lending for 19 years, real estate investing for 17, and have focused on 2-4units. I'm a fan of Evanston and think there's a lot of good opportunity up there. But of course, it's all block/area and building specific...so need to whittle down further. Also, keep in mind, if you're looking for a low down payment option (whether a standard purchase or a purchase with renovation), you'll be capped at $570k for a loan amount on a 3unit and $708k on a 4unit, if going FHA (as low as 3.5% down). Again, that's loan amount...not purchase price...so you can always put down more to bridge the gap. Anyhow, happy to help so never hesitate to reach out!

@Travis Rotheiser and @Michael Facchini thanks for the thoughts and responses. This has been a super informative thread for me to follow - really appreciate your time.

In Evanston I would likely be looking East of Chicago Ave and between Dempster and South - love the area south of Main for a 3 flat house hack. What are your thoughts on this area specifically? 

@Michael Facchini do you have any experience with a conventional loan and low down payments like @Travis Rotheiser mentioned? I have a good credit score and for what its worth am a physician as well. I know for my primary residence I had a "doctor loan" - low down payment, no PMI, good interest rate. I read some posts on BP mentioning that a doctor loan in particular usually doesn't apply to multifamily investment properties.

To invest in Evanston at the 750k - 1.25mil range I would need just over a year to accumulate the cash for a downpayment on a conventional 20% down loan. If I had options for financing with lower down payments and ideally no PMI I could invest sooner. All under the presumption this would become my primary residence as a house hack.

Thanks again for your thoughts - really just in a brainstorming and education phase of REI. Hope to dive in with my first deal next year.

Jonathan

@Jonathan Seyfert Lived in Evanston for 6 years and it's an amazing town. Take into consideration Evanston has their own Landlord/Tenant ordinance that gives protections to tenants. However, tenants in Evanston typically stay in the same unit for years. I have friends that rented the same apartment for 15 years. Considering your price point you won't be able to do FHA, but can get conventional financing and won't have a problem finding a property in high rent areas. Anything near the purple line or metra.

@Jonathan Seyfert The "Doctor Loan" has its advantages but there are also limitations which may not fit your lending criteria. While most programs offer low downpayment amounts and no PMI, there are restrictions on how many units you can purchase. Also there was a recent change to conventional lending requirements for 3-4 units which changed to 20% down. Your best option is to talk with a reputable mortgage broker/lender and discuss your investing goals. They will be able to tell you your down payment requirement at different price points with a variety of different loan packages (conventional, FHA, Jumbo loans, etc.). Feel free to reach out if you don't have a lender already. I have great contacts in the industry.

Based on your options from the lender, it may change your investing time frame and criteria. You may need to wait until you reach 20-25% down, change the number of units (a 2 unit with a duplex up/down could be nice for house hacking as well), or change location. Once you have decided on your investment strategy, you'll need a real estate broker that is familiar with multifamily units and the financial aspect that goes with it. Knowing your total returns, cash-on-cash returns, income & expenses, amongst other information will be crucial in determining whether a certain property is right for you. I am happy to assist with any real estate questions you may have as you continue your journey.

The below link has useful landlord & tenant resources for Evanston:

https://www.cityofevanston.org/government/departments/community-development/housing-grants-division/landlord-and-tenant-resources-4398

@Travis Rotheiser , I do have experience with conventional and low down payment options - tons in fact :-)  You are correct when you say that physician financing doesn't really apply to multi-units.  MD loans apply to 1 and 2units, not 3-4's.  Happy to Private Message and answer any other questions you might have.

Hey Jonathan,

I'm at the same stage as you were when you wrote this post. In fact, this is the first thread I've read on this forum. My wife and I are just in the beginning stages of our research. I was just wondering if you all ended up in Evanston, and if you sound any solid resources in the area. Hope you're well!

Cheers,

Connor