STR Arbitrage in Chicago?

Question

Anyone have experience with STR arbitrage in Chicago? I travel to Chicago every few months and wouldn't mind having a place there, but want to be able to have it working for me when I'm not there. I'm looking for something in a decent area with a landlord who's good with it being an STR. Any suggestions?

(Please don't respond by telling me arbitrage is a bad idea... I have read all about it and know that some people on BP are against it. I'm not 100% sure I'm going to do it, I'm just seeing if it's a possibility.)

Kelley Ogletree · Answer

@John Underwood - I have thought about it. I'm just not trying to tie up all my cash and credit in Chicago.

Mark Ainley · Answer

@Kelley Ogletree I love the idea as an east way to leverage and reduce risk.  We did a podcast episode with an attorney from KSN that spoke about short term legal gotchas around short term that I will DM you the link.

April Preyar · Answer

I have 5 friends who are all doing rental arbitrage in two buildings in Chicago in Hyde Park. Both are large apartment complexes, not 2-4 units. The landlords agreed to it. They all have proper licensing with the City.

Kevin Coleman · Answer

You are probably going to have a hard time getting it registered with the city. Airbnb will not allow you to post without first receiving a registration number. 1.5years ago I registered the basement unit of a 2flat I am hacking. I made the mistake of thinking the renewal fees would autodraft my account on a yearly basis. It didn't so my registration lapsed in September.  I re-applied and was denied so I had to appeal. The Alderman submitted a note in support of my registration during the appeal process to no avail. The city still denied me.

I said that to say, I do not know how they will approve someone who doesn't own the property.

Jonathan Klemm · Answer

Hey @Kelley Ogletree - Short term rentals have gotten tougher and tough in Chicago over the last 5 years and I say that being someone who has had an AirBnB for that entire time.   I don't think its impossible, but will be easier if you consider a mid-term rental.

Also, probably a higher likely hood if you found a landlord that is in a 2-4 building.  Definitely not impossible, but will take some time to find the right fit.

If you are interested in staying at our STR or Mid-term rental let me know!

Michael Baum · Answer

Hey @Kelley Ogletree, I am someone who tries to dissuade those who want to do arbitrage, but here is some data -

Vacation Rental (MCC 4-6-300) - means a dwelling unit that contains 6 or fewer sleeping rooms that areavailable for rent or for hire for transient occupancy by guests. The term “vacation rental” shall not include adwelling unit for which a tenant has a month-to-month rental agreement and the rental payments are paid on amonthly basis; or corporate housing; guest suites; or shared housing units. In a building with 4 units or less, thevacation rental dwelling unit must be the licensee’s “Primary residence” where applicant lives on a daily basis atleast 245 days in the applicable calendar year.

So it appears that you cannot rent a place then use it as a vacation rental. It isn't super definitive so I would call the city before moving forward.

Here is the document I am referencing - https://www.chicago.gov/conten...

John Underwood · Answer

Why not buy a place?

Then you'll have 100% control over your property, can take tax breaks, enjoy appreciation and principal paydown.