Finally jumping into Real Estate! - Chicago

12 Replies

Hi everyone! 

I'm Kevin O'Brien, a 29 year old engineer living in Chicago....I just wanted to say hello! A whopping 4 years after being introduced to BP, I decided I needed to stop making excuses and jump into the real estate game. So here I am, ready to embark on my real estate journey! 

I'm in the process of finding my 1st property - targeting a 3BR condo or small multifamily in Chicago (B or B+ neighborhood) that's within walking distance to a Blue or Brown line L stop. I'll owner-occupy, house hacking via roommates (renting units if multifamily). 

My background - I was born and raised in the west suburbs of Chicago, before heading a few hours south to Champaign for college. After getting my degree, I worked for a manufacturing company that moved me out to Harrisburg, PA for a year and then to Cedar Rapids/Iowa City, IA for 4 years after that. 

Living in Iowa in 2014, I noticed how inexpensive all the houses were compared to where I grew up and that piqued my interest in real estate. While searching online for info on real estate investing, I discovered the Bigger Pockets Podcast. TOTAL GAME CHANGER. I devoured the episodes, learned all I could and started getting familiar with the local neighborhoods & prices...I was convinced I would begin my real estate journey once I had saved for a down payment. 

Unfortunately in 2015 while saving for the down payment, I changed jobs, moved back to the Chicago suburbs and started taking MBA classes - real estate completely fell by the wayside. 

Seven months ago, I stumbled across a BP article for the first time since I left Iowa. Having spent the previous 2 years slogging through 80 hr work weeks, I realized I needed to make a change...that rat race was not how I wanted to spend the next 40 years of my life. So I left that crappy job, got a better one and moved to the city. I began catching up on all the BP Podcast episodes I'd missed, figured out what neighborhoods I wanted to buy in an began monitoring the prices to get a feel for my area.

I couldn't be more excited to jump into the game and I really look forward to all of the future discussions here on BP!

-Kevin O'Brien

@Kevin O'Brien welcome to BiggerPockets!

After reading your intro, I can say that it is never too late to start in real estate investing.

Life will throw you curveballs that go against your long term plans; that is for certain.  However, your focus and determination brought you back here and we are glad to have you back!

We are happy to help in any way we can.  You are not alone in your real estate ambition.

Once again, welcome back and congratulations.  I wish you the best in your real estate investing career.

Originally posted by @Kevin O'Brien :

Hi everyone! 

I'm Kevin O'Brien, a 29 year old engineer living in Chicago....I just wanted to say hello! A whopping 4 years after being introduced to BP, I decided I needed to stop making excuses and jump into the real estate game. So here I am, ready to embark on my real estate journey! 

I'm in the process of finding my 1st property - targeting a 3BR condo or small multifamily in Chicago (B or B+ neighborhood) that's within walking distance to a Blue or Brown line L stop. I'll owner-occupy, house hacking via roommates (renting units if multifamily). 

My background - I was born and raised in the west suburbs of Chicago, before heading a few hours south to Champaign for college. After getting my degree, I worked for a manufacturing company that moved me out to Harrisburg, PA for a year and then to Cedar Rapids/Iowa City, IA for 4 years after that. 

Living in Iowa in 2014, I noticed how inexpensive all the houses were compared to where I grew up and that piqued my interest in real estate. While searching online for info on real estate investing, I discovered the Bigger Pockets Podcast. TOTAL GAME CHANGER. I devoured the episodes, learned all I could and started getting familiar with the local neighborhoods & prices...I was convinced I would begin my real estate journey once I had saved for a down payment. 

Unfortunately in 2015 while saving for the down payment, I changed jobs, moved back to the Chicago suburbs and started taking MBA classes - real estate completely fell by the wayside. 

Seven months ago, I stumbled across a BP article for the first time since I left Iowa. Having spent the previous 2 years slogging through 80 hr work weeks, I realized I needed to make a change...that rat race was not how I wanted to spend the next 40 years of my life. So I left that crappy job, got a better one and moved to the city. I began catching up on all the BP Podcast episodes I'd missed, figured out what neighborhoods I wanted to buy in an began monitoring the prices to get a feel for my area.

I couldn't be more excited to jump into the game and I really look forward to all of the future discussions here on BP!

-Kevin O'Brien

 I don't suggest condos - too restrictive when it comes to how you can use the property down the road.  You have no control over rental restrictions 

@Brie Schmidt I really appreciate your input...I've had the same concern over getting into that space. Do you see a difference in getting a unit in a duplex vs. condos? I should have been more accurate and said I've been looking at units in 2 flats and not "condo" buildings with 4+ units that would qualify as commercial structures.

Originally posted by @Kevin O'Brien :

@Brie Schmidt I really appreciate your input...I've had the same concern over getting into that space. Do you see a difference in getting a unit in a duplex vs. condos? I should have been more accurate and said I've been looking at units in 2 flats and not "condo" buildings with 4+ units that would qualify as commercial structures.

 Buying a 2-4 unit is totally different than a condo.  You own the building, nobody can tell you what units you can rent

Originally posted by @Brie Schmidt :
Originally posted by @Kevin O'Brien:

@Brie Schmidt I really appreciate your input...I've had the same concern over getting into that space. Do you see a difference in getting a unit in a duplex vs. condos? I should have been more accurate and said I've been looking at units in 2 flats and not "condo" buildings with 4+ units that would qualify as commercial structures.

 Buying a 2-4 unit is totally different than a condo.  You own the building, nobody can tell you what units you can rent

 Understood. I phrased the question poorly - do you see a difference between buying one unit of a 2 flat vs. buying a condo in a larger building with lots of units? I understand not having full control in either instance as you don't own the whole building, just wondering if you see a difference. 

I'm looking at getting a multifamily for the same reasons you listed, but interested if you've had/heard of issues with buying a unit in a 2 flat. Thanks!

Originally posted by @Brie Schmidt :
Originally posted by @Kevin O'Brien:

Hi everyone! 

I'm Kevin O'Brien, a 29 year old engineer living in Chicago....I just wanted to say hello! A whopping 4 years after being introduced to BP, I decided I needed to stop making excuses and jump into the real estate game. So here I am, ready to embark on my real estate journey! 

I'm in the process of finding my 1st property - targeting a 3BR condo or small multifamily in Chicago (B or B+ neighborhood) that's within walking distance to a Blue or Brown line L stop. I'll owner-occupy, house hacking via roommates (renting units if multifamily). 

My background - I was born and raised in the west suburbs of Chicago, before heading a few hours south to Champaign for college. After getting my degree, I worked for a manufacturing company that moved me out to Harrisburg, PA for a year and then to Cedar Rapids/Iowa City, IA for 4 years after that. 

Living in Iowa in 2014, I noticed how inexpensive all the houses were compared to where I grew up and that piqued my interest in real estate. While searching online for info on real estate investing, I discovered the Bigger Pockets Podcast. TOTAL GAME CHANGER. I devoured the episodes, learned all I could and started getting familiar with the local neighborhoods & prices...I was convinced I would begin my real estate journey once I had saved for a down payment. 

Unfortunately in 2015 while saving for the down payment, I changed jobs, moved back to the Chicago suburbs and started taking MBA classes - real estate completely fell by the wayside. 

Seven months ago, I stumbled across a BP article for the first time since I left Iowa. Having spent the previous 2 years slogging through 80 hr work weeks, I realized I needed to make a change...that rat race was not how I wanted to spend the next 40 years of my life. So I left that crappy job, got a better one and moved to the city. I began catching up on all the BP Podcast episodes I'd missed, figured out what neighborhoods I wanted to buy in an began monitoring the prices to get a feel for my area.

I couldn't be more excited to jump into the game and I really look forward to all of the future discussions here on BP!

-Kevin O'Brien

 I don't suggest condos - too restrictive when it comes to how you can use the property down the road.  You have no control over rental restrictions 

 Agreed.  You also have basically no control over HOAs.  They can raise them at any time and that can really mess up all of your numbers...what seemed like a great deal can quickly turn into a bad deal if the condo board starts jacking up HOAs.  

Originally posted by @Kevin O'Brien :
Originally posted by @Brie Schmidt:
Originally posted by @Kevin O'Brien:

@Brie Schmidt I really appreciate your input...I've had the same concern over getting into that space. Do you see a difference in getting a unit in a duplex vs. condos? I should have been more accurate and said I've been looking at units in 2 flats and not "condo" buildings with 4+ units that would qualify as commercial structures.

 Buying a 2-4 unit is totally different than a condo.  You own the building, nobody can tell you what units you can rent

 Understood. I phrased the question poorly - do you see a difference between buying one unit of a 2 flat vs. buying a condo in a larger building with lots of units? I understand not having full control in either instance as you don't own the whole building, just wondering if you see a difference. 

I'm looking at getting a multifamily for the same reasons you listed, but interested if you've had/heard of issues with buying a unit in a 2 flat. Thanks!

 You can't just buy a unit in a 2 flat - you can buy a condo in a small condo building but to buy one unit in a 2 flat requires extensive zoning changes, tax pin changes, ect.  

Buying a condo unit in a smaller building gives you more control, but not enough for me to risk it

Originally posted by @Kevin O'Brien :
Originally posted by @Brie Schmidt :
Originally posted by @Kevin O'Brien:

@Brie Schmidt I really appreciate your input...I've had the same concern over getting into that space. Do you see a difference in getting a unit in a duplex vs. condos? I should have been more accurate and said I've been looking at units in 2 flats and not "condo" buildings with 4+ units that would qualify as commercial structures.

 Buying a 2-4 unit is totally different than a condo.  You own the building, nobody can tell you what units you can rent

 Understood. I phrased the question poorly - do you see a difference between buying one unit of a 2 flat vs. buying a condo in a larger building with lots of units? I understand not having full control in either instance as you don't own the whole building, just wondering if you see a difference. 

I'm looking at getting a multifamily for the same reasons you listed, but interested if you've had/heard of issues with buying a unit in a 2 flat. Thanks!

If the question is "should I buy a condo in a smaller building rather than a larger complex" then the answer is "maybe?". The downside to buying a condo in a 2, 3 or 4 unit building is that you have fewer owners to split the cost of a big special assessment with. The other downside is that it's easier for a crazy neighbor to have an ill effect on the functioning of your association. If there's only three owners in a building and two of them decide something, sucks to be the third owner. This is actually also a benefit sometimes if you plan to take an active roll in the association you might have more control over turning around or improving an ailing condo association. 

In either case I don't recommend investing in condos, the margins are slim and there's a lot of room for other people to interfere with the proper management of the asset. Chicago is a cheap enough market that you can find a 3 or 4 unit brick building on the edge of a gentrifying area for very cheap and improve the units and therefore the rents. If you are lucky the area will improve further and you will get significant market appreciation as well. I bought in Avondale just a block outside of Logan Square right off Milwaukee Ave in 2011 and paid $136,000 for a two flat with an illegal attic apartment. I fixed it up as I lived there and its now worth easily $500,000 because the market in this neighborhood has gone buckwild. 

Now I saw your other thread about buying in the Milwaukee Ave corridor, but remember that this area has already seen a huge wave of price appreciation. It probably is less risky like you say, but that also means lower potential upside. You can still find cheap pockets of the city near transit and improving areas, it might be worth taking a bit more risk because the upside is huge. It is worth considering areas like McKinley Park (right next to Bridgeport and also becoming a Western extension of Chinatown), West Pilsen (still seedy enough to yield an occasional good deal), or Bronzeville (again, pockets of dereliction open up the opportunity to help clean up your own little corner of the neighborhood). 

I think the first thing you need to do is narrow down your search by identifying exact what type of investment you are pursuing and then study the crap out of very specific sub markets. Watch a few areas you think are interesting on Redfin every day for a month. Look at what comes on the market and look at what sales close. Start building a database in your mind for roughly what stuff lists for and what it sells for. 

Originally posted by @Brie Schmidt :
Originally posted by @Kevin O'Brien:
Originally posted by @Brie Schmidt:
Originally posted by @Kevin O'Brien:

@Brie Schmidt I really appreciate your input...I've had the same concern over getting into that space. Do you see a difference in getting a unit in a duplex vs. condos? I should have been more accurate and said I've been looking at units in 2 flats and not "condo" buildings with 4+ units that would qualify as commercial structures.

 Buying a 2-4 unit is totally different than a condo.  You own the building, nobody can tell you what units you can rent

 Understood. I phrased the question poorly - do you see a difference between buying one unit of a 2 flat vs. buying a condo in a larger building with lots of units? I understand not having full control in either instance as you don't own the whole building, just wondering if you see a difference. 

I'm looking at getting a multifamily for the same reasons you listed, but interested if you've had/heard of issues with buying a unit in a 2 flat. Thanks!

 You can't just buy a unit in a 2 flat - you can buy a condo in a small condo building but to buy one unit in a 2 flat requires extensive zoning changes, tax pin changes, ect.  

Buying a condo unit in a smaller building gives you more control, but not enough for me to risk it

 I agree with this.  I would only invest in a condo if the numbers were just...so out of this World spectacular, too good to be true sort of numbers.  In general, I think it is best to steer clear of condos.  They're just not worth it IMO.  

I'll add my experience as an example of the condo issue. We had a vacation condo in Door County, Wisconsin, that we had used as a second home. When our children got older and began to scatter across the country, we decided to rent it out weekly as a vacation condo since we weren't using it as much. We were getting $1650 per week in the summer months, which went a long way toward paying our holding costs.

The complex had a total of 40 units. Two of those units were occupied by full-time owners and the others were owned as second homes. The full-time owners had an outsized voice on the condo board and did not like the fact the we and a couple of other owners were renting our places to "transient" residents. We had our own strict limitations on who could rent our place that precluded large groups, and we rented almost exclusively to families. Regardless, the Board adopted regulations that all but eliminated our options to rent the place, including a proposed $250 fee per rental for "administrative costs" and requirements that renters sign an extensive agreement about what they could and could not do on the condo common grounds. 

Rather than fight, we sold the condo. We didn't lose any money on it, but our experience taught us that we do not want to deal with condo boards any more.

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