Beginner Investor Moving to Chicago

Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes

6y

Hi, Reed. We are noobs in the Chicago market as well. I don't have any advice to offer, but we are looking near the Blue Line on the L. This is close to DePaul University and the fun city neighborhoods. Good luck!

1 Reply

Reed Meyer

OP

Investor · Chicago, IL · Member since 2020 · 66 posts · 55 votes

6y

@Jennifer Day That’s where I plan on looking as well once I get started. What’s your approach to getting leads in the area? Are you involved/planning on getting involved in any meetup groups or real estate investing organizations?

1 Reply

Jennifer D.

Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes

6y

@Reed Meyer We haven't done any networking yet except for calling one real-estate agent after seeing a foreclosure in her listings, so again, I'm sorry that I don't have any advice We will be absentee investors, but we also have some friends moving up there from Atlanta, so we expect to visit a few times.

Right now, I am trying to do some baselining to get a sense of how much properties in that area sell for under two conditions: pre-renovation and post-renovation. It seems like a 15-19k SF duplex (in Chicago, sometimes called a 2-flat) for $170-200k needing light renovation is not outside the realm of possibility, but these prices make me feel cautious. Is Chicago really so much less expensive than other big inland markets like Atlanta or Denver? Or have I just been seeing properties with some serious stuff wrong with them. At this point, I don't know. A general contractor is the next person I will be calling to see if I can get some answers.

1 Reply

Roberto Horodeski

Chicago, IL · Member since 2017 · 2 posts · 1 vote

6y

@Jennifer D.

I don't believe that is an accurate price range for the DePaul area but I don't look at foreclosures.

1 Reply

Alleia James

Accountant · Chicago, IL · Member since 2020 · 62 posts · 23 votes

6y

@Reed Meyer Hi Reed!

I am a new user of BP as well. Are you a member of any meetup groups? I also want to purchase my first multifamily residence in 2021. Have you built your team? Let's connect!

Warmly,

AJ

1 Reply

Reed Meyer

OP

Investor · Chicago, IL · Member since 2020 · 66 posts · 55 votes

6y

@Alleia James Hi Alleia!

I am not a part of any meetup groups yet as I don’t move to Chicago until July. I also haven’t started putting together a team yet as I am really just in the educational phase right now and trying to learn as much as possible. Have you started to assemble a team yet? If so, where did you start.

0 Reply

Johnny AlvarezPro Member

New to Real Estate · Chicago, IL · Member since 2020 · 9 posts · 5 votes

6y

Hi @Reed Meyer !

I’m also a newbie residing/working in Chicago looking to invest in multi-family properties. Have some some cash to spend but still educating myself to pull the trigger. I have some familiarity with the neighborhoods and would love to connect with other BP real state enthusiasts!

Cheers,

Johnny

2 Reply

Jennifer D.

Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes

6y

@Roberto Horodeski, Thanks! I am seeing quite a lot of 2 flats in the Lincoln Park, Bucktown, and Wicker Park neighborhoods for around this price. But I appreciate your observation and will be cautious.

0 Reply

Jason MarcordesPro Member

Investor · Chicago, IL · Member since 2015 · 154 posts · 91 votes

6y

@Jennifer D. Please be very careful with whatever broker you're dealing with here. I live about 10 min from Lincoln Park and there's definitely something wrong with the info that broker is feeding you. Just for kicks I pulled up Lincoln Park on my MLS and the cheapest 2-flat on the market is $675K. Foreclosures go for a slight discount but they don't trade at 25%....not even in 2009-2011. Being in property management, I see out of state/country investors get burned all the time because they're not familiar with the neighborhoods in Chicago. Not saying this is the case here - just proceed with caution and triple check everything.

1 Reply

Jennifer D.

Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes

6y

@Jason Marcordes, thank you!

I’m glad to hear from you. It’s great to meet a PM in Chicago.

When you say you’ve seen people get taken advantage of, do you mean they buy a structural nightmare, for instance?

I don't have MLS access, but here are some examples of what I am seeking. Do any problems glare at you from these?

https://www.zillow.com/homedetails/1840-N-Bissell-St-Chicago-IL-60614/2115397472_zpid/?utm_source=txtshare

https://www.compass.com/listing/3946-west-dickens-avenue-chicago-il-60647/435388072604128193/?origin=listing_page&origin_type=copy_url

https://www.compass.com/listing/2906-north-springfield-avenue-chicago-il-60618/466416557120590481/?origin=listing_page&origin_type=copy_url

0 Reply

Jason MarcordesPro Member

Investor · Chicago, IL · Member since 2015 · 154 posts · 91 votes

6y

@Jennifer D. They get burned a number of ways but typically the pro-forma they're sold on is way off. Turn key providers slanging south side properties using vacancy rates, repair costs, cap-ex costs, that aren't anywhere near representative of the property....

Here's what I found on these:
https://www.zillow.com/homedetails/1840-N-Bissell-St-Chicago-IL-60614/2115397472_zpid/?utm_source=txtshare

This is an illegal 3 flat that is actually zoned for SFR. It looks like $225K was the opening bid but the bidding has ended so it's not showing me the final price. The cheapest SFR within .5 miles that has sold within the past 6 months sold for $600K (it was a court order sale).

https://www.compass.com/listing/3946-west-dickens-avenue-chicago-il-60647/435388072604128193/?origin=listing_page&origin_type=copy_url

This is a tear down so you're paying $165K plus the cost of removing the existing structure for an empty lot in Hermosa (not Logan). There's a similar lot on Armitage priced at $159K, on the market since 2011.

https://www.compass.com/listin...
Another tear down on the NW corner of Logan. This listing has been cancelled.

Hope that helps!

1 Reply

Jennifer D.

Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes

6y

@Jason Marcordes, it does! Thank you!

0 Reply

Andrew SyriosPro Member

Moderator

Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes

6y

Welcome to BiggerPockets Reed!

Podcast Guest on Show #121

1 Reply

Brie SchmidtBusiness Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

6y

@Reed Meyer - what kind of budget and areas are you looking in? What type of loan program? I would definitely suggest renting for a year and getting to know the areas during that time. In Chicago it is illegal to deny a sublet, so as long as you find an adequate replacement tenant you can move out anytime during your lease, offering flexibility with your purchase timeline

Podcast Guest on Show #132

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3 Reply

Reed Meyer

OP

Investor · Chicago, IL · Member since 2020 · 66 posts · 55 votes

6y

@Brie Schmidt that's great advice. Thanks! I am not entirely sure what my budget will be but the plan would most likely be to start with a house hack where I could get an FHA loan and put 3.5% down. This down payment would most likely be anywhere up to $20k. As you mentioned, I plan on renting to start in order to get a sense of the neighborhoods and what a good investment would be.

0 Reply

Jeff Burdick

Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes

6y

Originally posted by @Reed Meyer:

Hello,

I am a senior in college finishing up my last semester. In July I am starting my career in investment banking in Chicago.

During this downtime I have invested nearly all of my time into learning about real estate investing and educating myself before I start investing on the side of my job. I am interested in investing in multi-family residences. The plan is to spend my first year of work saving money and learning absolutely everything I can about investing in multi-family properties. Then come around May-July of 2021 I want to buy my first multi-family residence (most likely a duplex or triplex). Then I want to slowly "trade-up" and continue saving and adding more properties as I work towards larger multi-family residences. My goal is to own luxury apartment complexes down the road.

My Favorite Business Book: Rich Dad Poor Dad

My Favorite Real Estate Related Book: The Book on Rental Property Investing by Brandon Turner

Hobbies/Interests: College Football, MLB, NBA, NFL, architecture, The Office, golf, surfing

Contact: I am very responsive to my email which can be found on my profile.

Thanks a lot and I hope to meet and learn from some of you.

-Reed

Hey, I am an investor on the north side of the city and always up for chatting real estate. I think you've a very good plan. Try to save as much cash as possible.

1 Reply

Jeff Burdick

Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes

6y

Originally posted by @Jennifer D.:

Hi, Reed. We are noobs in the Chicago market as well. I don't have any advice to offer, but we are looking near the Blue Line on the L. This is close to DePaul University and the fun city neighborhoods. Good luck!

The blue line isn't that close to DePaul. If you're driving, its not bad, but I wouldn't really call it walkable, unless you like really long walks.

0 Reply

Jeff Burdick

Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes

6y

Originally posted by @Jennifer D.:

@Reed Meyer We haven't done any networking yet except for calling one real-estate agent after seeing a foreclosure in her listings, so again, I'm sorry that I don't have any advice We will be absentee investors, but we also have some friends moving up there from Atlanta, so we expect to visit a few times.

Right now, I am trying to do some baselining to get a sense of how much properties in that area sell for under two conditions: pre-renovation and post-renovation. It seems like a 15-19k SF duplex (in Chicago, sometimes called a 2-flat) for $170-200k needing light renovation is not outside the realm of possibility, but these prices make me feel cautious. Is Chicago really so much less expensive than other big inland markets like Atlanta or Denver? Or have I just been seeing properties with some serious stuff wrong with them. At this point, I don't know. A general contractor is the next person I will be calling to see if I can get some answers.

Yes, we exclusively call them two flats, three flats, or four flats in Chicago.

Duplex in Chicago has an entirely different meaning. In Chicago, we'll say we're going to "duplex up" or "duplex down." Duplexing up means combining the 2nd floor unit with the attic, Dupexing down means combining the first floor unit with the basement. A duplex in Chicago is one unit that is two floors.

170K-200K for a property is unlikely unless you're interested in class C or D neighborhoods.

0 Reply

Jeff Burdick

Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes

6y

Originally posted by @Jennifer D.:

@Jason Marcordes, thank you!

I’m glad to hear from you. It’s great to meet a PM in Chicago.

When you say you’ve seen people get taken advantage of, do you mean they buy a structural nightmare, for instance?

I don't have MLS access, but here are some examples of what I am seeking. Do any problems glare at you from these?

https://www.zillow.com/homedetails/1840-N-Bissell-St-Chicago-IL-60614/2115397472_zpid/?utm_source=txtshare

https://www.compass.com/listing/3946-west-dickens-avenue-chicago-il-60647/435388072604128193/?origin=listing_page&origin_type=copy_url

https://www.compass.com/listing/2906-north-springfield-avenue-chicago-il-60618/466416557120590481/?origin=listing_page&origin_type=copy_url

Bissel backs up to the L and that stretch is really loud. Its also an auction so see what it sells for. Its also zoned as a single family home. Honestly, that place is probably a tear down.

3946 W Dickenson is in Hermosa. Very very different place than Lincoln Park.

2906 N Springfield is on the far west side of Logan Square. It is an up and coming area, but still, def. not Lincoln Park.

0 Reply

Jennifer D.

Investor · LA - Honolulu - Reno - Atlanta - Melbourne (Australia) · Member since 2020 · 35 posts · 11 votes

6y

@Jeff Burdick, thanks! I can now see the value of waiting for the auctions to finish — and also of looking for L lines.

0 Reply

John CasmonPro Member

Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes

6y

@Reed Meyer Lots of great people who can help you in Chicago. If you want to find groups and events, make sure you check out our Chicago Multifamily Club on FB and live events (whenever that's allowed again). @Brie Schmidt also hosts a great event every 3rd Tuesday of the month.

As for neighborhoods, this will depend on your business plan, but certainly some great areas throughout the city. Stay close to the train lines and keep your eye on new developments.

1 Reply

Brie SchmidtBusiness Member

Moderator

Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes

6y

@Reed Meyer - you are going to need a lot more than that. In areas like Avondale, Albany Park, Irving Park you are looking at $600k for a decent property, so $21k down payment plus $12k in closing costs plus $12k for 3 months reserves, $24k if banks are doing 6 months reserves at the time. You can use 70% of your 401k for reserves and closing costs.

You won't be anywhere near Lincoln Park with FHA

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2 Reply

Trevor Fritz

Investor · Arlington Heights, IL · Member since 2014 · 58 posts · 15 votes

6y

Hi @Reed Meyer, it is awesome that you are getting into real estate investing right out of college. I started investing at 25 in a condo in the NW suburbs that I got pretty lucky on and recently bought a condo in Irving Park that will allow me to live below my means and then rent it out at a decent investment.

I know there are people on here who are more knowledgable than me but I will give you some insight into what frustrated me the most. My dad is in construction and pretty much any 2 flats/2flat+in law unit/3 flats were either in tear down shape, needed 100k to fix them up, or had been fixed up with new appliances but the bones were abysmal and not worth my risk appetite.

My opinion on what you should do: Buy a 3 bedroom condo in an area that you and your friends wouldn't mind living in. Off the beaten path in Logan Square or off the Brown line in Irving Park. You will still need probably more than $20k. I wish I would have done this but didn't consider it until my friends and I were in positions to not be living with 2-3 roommates. Hypothetically, you could put yourself in a great position after 3-4 years if you get to live rent-free and save an extra $15k a year. I have found, sometimes the best investment is finding an opportunity to bring in some cash flow while also living as cheap as possible.

I have worked with a great investment broker who came up with some unique financing options for my investments so let me know if you would like his contact info. I can share his IG account which demonstrates his understanding of financing and investing.

1 Reply

Jeff Burdick

Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes

6y

Originally posted by @Brie Schmidt:

@Reed Meyer - you are going to need a lot more than that. In areas like Avondale, Albany Park, Irving Park you are looking at $600k for a decent property, so $21k down payment plus $12k in closing costs plus $12k for 3 months reserves, $24k if banks are doing 6 months reserves at the time. You can use 70% of your 401k for reserves and closing costs.

You won't be anywhere near Lincoln Park with FHA

There are exceptions. I recently closed on a place for under 300K in Irving Park that was in solid shape. I agree about Lincoln Park though. The numbers don't work there anyway unless you're okay with negative cash flow.

0 Reply

Jeff Burdick

Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes

6y

Originally posted by @Trevor Fritz:

Hi @Reed Meyer, it is awesome that you are getting into real estate investing right out of college. I started investing at 25 in a condo in the NW suburbs that I got pretty lucky on and recently bought a condo in Irving Park that will allow me to live below my means and then rent it out at a decent investment.

I know there are people on here who are more knowledgable than me but I will give you some insight into what frustrated me the most. My dad is in construction and pretty much any 2 flats/2flat+in law unit/3 flats were either in tear down shape, needed 100k to fix them up, or had been fixed up with new appliances but the bones were abysmal and not worth my risk appetite.

My opinion on what you should do: Buy a 3 bedroom condo in an area that you and your friends wouldn't mind living in. Off the beaten path in Logan Square or off the Brown line in Irving Park. You will still need probably more than $20k. I wish I would have done this but didn't consider it until my friends and I were in positions to not be living with 2-3 roommates. Hypothetically, you could put yourself in a great position after 3-4 years if you get to live rent-free and save an extra $15k a year. I have found, sometimes the best investment is finding an opportunity to bring in some cash flow while also living as cheap as possible.

I have worked with a great investment broker who came up with some unique financing options for my investments so let me know if you would like his contact info. I can share his IG account which demonstrates his understanding of financing and investing.

The issue I have with condos is that the HOA will eat into your cash flow pretty heavily. And you don't have control over the HOA changes...if it increases, that could be your entire profit margin. I'm not saying I'd never invest in a condo, but it would have to have spectacular numbers.

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Beginner Investor Moving to Chicago

Beginner Investor Moving to Chicago

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