New REI investor looking to get started and househack in Chicago

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New REI investor looking to get started and househack in Chicago

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

Hello BP community!

I have been lurking in the forums but wanted to finally make an introductory post. I moved to Chicago this past January, a city that I absolutely love, where I would like establish myself and land my first investment. I'm working full time as an engineer in a manufacturing plant, and I am determined to pursue a multifamily house-hack. First of all, I wanted to connect with you and start conversations on these topics so feel free to reach out! Secondly I had some specific questions for my Chicago people to start off:

  • From your perspective what are some of the best neighborhoods to house-hack currently? Any specific area that is currently appreciating at higher rate? I've been looking into Avondale and Tri-Taylor area. I like Ukrainian village but looks like in general is too expensive and lower probability to cashflow
  • What are some of the intricacies from the Chicago market that makes it unique from other major metropolitan areas?
  • Is FHA the way to go for househacking or should you pursue a conventional loan if can afford it?

Looking forward for discussions and learning from your experiences

Johnny Alvarez

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    Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    6y

    @Johnny Alvarez - Welcome to Chicago! And maybe more importantly congrats on jumping into RE investing.

    1.  Where you want to house hack really depends on you and your comfort level.  Chicago's NW side has and will likely always continue to appreciate at a steady rate, but I like areas on the South side like Bronzeville and Washington Park.  I also like Tri-taylor and Pilsen as well.

    2.  Chicago has a lot to offer because there are so many 2-4 units and you can find real estate at all different price points.  Understanding Chicago as a whole is almost impossible but there are tons of great people (some above) that know the neighbors like the back of their hand.  Find the general area you want to look in and then find someone who knows that area.

    3. I'd say FHA is definitely the way to go if you can find a deal that fits the criteria. 3.5% down @ 2.75% interest rate for 30 years.....are you kidding me? That's a killer deal with low money in.

    My biggest suggestion would be to build a team and move fast.  The faster you get going the faster you get some real experience which is invaluable.  If you need any help or referrals shoot me a pm and I am happy to assist.

    [email protected]
    Quality Builders4.966 Reviews
    WebsiteView Page
    2Reply
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    • Jin Kim
      Real Estate Agent · Santa Clarita, CA · Member since 2020 · 39 posts · 36 votes
      6y

      Hi Johnny! I cannot answer the first two questions due to the fact I do not live in Chicago. However, for the 3rd questions, I personally would recommend getting an FHA loan compared to a conventional loan. For an FHA loan, you only need 3.5%. The less of your money in the deal, the better.

      Also, since it will be a house hack, the people you are renting to will help pay your mortgage. When you do decide to move out of the house, I would refinance a year prior to moving out to get rid of the PMI and lower your payments. That way you can get better cash flow when you move out.

      Let me know if you have any questions and if you need a recommendation for an agent in Chicago, let me know! Good luck and I wish you the best!

      1Reply
    • Ricardo Delgado
      Real Estate Agent · Chicago, IL · Member since 2020 · 26 posts · 12 votes
      6y

      @Johnny Alvarez

      Welcome to Chicago and welcome to BP!

      I’ll try my best to answer your questions.

      I had the same idea as you when I first started.

      1. There’s a lot of neighborhoods that will work for house hacking in Chicago. Really depends on your budget and where your comfortable living. I’ve personally considered East little village, West Humboldt Parky, McKinley Park, and Hermosa. But there’s a lot of other areas that would work.

      Avondale and Ukraine village are great areas but prices tend to be higher than some of these up and coming areas that I’ve mentioned.

      2. Im not too familiar with markets outside of Chicago so I’d love to hear what others have to say about this. I would say Chicago has plenty of multi units to choose from and many neighborhoods can be considered block by block. For example South of grand maybe even Division in west Humboldt Park gets very sketchy. North of Grand is generally a sweet spot.

      3. I would strongly recommend a low down payment option ( 3.5% FHA or 5% conventional if you qualify or it's available.)

      This way you have reserves and are able to make some renovations to increase rents and the increase value of the property in order to refinance in the future to remove PMI.

      You'll still pay PMI with a 5 % conventional Loan but from what I understand PMI will drop once you hit 80% LTV (Ask lender).

      Best of Luck to you and feel free to reach out if you have any questions.

      1Reply
    • John Warren
      Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
      6y

      @Johnny Alvarez welcome to the forums! Chicago is an amazing city to invest in, and you have so many options here. Chicago is a city of neighborhoods, and you will have a lot of options. @Ricardo Delgado already mentioned a lot of the up and coming neighborhoods. It seems like you are looking to stay close to the downtown? A lot of investors have success along the blue line following neighborhoods like Logan Square, Old Irving Park, Avondale, Albany Park and Jefferson Park. I have seen a lot of action recently in Little Village and Humboldt Park if you feel comfortable in those neighborhoods. I personally am buying buildings in Berwyn and Cicero right now which are about 20-25 minutes from down town. 

      2Reply
    • Johnny AlvarezPro Member
      OP
      New to Real Estate · Chicago, IL · Member since 2020 · 9 posts · 5 votes
      6y

      @John Warren thanks for the insight! I actually work close to Cicero area so it would significantly help my commute. Definitely will consider

      0Reply
    • Johnny AlvarezPro Member
      OP
      New to Real Estate · Chicago, IL · Member since 2020 · 9 posts · 5 votes
      6y

      Appreciate your thoughts @Ricardo Delgado. Needed to narrow down my efforts, and those neighborhoods sound like a good place to start analyzing.

      0Reply
    • Johnny AlvarezPro Member
      OP
      New to Real Estate · Chicago, IL · Member since 2020 · 9 posts · 5 votes
      6y

      @Jin Kim thanks for your take on FHA loans. From what I'm reading and listening, sounds like it would be worth my while doing some form of rehab to increase value, maybe that would be good enough to offset the PMIs

      0Reply
    • Crystal SmithPro Member
      Moderator
      Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
      6y
      Originally posted by @Johnny Alvarez:

      Hello BP community!

      I have been lurking in the forums but wanted to finally make an introductory post. I moved to Chicago this past January, a city that I absolutely love, where I would like establish myself and land my first investment. I'm working full time as an engineer in a manufacturing plant, and I am determined to pursue a multifamily house-hack. First of all, I wanted to connect with you and start conversations on these topics so feel free to reach out! Secondly I had some specific questions for my Chicago people to start off:

      • From your perspective what are some of the best neighborhoods to house-hack currently? Any specific area that is currently appreciating at higher rate? I've been looking into Avondale and Tri-Taylor area. I like Ukrainian village but looks like in general is too expensive and lower probability to cashflow
      • What are some of the intricacies from the Chicago market that makes it unique from other major metropolitan areas?
      • Is FHA the way to go for househacking or should you pursue a conventional loan if can afford it?

      Looking forward for discussions and learning from your experiences

      Johnny Alvarez

        In my opinion, Chicago's too diverse to answer the question- "What's  the best neighborhoods to house hack?" In all 77 communities in Chicago proper, plus the suburbs, there are house hacking investors & opportunities. The 1st questions you should address are: 

        • What can you qualify for loan wise? 
        • Are you more interested a neighborhood where you can also hang out or are you strictly interested in maximizing your cash flow?
        • Or is your strategy to bet on appreciation versus immediate cash flow?
        • The intricacies of the Chicago market that make it unique from the other major markets is naturally the price point. Major markets being New York, LA, Miami, Seattle,.... basically the cost to invest in the midwest versus the costs to invest on the coasts. 
        • Regarding FHA versus conventional- There's a maximum loan limit on FHA loans depending on whether you are purchasing a 2,3 or 4 family. This limit will rule out some areas for investing & you'll have to go conventional.
        312-681-7487
        2Reply
      • Jonathan KlemmBusiness Member
        Moderator
        Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
        6y

        @Johnny Alvarez - Welcome to Chicago! And maybe more importantly congrats on jumping into RE investing.

        1.  Where you want to house hack really depends on you and your comfort level.  Chicago's NW side has and will likely always continue to appreciate at a steady rate, but I like areas on the South side like Bronzeville and Washington Park.  I also like Tri-taylor and Pilsen as well.

        2.  Chicago has a lot to offer because there are so many 2-4 units and you can find real estate at all different price points.  Understanding Chicago as a whole is almost impossible but there are tons of great people (some above) that know the neighbors like the back of their hand.  Find the general area you want to look in and then find someone who knows that area.

        3. I'd say FHA is definitely the way to go if you can find a deal that fits the criteria. 3.5% down @ 2.75% interest rate for 30 years.....are you kidding me? That's a killer deal with low money in.

        My biggest suggestion would be to build a team and move fast.  The faster you get going the faster you get some real experience which is invaluable.  If you need any help or referrals shoot me a pm and I am happy to assist.

        [email protected]
        Quality Builders4.966 Reviews
        WebsiteView Page
        2Reply
      • Johnny AlvarezPro Member
        OP
        New to Real Estate · Chicago, IL · Member since 2020 · 9 posts · 5 votes
        6y

        HI @Jonathan Klemm,

        Thanks for the information. That what I have been reasoning with, low money down with a low interest rate is a sweet combo to go with, used the extra cash to work elsewhere.

        Regards,

        Johnny

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