Looking for Insight into Investing in Rockford, IL

9 Replies

Hey everyone! I'm a newbie investor looking to get started with buy-n-hold rental properties in the Rockford area. I saw on a BP blog post that the area offers excellent cap rates so I am beginning to research the area. I'm going to be attending the Rockford Apartment Association meeting on the 15th of September but hopefully I can get a jump start on some insight from you, dear reader.

Here are some of the questions I'd like to ask at the meeting - if anyone could provide some answers, I would greatly appreciate it! If I am missing a key question, please let me know about that as well.

Who should I know?

What do you think of the Amerock Hotel Redevelopment?

Do you think that the Amtrack expansion will become a reality in the next five years?

What neighborhoods should I avoid?

What are the disadvantages to investing in Rockford?

Where do you see Rockford in the next five years?

hi Aaron! It's Aaron from Chicago! Congrats on your venture into real estate! I'd be glad to answer any questions you may have. Please feel free to connect!

Hi @Aaron Mikottis ,

Congrats on starting your journey.  You have some good questions but a little more specifics about your strategy would help as well.

Rockford is attempting to attract visitors through youth/amateur sports and tourism.  It is also getting locals downtown with the farmers markets and other special activities. The fact that investors are considering a hotel downtown is encouraging but more is needed to bring tourists especially with Chicago, Milwaukee, and Madison near by.

In my opinion, with the current Illinois debt and the conservative Governor's budget, the state is not likely to contribute much to the Amtrack expansion anytime soon.  That will at least effect the hotel timing but hopefully there is still enough potential to go forward.  There are investors betting on downtown already and rehabbing multiple buildings with retail on the main level and luxury lofts above.  Those units, whether for sale or for rent, are not turning very quickly.  

There have been some employment wins lately with the Woodward expansion in Loves Park, a new call center on State Street, and a aircraft mechanic school at the airport.  These help but there needs to be more opportunities to really make a difference in unemployment.

As far as cap rates, it will depend on your investment strategy. Currently, there is a low inventory of multi-family properties so it is difficult to find value, especially on the MLS. Single family foreclosures are consistently coming on the market in B class areas but are getting bought up quickly by investors so you need to move fast to get one but it is possible. There are a lot more available in C and D class areas but will obviously have higher risk and require more attention.

The biggest disadvantages are taxes and the lack of appreciation.  Property taxes are high in Rockford and a little better in surrounding Loves Park, Machesney Park, Cherry Valley, Roscoe, and Rockton.  Prices are currently around 2005 levels but have been increasing lately in the A and B class locations.  C and D class areas have been below 50k for decades.

This turned out much longer than I expected but I hope it helps. 

@Craig Wilcox

I think you summed it up well - high taxes and I would say zero appreciation.  I'll add declining population as well.  

In my opinion it is clearly a cash flow play.  

I didn't realize the inventory was so low though.  Might have rents drop.  I looked seriously at that market last year I'll have to revisit it to look at inventory.

@Craig Wilcox , I really appreciate your detailed reply. It will work as a great springboard for further research. 

Ultimately, my goal with real estate is to reach a state of financial independence as soon as is reasonably possible. For context this means 4-5k / mo net income. To this end, I want to invest in high cash-flow properties to quickly start rolling the snowball. I am happy to invest a lot of extra effort to increase my bottom line for this stage. Once I hit the right sized investment portfolio, my hope is to trade up into a large apartment building (50 units+) for a more reliable, consolidated investment. At this point I'd like to continue to grow but at a slower rate and with the interest in having the less hassle. 

I'm in the field of architecture so the BRRR strategy is of particular interest to me. But if appreciation is flat, as you and @John Weidner say, is Rockford the wrong place to be? Would it be better to forgo major renovations and focus instead on accumulating quantity of cash-positive properties?

What do you think about the I90 expansion - any affect on property values in the next 5-10 years? 

@John Weidner ,

If you are looking for commercial multi-families, there is some inventory.  The 2-4 family properties on the market either have lower cap rates (sellers looking for appreciation) or have lots of deferred maintenance.  The ones priced right, go quickly.

Rents are still on the rise, especially in the northeast.  I think the multi inventory will stay low until rents stabilize.

@Aaron Mikottis ,

If you are going with the BRRR strategy, there is opportunity in Rockford, LP, and MP if you buy right (obviously). Most of our tenants and first time buyer clients will only consider the east side of Rockford and surrounding villages. Those with children do not want to be in Rockford 205 schools.

With prices just starting to rise, it is still a good time to purchase SFH in the desirable neighborhoods. Distressed properties are hitting the market but selling quickly. Once rehabbed, and sometimes without rehab, these homes rent quickly as well. These are the same areas buyers will look at when financing is available so they are the best opportunity for appreciation also (at least in this area).

Your comment on I-90 just reminded me that a new 400 million dollar hospital was just announced to be built at Riverside next to I-90.  There is also a new industrial park off of the 173 exit as well as the recent improvements to 173 itself.  

@Craig Wilcox , thanks once more for the tips. Your posts have greatly helped me narrow my search and follow my investing strategies further down the rabbit hole. It sounds like investors outside of the real estate market have taken an interest in the greater Rockford area - hopefully this sticks and the area will prosper.

If you think of anyone that I should talk to or if you know of any resources that could help me with my venture, I'm all ears. 

Thanks again.

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