Chicago Deals Are Needles in Haystacks

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Chicago Deals Are Needles in Haystacks

Demetrius Davis
Rental Property Investor · Chicago, IL · Member since 2016 · 98 posts · 52 votes

The past few weeks have left me very pessimistic. I'm feeling that the good times are very likely winding down for finding good deals in Chicago. Seems that lots of properties are overpriced and good deals are wrapped up in multiple offers within several days of hitting the market. I am preparing to close on a flip, but am feeling like my goal of picking up 5 more units (good deals) this year will be tough.  What are you seeing/experiencing in the Chicagoland market?

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Jeff Schroeder
Investor · Chicago, IL · Member since 2016 · 16 posts · 9 votes
9y

Fair to say you've not looked at the South side of Chicago? There absolutely are deals to be made in neighborhoods which are nice, and are fairly obviously going to appreciate in a few years. As an idea, anything around Jackson Park, where the Obama Presidential Library will be put. You can still buy property cheaply in that area to fix up and flip, or hold onto for appreciation and cash flow. I literally just bought a two flat in that neighborhood this week. I guess it depends on what type of investing you're looking for and how much you want to hustle to do it.

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  • Jeff Schroeder
    Investor · Chicago, IL · Member since 2016 · 16 posts · 9 votes
    9y

    Fair to say you've not looked at the South side of Chicago? There absolutely are deals to be made in neighborhoods which are nice, and are fairly obviously going to appreciate in a few years. As an idea, anything around Jackson Park, where the Obama Presidential Library will be put. You can still buy property cheaply in that area to fix up and flip, or hold onto for appreciation and cash flow. I literally just bought a two flat in that neighborhood this week. I guess it depends on what type of investing you're looking for and how much you want to hustle to do it.

    6Reply
  • David Dachtera
    Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    9y

    @Demetrius Davis,

    You want to be looking for off-market properties if you're looking for good deals. Good deals on the MLS are few and far between and, as you've seen, they get into bidding wars rather quickly.

    What most REIs tend to gloss over is the impact of the crash. Some 80% or so of home builders and developers went under in the crash. Inventories ARE low because, as some economists estimate, we are some five years and some 5 million housing units behind the demand.

    Focus on off-market properties. Network and research to find them. They're out there. I just got a line on one myself, actually, by getting in touch with someone I knew in high school.

    1Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    9y

    @Demetrius Davis - I am an agent and I only work with investors on 2-4 unit properties.  I can tell you that business typically slows down from October - April.   Two years ago I had less than 10 showings during that time.  

    But I also notice that the good properties come in waves.  I could go months without finding something good for a client and then out of nowhere I have 5 go under contract for good properties in a few weeks.  It is just how it works.

    Last year was weird, I had 4 clients go under contract in December, so if that happens again it should be coming soon!

    As far as multiple offers... 90% of my clients end up buying in a multiple offer situation.  You have to be quick and aggressive to get these deals.  You also have to break the thinking that a deal is just about price.  You can still get a deal by going over list price 

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    3Reply
  • Jay Collins
    Flipper/Rehabber · Chicago, IL · Member since 2016 · 9 posts · 0 votes
    9y

    Great thread. Are any of you currently investing in the Rose land area of Chicago?

    0Reply
  • Alex Bok
    Real Estate Agent · Chicago, IL · Member since 2016 · 283 posts · 71 votes
    9y

    definitely agree with what the folks have said that market has heated up which has made finding great deals harder to find in the South side of Chicago but they are there! I do look at Roseland often and west pullman areas more now as well since some of the more popular areas are being eaten up

    0Reply
  • Emmett R. McCarthy
    Attorney · Chicago, IL · Member since 2015 · 142 posts · 79 votes
    9y

    I have lots of clients buying expired tax certificates (meaning "ripe" to go to tax deed) and they have been very pleased with the prices and the process. I guess it depends on what type of properties you were looking for.

    0Reply
  • Edouard Pierre
    Chicago, IL · Member since 2015 · 72 posts · 12 votes
    9y

    @Demetrius Davis I can definitely understand where you're coming from as a broker, but like some on here has said there are many sub-markets in Chicago. I just closed on a 3-flat that's running 67% cash-on-cash ROI. I am under contract on a 7-unit building that will yield a 38% cash-on-cash ROI. Both of these properties are to be buy/holds, however with the price and minimal updating I need to do they could be seen as handsome flips as well. One I found the 3-flat on the MLS and found out the owner was extremely motivated so I low-balled...and within the hour I was under contract for slightly over what I offered. The 7-unit was an off-market estate sale so that might not count in this regard...but it's who you know right??

    If you'd like I can ask around my pool of off-market brokers/investors if they have something that would suit your needs. I'm staying put for the moment after these two purchases...they're my first ones :). 

    0Reply
  • Edouard Pierre
    Chicago, IL · Member since 2015 · 72 posts · 12 votes
    9y

    @Crystal Smith I like your answer...

    0Reply
  • Jaclyn McClellan
    Real Estate Agent · Chicago, IL · Member since 2016 · 176 posts · 73 votes
    9y

    great thread and some great insights everyone!

    I think @Brie Schmidt hit it on the head - deals come and go. Markets tend to slow down during the winter but that doesn't mean there's no deals. You just have to be ready to move quickly and also expect a multiple offer situation. Irrespective, don't go over what YOU determine you need to pay for a property, I've seen people increase their purchase price more and more just to be competitive and get the deal, but then they end up eating into their profits and barely make money when they go to sell.

    Anyways, I hope everyone in Chicago is staying warm today..! 

    4Reply
  • Eric Daugherty
    Chicago, IL · Member since 2016 · 1 post · 0 votes
    9y

    @brie Schmidt you always have great content thank you can't wait until we can work together 

    0Reply
  • Oscar Jacome
    Investor · Chicago, IL · Member since 2015 · 75 posts · 32 votes
    9y

    I agree, Brie always motivates me to keep looking for deals. 

    0Reply
  • Jen V.
    Residential Real Estate Broker · Chicago, IL · Member since 2017 · 9 posts · 4 votes
    9y

    Hi folks - 

    Am new to REI, been spending the last month catching up on BP books, forums and podcasts. Have started to analyze some deals, and was SHOCKED at the awful ROIs I was seeing. Looking near Humboldt Park, Avondale, Jefferson Park, Albany Park... was feeling a little disheartened. My strategy plan was to house hack a multi-family unit on a FHA insured loan, though I may have to rethink my starting approach. The only way I was getting numbers that started to work was if there were four units, not 2-3. Or perhaps short sales or auctions, though the financing is giving me pause.  

    I'm curious - are you seeing inventory replenish?  Any advice on starting strategy in this market for a newbie like me?  

    Looking forward to connecting more! 

    Jen

    1Reply
  • Shawn AckermanPro Member
    Real Estate Entrepreneur · Mid West, East Coast · Member since 2015 · 3k+ posts · 1k+ votes
    9y
    Demetrius Davis it may be time to source another market within range. You have to zig when everyone else zags. Best of luck to you
    1Reply
  • Lucas Hammer
    Chicago, IL · Member since 2016 · 238 posts · 68 votes
    9y

    Come to the dark side... I mean, South side. I lived in Albany Park for a few years as a renter and when I decided to buy a multi-unit, I ended up in Little Village, near California and Cermak. I'm not cashflow in currently, but as soon as I move out and rent the one I'm living in, I'll have a decent margin for my first deal. 

    0Reply
  • Demetrius Davis
    OP
    Rental Property Investor · Chicago, IL · Member since 2016 · 98 posts · 52 votes
    9y

    @Shawn Ackerman I agree with your zig zag theory wholeheartedly!

    @Jen V., I would start looking at other neighborhoods, as the ones you mentioned are likely already overrun by investors.

    0Reply
  • Ryan Jang
    Investor / Realtor · Chicago, IL · Member since 2013 · 48 posts · 11 votes
    9y

    I credit real estate educators for teaching people how to wholesale get deals which is by far way more creative and aggressive. I apologize for not finding deals and I apologize on behalf of all Realtors for not convincing people to sell and list on MLS.

    0Reply
  • Elbert D.
    Real Estate Entrepreneur / Investor · Chicago, IL · Member since 2016 · 688 posts · 367 votes
    9y
    They teach them about the concepts of wholesaling but not how to run numbers or the important parts of wholesaling. Some gurus tell them they don't even have to see these house lol. I do genuinely like helping people achieve their goals so I'm not into this just for the money.
    0Reply
  • Robert Boban
    Investor · Chicago, IL · Member since 2015 · 19 posts · 2 votes
    9y

    Nothing is perfect and by any means all Wholesalers are. But if you stick around with a few good wholesalers (and there are more then few out there) and you develop a good relationship in becoming their go to buyer you should have more then enough properties for any investment strategy you are pursuing here in Chicago. Also it is important to have understanding of what it takes to source all this off market properties (lots of time, money, skills) sooner you do you will be able to have much greater success with wholesalers. The MLS is too thin and over saturated this days and most of the properties are way overbid instantly.

    All that said I am licensed broker 10+yrs, active wholesaler/rehab-er 10+yrs and our company doesn't have any shortage of investments properties. Yes market seems much different these days on the acquisition side via regular chanels MLS etc. but the upside is if you are able to find right deals ARV's-retail market sales and profit margins are great.

    @Ryan Jang - lol, nice post

    If you need any help with deal sourcing send me PM.

    Gracias

    0Reply
  • Andrew Holmes
    Rental Property Investor · Chicago, IL · Member since 2015 · 275 posts · 271 votes
    9y

    @Demetrius Davis

    There are still a lot of transactions that have margin the only issue is that MLS is tough. You can still find deals but it's not a cake walk like it was from 2008 to 2014.

    Go after Probates

    Shadow Inventory Deals

    Pre-foreclosures with equity

    Pre foreclosures 30 days from Auction

    0Reply
  • Edouard Pierre
    Chicago, IL · Member since 2015 · 72 posts · 12 votes
    9y

    I whole heartingly agree with @Crystal Smith . I just closed on two multi-family buy & holds with 27% Cash on Cash return. Both off market but there are some sub markets in Chicago that look real nice no matter what your style of investment is. All about research, due-diligence, and patience. Don't get caught naked when the tide goes out ;). Low inventory, low interest rates, and high sales prices can only last so long...

    1Reply
  • Demetrius Davis
    OP
    Rental Property Investor · Chicago, IL · Member since 2016 · 98 posts · 52 votes
    9y

    Thanks everyone for the insight and perspectives! You're what makes BiggerPockets so valuable! Since my original post 8 months ago, I have been able to pick up two new properties. One of them is a townhome on the south side of Chicago. My agent contacted me while I was traveling back to Chicago during the Christmas holiday. One of her clients low-balled the seller, causing them to get offended and refuse to consider any further offers from that buyer. My agent sent me the video walk-thru and I submitted a full price offer within hours. Decisiveness and good relationship with my agent helped get that deal done. Also I did not haggle with the seller, given the history. The numbers worked very well at their asking price. There was no need to get greedy. After reviewing the HUD after closing, I saw that the seller's net was less than $2000. I then understood why she was offended by the other person's low-ball offer. She was older, had lived in the home for 20 years, and the prospect that she would have to owe money to sell her home was insane.

    The second deal I acquired since the original post is a 2/1.5 duplex condo in the Kenwood area of Chicago. It's in a historic mansion on Drexel Blvd and 2 blocks from the Obama's house. I offered $4k above asking price and $20k earnest money the day that it went back on the market. Previous offers fell through likely because $7k in past due and special assessments were due. Also, over 30% of the units were 60-days or more delinquent on assessments. The property had a $100k spread between asking price and ARV and it needed mostly cosmetic updates. I knew that even if I had to spend $20k cleaning up my assessments and a few of the neighbors', I would still make a handsome profit. Additionally, since I was going in all-cash, I could offer seller financing to a potential buyer if HOA assessment delinquencies presented a problem with bank financing. We just placed this flip on the market yesterday, so we'll know how it all plays out in the next few months. My major lessons on this one are: Be aggressive when you spot a good deal; If you can go above asking price and still make the deal work for you, do it; Consider offering large earnest money deposits to show that you're serious (I viewed property before delivering earnest money).

    0Reply
  • Joe H.
    Developer · Chicago, IL · Member since 2016 · 82 posts · 88 votes
    9y
    Originally posted by @Josh Sartori:

    I'd agree, there's not nearly as many properties where you can get a good bang for your buck. I find this particularly true in what most would have deemed up and coming neighborhoods such as Logan Square and Avondale.  

    Go to Redfin, hover over Logan Square (the actual park with the monument).Turn off land, condos, and other so you are only looking at SFH and Multi Family. Note the giant freaking hole you are staring at. There isn't even anything on the MLS that is ridiculously over priced. Virtually nothing is even on the market within a 5+ block radius of the boulevards.

    I agree it is depressing, then again I got in for $136k for a 2 flat plus non conforming attic apt in 2011 so I'm happy. Just did a 30 year refi at a $380k valuation which is still low compared to what it is actually worth right now, but it's a cash out refi so I can see why they are going to be conservative when handing out cash like that. My fortune on my buy and hold doesn't change the fact that I'm now almost done winding down everything else I had acquired in the area leaving me with only my primary residence left in that area. Perhaps liquidating was foolish given the trajectory in Avondale and Logan?

    0Reply
  • Jonathan Davis
    Chicago, IL · Member since 2017 · 4 posts · 0 votes
    9y

    As a very new investor living in Chicago and currently working to save money to afford an investment property, am I better off not trying to invest in Chicago? I was a part of a scholarship program for teachers that requires me to stay in IL for 5 years. Would I be better off looking further down state for investment properties or even in nearby Indiana? Any thoughts would be greatly appreciated. 

    0Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    9y
    Originally posted by @Jonathan Davis:

    As a very new investor living in Chicago and currently working to save money to afford an investment property, am I better off not trying to invest in Chicago? I Would I be better off looking further down state for investment properties or even in nearby Indiana? Any thoughts would be greatly appreciated. 

     Because of the size of the Chicagoland area, statistically, you have a better chance of finding an investment property in this area than going down state.  This doesn't mean that going downstate is a bad idea but by mere density alone you'd be better off in the Chicagoland area.  Please note I include a 40 to 50-mile radius from downtown as part of Chicagoland so this picks up part of Indiana.

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  • Jonathan Davis
    Chicago, IL · Member since 2017 · 4 posts · 0 votes
    9y

    Thanks so much for the reply @Crystal Smith . I was trying to track down an MLS for Chicago and the area and found a site but couldn't figure out how to get access. If you can lend a hand for my answer send me a PM.

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