Population decline in Chicago and Illinois
Oak Park, IL · Member since 2017 · 14 posts · 7 votes
Hello everyone,
I'm a newbie real estate investor in the beginning stages of saving money for a down payment on a multifamily buy and hold. I'm currently looking at the area surrounding the Garfield Park Conservatory. There are obviously issues with the area (crime, violence), but at this stage I'm looking at investing from a 40,000 view. One of my high level concerns is population decline in Chicago and Illinois.
I'm trying to remain optimistic that the population decline is a good thing because it may increase the chance of finding a good deal. However, the cynic in me says that state corruption and tax increases is going to continue to drive people to move out.
Any insights on what this means for investors?
See the agents BiggerPockets members work with in Chicago, IL.
See agentsI've lived in Chicago almost my entire life. It's a city of extremes. There are areas that are booming like I've never seen before, and there are areas with entire blocks of vacant lots and abandoned buildings. The same stark differences exist between neighborhoods in terms of crime rates, income levels, etc.
Because of this, I find many of the "40,000 view" stats about Chicago -where the all of the extremes are averaged together and presented as simple data- almost meaningless. Even neighborhood-specific data can be misleading if you don't understand the dynamics. For instance, some gentrifying areas actually see population loss as multifamily buildings are converted into SFHs and apartments that used to house entire families are rehabbed and rented to a couple roommates.
You just have to know the neighborhoods.
@Joe Splitrock Desensitized? No. Experienced in the city and aware of what it is like to live there? Yes.
The city of Chicago is easily one of the most beautiful, clean, large cities in the entire world. I lived there for ten years - part of that time with wife and child. At no point was I ever putting my family in any more danger than I currently am living in a really nice suburb of Chicago. Bad stuff happens here too.
Chicago is just like any large city - there are A LOT of people living in a centralized area. Whenever you increase population by that much, there are bound to be more instances of violence. As everyone else on here has said but apparently no one wants to listen, a disproportionately high percentage of the violence happens in very isolated areas. These areas are also not necessarily places that you have to travel through unless you would like to. Even with that said, I reverse commuted through many of the "less desirable" areas on a daily basis, with one year old in the car. Not once was I ever harassed or felt like either of us were in danger. There are lots of great people in those areas too just trying to survive on a daily basis.
Unless your are completely ignorant of the area, or stupid, you can avoid putting yourself in any danger in Chicago.
I feel bad for people that have the same opinion as you. The city of Chicago has so much to offer people with a vast array of fantastic food, music, life, and cultural experiences. I feel extremely lucky to have lived and still work in the city. I am certain, because I live it, the vast majority of people I meet do not feel like you do. Droves of professionals into their late 30's, 40's, 50's decide to stay in the city as young people continue to come in to popular areas. I cannot speak for the city as a whole because blanketing the entire city when speaking is dumb and violates probably the most essential cornerstone to great value in real estate - location, but for the popular areas, a decrease in population seems to be the exact opposite of the truth. Supply can't keep up with demand whatsoever and it doesn't seem like it will any time soon.
And if sensationalized news is any indication on things, I think you guys are in some trouble in South Dakota:
@Joe Splitrock Such stunning statistics...a less than 0.0003 chance of being shot. People in countries like Germany @ 0.7 homicides caused by guns per 100k persons likely look at ALL of us in the USA, you great folks in Sioux Falls included, and wonder how you/we survive with 3.43 firearm deaths per 100k persons here in the USA as a whole. Do you think that's a fair analysis of where you live?
Here in Chicago, demographics are extremely segregated and violence along with it, enough so that I'm surprised the federal gov't hasn't made more of an issue of the segregation (but that's a soap box for me to stand on in a different thread). Even within our neighborhoods, the violence is concentrated to certain areas/blocks of certain bad neighborhoods. I can understand how an outsider may view Chicago based on the sensationalist media reports, but I can tell you as a resident and broker who works throughout a number of the "war zones", these stats and stories you read about are extremely concentrated to certain areas while the rest of the neighborhoods flourish.
I'm not trying to paint a daisy-field picture and ignore the violence, but rather to put the stories you receive via the media into perspective. I'm also certainly not desensitized, but am rather unaffected, having not been shot along with roughly 2,717,045 other people here, assuming your and @Erica Rodriguez's numbers are accurate.
In both cases - in the neighborhoods that flourish and in those that are challenged - there are opportunities to invest based upon your goals. And that's one of the things I love about Chicago, we've got some great places to dump money into for the long-term appreciation, and just a couple miles away you can pick up a place and hope to double your money in a few years just on rents.
People aren't fleeing the violence like asylum-seekers from Syria. For most of us nothing has changed, the bad areas have just gotten worse. I'd chock up this ever small decrease in population to the natural cycle of folks moving to and from the suburbs, and even then question the accuracy depending on what this data was based upon.
Thank you for your optimism and for sticking up for our beautiful city. It is very encouraging.
After reading everyones posts I'm becoming less concerned with population decline. As I said, I'm a young investor trying to see the bigger picture.
I see so much potential in the challenged areas and hope to cash in on the long term appreciation you speak of. I grew up in Cicero, so I'm a bit desensitized to gang violence. I know I have the stomach to go into or near the "war zones" (as does my husband) to not only invest but proactively transform the neighborhood. Podcast 008 with Al Williamson has some creative ideas about how to do this in inner cities.
I hope more investors will take a closer look at 60624 and 60623 areas so we slowly can make these communities more safe and desirable.
I know the area around the Garfield Park Conservatory is going to transform back into its former glory. It my take 5, 10 or even 15 years but it will happen.
Erica - I would just caution you on this quote. None of us know what will happen. If you like the area, don't speculate, find out what the city has planned. Meet with the Alderman or at least check out his website - http://www.aldermanervin.com/. Go to the community meetings held each month. Try to gather as much info as you can to make an informed decision and develop an investing strategy that minimizes your risk.
There's nothing like having boots on the ground...whether you are in Sioux Falls or Chicago. Numbers are useful, and can help, but often don't tell the whole story. @Erica, it sounds like you are optimistic, so just do your due diligence and try to err on the side of realistic. You know the area, you know your comfort level, and you probably know the types of tenants you will be dealing with in a buy-and-hold scenario. I am in a part of Sioux Falls that isn't the greatest, but I also am hopeful that in 10-15 years, it will be a different story, and my properties will be paid off (or almost) and will be much more valuable then. In the meantime, I'm bringing home a little cash in addition to my full-time work, learning the business, and letting tenants pay off my assets. All the best to you as you begin this journey...it sounds like you are doing your homework, so you should do great - just be prepared for the ride (no matter what city/neighborhood)!
Erica - I would just caution you on this quote. None of us know what will happen. If you like the area, don't speculate, find out what the city has planned. Meet with the Alderman or at least check out his website - http://www.aldermanervin.com/. Go to the community meetings held each month. Try to gather as much info as you can to make an informed decision and develop an investing strategy that minimizes your risk.
Excellent tip. Thanks so much!
I will definitely do my due diligence. My partner and I giving ourselves a year to save, educate ourselves. We'll take your advise to gather as much information about the areas we are considering.
@Jeff Dulla NYC has over three times the population and under half the murders, so it is not just what you should expect with any large city. I understand it mostly in the poor minority neighborhoods and that tourist areas are much safer than Chicago as a whole. That is a fair point, but I would still argue that murders hurt the entire city.
@Matthew Olszak based on population size it is a .0003 chance of being murdered, not shot. The chance of being shot is .0013 based on 3500 shootings. In other words, 1 of 76 people will be shot every year. At that rate, it means by age 76, you have probably been shot once in your life. Hopefully my point illustrates why I am not a fan of using statistics. You can prove just about anything using statistical logic. The reality is that some people in the city have a much better chance of being shot than others.
I wasn't trying to offend anyone, but I see how my comments could easily be taken that way. I am just trying to make the point that crime is a significant factor in choosing where to live. I don't love the national media, but they do keep reporting bad stories from Chicago. Like it or not, it is hurting the image of Chicago.
I'm coming to this thread a little late. It looks like you're getting good inputs from the locals who live & invest in this market.
Population growth/decline can be a good metric for investing but you have to be careful how you use it. Your chart at a Macro level shows population decrease in Chicago as a whole, which is true, but the facts are some areas are actually growing in population; (e.g. Loop, South Loop, & the Near North Side which includes: Gold Coast, River North, and Streeterville.) I recommend you research the statistics by neighborhood if you're going to use it as a metric for investing.
You commented that you're "trying to remain optimistic that population decline is a good thing because it may increase the chance of a good deal? You're right that population decline may increase your chance of a good deal but don't bet on your property appreciating. Declining population in a neighborhood usually means declining values. If you're going to buy and hold for a long period of time then you'll be ok. But if you're time horizon for holding the property is short then you'll probably lose money. The potential exception to the rule is if you're investing in a declining area that is adjacent to a growing area. As prices rise in the growing area there can be positive spill over to adjacent areas from buyers or renters that can't afford to live in the growing area. With that in mind I recommend you review the population stats for the areas adjacent to where you're considering investing. It may help you narrow down where to invest.
Hi Erica -
I am also investing right in the Conservatory area - trying to buy a mixed use property right now. I've lived and worked in higher-crime neighborhoods in the past so I'm somewhat prepared. Its always a risk but for me the chance of higher returns than my better located properties is worth it.
Good luck! let me know if you end up moving over there.
I don't own anything in Chicago. But from what people tell me, you need 2 union electricians to change a light bulb and a city inspector to confirm it was done right (Emphasis through exaggeration of course). Coupled with annual tax hikes and the gang wars on the west and south sides, it seems the future of Chicago is highly uncertain at best. Granted, some areas are improving; but the most recent annual population chart suggest a .4% drop from July 2015-2016. From a marco standpoint, that's alarming if it continues the next few years.
I suppose time will tell.
Coming in late here to defend both my city and proper decimal placement...a .0013 chance is 1 in 769, not 1 in 76.