Flipper/Rehabber · Chicago, IL · Member since 2016 · 123 posts · 38 votes
What have you found are the best areas to get buy-and-hold rentals in the Chicago area with good true cash flow?
Looking most at price to rent ratios with a combination of good area.
Prefer South and West Suburbs. I'm staying out of Englewood and the rough crime-infested areas in Chicago, no Harvey, Riverdale, Robbins, etc.
What I've found is you can get good rents fro South Suburban towns but property taxes are so high in Dolton, Olympia Fields, etc. that it is hard to cash flow after accounting for maintenance and cap X.
@Francis Rusnak I prefer areas with some type of economic stimulus or driving factor for tenants. I avoid areas like Dolton and Olympia Fields because they are loaded with rental properties already and there's nothing really drawing tenants. I've had a lot of success with properties around University of Chicago. It creates some stability in the neighborhood and draws tenants. Find areas in the south suburbs where there is some type of economic growth and new jobs.
Humboldt Park (North of Grand), West Buck Town area, parts of Logan Square, Hermosa, Avondale, Pilsen all solid markets. A little cheaper.... Brighton Park, Little Village, Mckinley Park, East Garfield Park. Taxes are a big issue once stepping outside Chicago into the burbs.
@Francis Rusnak I live and invest in the near southwest suburbs. I own properties in Berwyn and Lyons, and have been very pleased with the cash flow. I don't think great cash flowing properties are growing on trees anymore, but if you are patient there are still excellent deals to be had in the area. We also are 25 minutes from the loop, so jobs/desirability are not issues like in the far south areas of Chicago.
I live in the West suburbs also, and like to keep commute times to properties near 1/2 hour. So my bias is West. Oak Park,Berwyn, LaGrange and Downer Grove. Are where I consistly see best combination of stability and ROI. Lyons, Bolingbrook and Lisle, all seem more saturated with rentals, and more risky. Oak Park is also rental saturated, lots of upscale construction going on there though, and proximity to downtown probably creates more price stability than some other burbs.
I am in Melrose Park and I see opportunity. Stay above lake street. And there are opportunities and it seems some other investors are around I have seen a few places being rehabbed. I think I bought the worst one on the block and am making it better though. Only issue with anything in cook is the evictions. They will take a long time. Other than that, I am at 20th Ave and Thomas and it is walkable to a few shops and there are some amazing bars and places right on division. A few blocks from the metra station. And I am house hacking 10 minutes away from my day job.
Don't see how most of these places are cash-flowing positive. Seems like you'd have to manage the rental on your own and not account for maintenance and cap-x to be cash flow positive in most of Chicago and suburbs. Or, just not have a mortgage.
Two examples of houses we got as flips and considered using as rentals.
437 Bayview, Naperville
Purchase 170k
Reno Budget 5k
Likely Appraisal Value 220k
Property Taxes: $4,629
Insurance: $900/year
Expected monthly payment with 20% down from 220k: $1,352/month
Avg rent $1,361/month
9033 S. Jeffery, Chicago
Purchase 100k
Reno Budget 60k
Likely Appraisal Value 215k
Property Taxes: $2,852
Insurance: $900/year
Expected monthly payment on 160k mortgage: $1,123/month
Avg rent $1,336/month
That's not accounting for property management, vacancy or anything going wrong with the house.
We have a house in Morgan Park (South side of the city) that would make a little more sense numbers wise, but it is a fairly tough neighborhood and I can expect the maintenance numbers to be very high there.
Didn't even run the numbers on our Dolton or Olympia Fields houses since the property taxes are so insane.
@Wayne Popelka I am with you. Not much cash flow in Oak Park unless you have a time machine to go back to 2009-2013. Forest Park and Berwyn are both solid though.
@Francis Rusnak I agree that most of the single family homes are not solid rentals. Multifamily does much better as the taxes are lower per unit (at least in the areas I invest in). Also, I agree that many land lords self manage and don't count the management fee into their earnings. Single family homes and 2-4 units are very expensive to out source to a a management company in comparison to apartments, which is another reason am getting into larger buildings.
I echo @Henry Lazerow west side like South Lawndale and Little Village good cash flow.
Case study- 3 flat 9 bed 6 bath purchased for 164k one year ago in Little Village rents were $3226 now 3800. Built in 2008 with minimal deferred maintenance, however needed to non renew a hoarder so new paint, floors, and stainless steel appliances ate into some profit.
There is a lot of BP confusion with the term cash flow. Varied equity, varied credit worthiness, varied amortizations, the list goes on. ROI, is a simpler less ambiguous evaluation method. Even with ROI, different calculations for maintenance, management, leasing agent fees and vacancy rates, can leave one scratching their head, as to what be the ROI.
I'm just jumping into this thread, what are your thoughts on Cicero near Morton East High School? I might have an off market deal coming up in the next month or two and since I'm NEW, would love to hear your thoughts?
Cicero is a solid area for cash flow. My favorite section is further souteast closer to Berwyn. The town can be tough to work with so just make sure you know what you are getting yourself into with the of market deal. The pre sale compliance is what kills a lit of interesting deals.
What are thoughts on Woodlawn for a 5-10 year buy and hold strategy? I’m currently looking at a MFH with great cash flow and ROI. Do you think the neighborhood will appreciate a bit given the upcoming development?
I have a rental in Pullman area, zip code 60628, , 3br, 2ba SFR, not the best area and I don't expect much appreciation, but cash flow is good, voucher rate is about $1200. The best part is after refi, I have no money in the deal and still get positive cash in my pocket each month.
Prefer South and West Suburbs. I'm staying out of Englewood and the rough crime-infested areas in Chicago, no Harvey, Riverdale, Robbins, etc.
What I've found is you can get good rents fro South Suburban towns but property taxes are so high in Dolton...
I grew up in Dolton, lived a block from Riverdale for a good part part of it, back in the 60's and 70's.
It was a decent area then. Last time I was back 4 or 5 years ago, it seemed more run down. RE prices seem stagnant and cheap. Didn't see much if anything getting built, but the trains still blocked the street crossings as they please. LOL.
Humboldt Park (North of Grand), West Buck Town area, parts of Logan Square, Hermosa, Avondale, Pilsen all solid markets. A little cheaper.... Brighton Park, Little Village, Mckinley Park, East Garfield Park. Taxes are a big issue once stepping outside Chicago into the burbs.
Good recommendations! I've been eyeing some of these areas as well.
I'm looking at a couple of properties in Homan Square and South Chicago. Any thoughts on those neighborhoods in general? Any advice would be appreciated.
Homan Square is just like South Lawndale are block by block bases. I know people who did very well in South Chicago. But I haven't invest in South Chicago. My favor part is South Lawndale by Pink line Central Park station. ROI is above 15% in that area.