Investing in Chicago area: is it still worth it?

14 Replies | Chicago, Illinois

Greetings fellow investors,

I am complete noob, been looking to buy a 3-4 unit somewhere in Chicago area, preferably in the north-west or west suburbs. My question is, with rising taxes, anti-landlord regulations, stagnant job growth, and people leaving the area, is it still a good idea to buy an investment property here? Would I be better off somewhere else?

Thanks in advance.

I don't know the Chicago market, but i think there is great value, especially for a newbie, to invest in your backyard. In general, the entire country is hot- the RE market is doing well and unemployment is virtually at 0%, so in relative terms, Chicago shouldn't be that much different than the rest of the country. Define buying criteria that is comfortable for you, and be aggressive in your negotiations and patient in waiting for the right property. If you do great with your first few deals, you'll have the room to stretch and risk a bit on your future deals. Good luck!

It all depends what you are looking for. You can find almost everything in Chicago. 

Honestly, check the sources of the economic variables you indicated.

How many cranes can you see downtown? What's the average cost of a high end flip in Albany Park, Humboldt Park, or Logan Square? How much has it been invested in Healthcare? Are there future/ongoing plans for infrastructure? What are the areas with high concentration of blue collar workers to fulfill the above-referenced projects? 

More importantly, where is the largest source of potable water in the world? 

Best, 

Frank

Originally posted by @Yan Bekker :

Greetings fellow investors,

I am complete noob, been looking to buy a 3-4 unit somewhere in Chicago area, preferably in the north-west or west suburbs. My question is, with rising taxes, anti-landlord regulations, stagnant job growth, and people leaving the area, is it still a good idea to buy an investment property here? Would I be better off somewhere else?

Thanks in advance.

 Hey Yan.  I don't know about the suburbs...but the city of Chicago is booming.  Consider investing in the city.  PM me if you'd like to discuss further.  

@Yan Bekker   I echo the few points already made by @Jeff Burdick @Frank S. @Ibn Abney - there is a lot of opportunity, but it depends on what returns you are expecting and how long you want to hold it.  

I would say its tougher these days to find easy flips in the multifamily space, but if you are looking to buy/hold for rental income you can cash flow about $1000/mo (after debt service) on a $500,000 building (4-6 flat) in several areas.  

City:  Look at western "fringe" neighborhoods like W. Humboldt, W. Logan, Irving Park and Portage Park.  Or south side neighborhoods like South Shore, Hyde Park, etc.

Just outside city:  Forest Park, Berwyn, and Cicero are also good working class areas where taxes dont kill cash flow just yet. 

Having worked heavily in multi family for the past four years I can tell you that market has been heavily saturated by investors. If you stick with 2 to 5 unit buildings there are still opportunities but the market for larger buildings is brutal. I'm taking the contrarian view and have been looking back at residential flips in the burbs. Many of the rehabbers turned into wholesalers and left the market wide open. So far I've found a lot of opportunities. Don't go where the puck was, go where the puck is going.

@Bob Floss II I think it is interesting that you feel all the opportunities are gone in the larger apartment space. I am finding quite the opposite in the near southwest burbs. A lot of my clients were picking up three units for 240-250k last year in Berwyn and Forest Park, and those same opportunities are now selling for north of 300k. On the other hand, I just put a 19 unit under contract for 1.1 million in Berwyn. I am getting this deal at 57k per door instead of 100k per door. 

In my opinion, everything is hot right now and we investors just have to buy on good fundamentals and be patient. It took me 14 months since my last purchase to locate this opportunity. The good thing, though, is I don't need to buy a deal every month! I just need to buy great deals. 

I agree with John. I have zero vacancy in the suburbs across 52 units and new tenants constantly calling for any apartment openings. Go with a location that you're comfortable with... distance from you, safety and cash flow. It's very competitive as you're competing with multiple offers and cash offers but you need to go after what you want and start somewhere.

@John Warren When you get your building in Berwyn updated and rented out, what do you project your CAP?

I should amend my comment. There are always multi family opportunities but they are not nearly at the CAP I was getting a couple years ago. You can still find some but they are becoming fewer and fewer.

Hi Yan, I closed on my first deal in January in Chicago (house hack).  It's totally doable and worth it.  I'd more than happy to share details as I'm a newbie myself.  All the best and don't quit!  Chicago has quite a bit a deals in my opinion.

@Bob Floss II I think I will be able to operate the building at around a 10 cap by the end of year 1. It is certainly not operating at a 10 cap right now though, which is why I have the opportunity to get in on it. I would agree that it is harder and harder to find good opportunities, but I am still focused on value add multi family investing as I feel it is the best strategy for me long term.