15 tips and tricks for the Chicago market

15 tips and tricks for the Chicago market

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

Thought this would be a fun post. Here is a list I created. This is targeted more towards beginner investors so I left out the advanced/high cost strategies. Feel free to add to the list with any of your own tips. Happy investing everyone! 

  • 1) The best bang for your buck value add is adding in-unit laundry. This will cut your vacancy rates down significantly and in many north side neighborhoods can bump the price of the unit up $100-200 per a month.
  • 2) The second best value add is new counter tops/sink and paint. These are things you can do cheap without pulling permits and make a world of difference in the rent you can achieve. I like to steer first time investors towards buildings that already have the modern HVAC systems (furnaces no boilers) so they can do an easy value add such as steps #1 and #2. Having to change HVAC can be $20k+ by itself if doing it legally.
  • 3) White is the desirable look for kitchen rehab rentals right now. Doesn’t have to be high end or expensive finishes but the all-white look with Stainless Steel appliances sells. 
  • 4) The Chicago market is seasonal. An identical property can sell for 5-10% higher in April-May then it would in October-November. Late in the fall around the holidays significantly less people are shopping for properties which means less competition and sellers start to get desperate accepting lower offers/doing price drops. To give some context had a $850k contingent in November which had sat unsold 2 weeks then broke contract mid January all of a sudden multiple offers sold for $900k. Potential $50k saving by shopping when others are busy with the holidays. If you want the best deal this is the time of year!
  • 5) Rentals are also seasonal in Chicago. The prime rental season is March to July. If you buy a building in the off season the best practice is to rent it up on leases that will end between March and July for example a 9 month lease or a 15 month lease. You may have to rent the units under market rate especially if you get stuck in the late fall.
  • 6) 5% down conventional is often the best option for your first house hack and available in many of the gentrifying Chicago neighborhoods. You can check the census track through this link to see what exact neighborhoods this loan is available in for non-income restricted buyers. http://www.freddiemac.com/homepossible/eligibility.html
  • 7) Property management on the north side is a lot cheaper than what you may see quoted on Bigger Pockets for other parts of the US. I can name a handful of managers that charge 5-7% for 3-4 unit buildings.
  • 8) Leasing fees in Chicago are 1 full month if you are buying from out of state, etc. be sure to calculate this in your analysis. The good north side property managers will open their portfolio up to all the little leasing companies in Chicago which gets these units rented quick vs trying to make more money themselves pocket listing both sides ask your manager what their policy is on this.
  • 9) Vacancy rates should be sub 5% if you are priced right in A or B areas. If units are sitting longer you may be over priced or lacking in unit laundry. Make sure to start marketing units 8 weeks in advance of a tenants lease ending. You should have a signed lease before a tenant vacates when done right. I helped lease 1100 north side managed condo/2-4 units when first got licensed so saw the vacancy trends on a larger scale. It's good to be conservative though so run 5-7%.
  • 10) Chicago is a very pet friendly city. Accepting pets will both help reduce vacancy and bring in pet fees. You can charge pet rent $25 per month or a one-time fee of $250-350. No aggressive breeds.
  • 11) In Chicago the norm is a move in fee and no security deposit. Chicago has strict laws with security deposits and most landlords choose to just take a non-refundable move in fee.
  • 12) Parking in Chicago can be worth a lot depending on area be sure to add this into your analysis. It’s not uncommon for parking to rent $100-150 per spot in class A/B. Do not include it with a unit always charge extra for it to max out your cashflow. Whether the parking is garage or a pad it will still rent well. Exceptions are areas with lots of street parking available a good trick to drive by property at a few different times of day.
  • 13) The real profits from north side investments will be over the long term as rents grow and your mortgage stays the same these are typically not high yield in day 1 properties with the exceptions of buildings that have an un-zoned extra unit. There may be ups and downs but over the long run rents will statistically rise. This is especially true in the gentrifying neighborhoods.
  • 14) Run your own market rent analysis. On the good deals you will often see rents very low from old mom and pop landlords. Look at this as an opportunity and don’t get scared when it’s $600 or $800, etc.
  • 15) My hot list of gentrifying neighborhoods…. Avondale, West Logan Square, Hermosa, Humboldt Park (North of North Ave. or between Western Ave. and California Ave.), Albany Park, Irving Park, Rogers Park, West Edgewater, Pilsen/Heart of Chicago, Little Village, Mckinley Park, Bridgeport and Bronzeville. These areas have a ton of upside and the numbers still work for house hacks if you find the right deal.
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Rental Property Investor · Chicago, IL · Member since 2011 · 73 posts · 48 votes
7y

@Marco Morales Beware of security deposits. Any half savvy tenant can find a lawyer to represent them on contingency and you WILL get a judgement against you for $5-$10K, easy. The RLTO (Residential Landlord Tenant Ordinance) has ZERO wiggle room; no matter how well intentioned you are, you will not be able to satisfy all the requirements of the RLTO in a way that makes sense.

In virtually every scenario you will be better off with a non-refundable move-in fee.

See this reply in the discussion

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  • Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes
    7y
    Originally posted by @Henry Lazerow:

    Thought this would be a fun post. Here is a list I created. This is targeted more towards beginner investors so I left out the advanced/high cost strategies. Feel free to add to the list with any of your own tips. Happy investing everyone! 

    • 1) The best bang for your buck value add is adding in-unit laundry. This will cut your vacancy rates down significantly and in many north side neighborhoods can bump the price of the unit up $100-200 per a month.
    • 2) The second best value add is new counter tops/sink and paint. These are things you can do cheap without pulling permits and make a world of difference in the rent you can achieve. I like to steer first time investors towards buildings that already have the modern HVAC systems (furnaces no boilers) so they can do an easy value add such as steps #1 and #2. Having to change HVAC can be $20k+ by itself if doing it legally.
    • 3) White is the desirable look for kitchen rehab rentals right now. Doesn’t have to be high end or expensive finishes but the all-white look with Stainless Steel appliances sells. 
    • 4) The Chicago market is seasonal. An identical property can sell for 5-10% higher in April-May then it would in October-November. Late in the fall around the holidays significantly less people are shopping for properties which means less competition and sellers start to get desperate accepting lower offers/doing price drops. To give some context had a $850k contingent in November which had sat unsold 2 weeks then broke contract mid January all of a sudden multiple offers sold for $900k. Potential $50k saving by shopping when others are busy with the holidays. If you want the best deal this is the time of year!
    • 5) Rentals are also seasonal in Chicago. The prime rental season is March to July. If you buy a building in the off season the best practice is to rent it up on leases that will end between March and July for example a 9 month lease or a 15 month lease. You may have to rent the units under market rate especially if you get stuck in the late fall.
    • 6) 5% down conventional is often the best option for your first house hack and available in many of the gentrifying Chicago neighborhoods. You can check the census track through this link to see what exact neighborhoods this loan is available in for non-income restricted buyers. http://www.freddiemac.com/homepossible/eligibility.html
    • 7) Property management on the north side is a lot cheaper than what you may see quoted on Bigger Pockets for other parts of the US. I can name a handful of managers that charge 5-7% for 3-4 unit buildings.
    • 8) Leasing fees in Chicago are 1 full month if you are buying from out of state, etc. be sure to calculate this in your analysis. The good north side property managers will open their portfolio up to all the little leasing companies in Chicago which gets these units rented quick vs trying to make more money themselves pocket listing both sides ask your manager what their policy is on this.
    • 9) Vacancy rates should be sub 5% if you are priced right in A or B areas. If units are sitting longer you may be over priced or lacking in unit laundry. Make sure to start marketing units 8 weeks in advance of a tenants lease ending. You should have a signed lease before a tenant vacates when done right. I helped lease 1100 north side managed condo/2-4 units when first got licensed so saw the vacancy trends on a larger scale. It's good to be conservative though so run 5-7%.
    • 10) Chicago is a very pet friendly city. Accepting pets will both help reduce vacancy and bring in pet fees. You can charge pet rent $25 per month or a one-time fee of $250-350. No aggressive breeds.
    • 11) In Chicago the norm is a move in fee and no security deposit. Chicago has strict laws with security deposits and most landlords choose to just take a non-refundable move in fee.
    • 12) Parking in Chicago can be worth a lot depending on area be sure to add this into your analysis. It’s not uncommon for parking to rent $100-150 per spot in class A/B. Do not include it with a unit always charge extra for it to max out your cashflow. Whether the parking is garage or a pad it will still rent well. Exceptions are areas with lots of street parking available a good trick to drive by property at a few different times of day.
    • 13) The real profits from north side investments will be over the long term as rents grow and your mortgage stays the same these are typically not high yield in day 1 properties with the exceptions of buildings that have an un-zoned extra unit. There may be ups and downs but over the long run rents will statistically rise. This is especially true in the gentrifying neighborhoods.
    • 14) Run your own market rent analysis. On the good deals you will often see rents very low from old mom and pop landlords. Look at this as an opportunity and don’t get scared when it’s $600 or $800, etc.
    • 15) My hot list of gentrifying neighborhoods…. Avondale, West Logan Square, Hermosa, Humboldt Park (North of North Ave. or between Western Ave. and California Ave.), Albany Park, Irving Park, Rogers Park, West Edgewater, Pilsen/Heart of Chicago, Little Village, Mckinley Park, Bridgeport and Bronzeville. These areas have a ton of upside and the numbers still work for house hacks if you find the right deal.

    Great post Henry.  

     1.  This was the only one of the fifteen that surprised me.  You now having me pondering how I could get in unit laundry into my units to maximize rents and minimize turnover.  Is the "$100-200" difference that you stated simply something you've concluded through observation and experience or do you have data to support it?  

    4.  Agreed.  I've bought properties in November and December.  It can be rough dealing with the weather, but its worth it.  

    5.  I've always considered prime rental season to be March-September 1st.  

    10. Exactly.  People with pets have limited moving options.  It gives them more reason to stay in their current unit, decreasing turnover.  As long as their pet doesn't cause a lot of damage, its beneficial to be pet friendly. 

    12.  I like to tie parking in with the lease.  Depending on demand for the unit, I'll either say put it as a premium that includes parking for an additional $100 a month or I'll use it as an incentive for a tough to rent unit.  


    15.  I agree with your neighborhoods and my properties(and the one I'm set to close on in October) are in the neighborhoods you've listed.  



  • Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes
    7y
    Originally posted by @Jon Mulholland:

    @Henry Lazerow Great post. I bought my first 3-flat in Albany Park 2 years ago, lived in one of the units and recently moved out and now rent all 3 units. I can attest that virtually everything you wrote applies. 

    Looking back at the renovations I made before moving in and while living there, I wish I had added in-unit washer/dryer. I don't think it is a HUGE downfall not having them since we make a nice chunk of change from coin laundry in basement, but over time I think it would help grow with the market, and I wish I had just done it at the time. Oh well, you live and learn with each deal.

    Any thoughts on RUBS/separately water and utilities?  I know it int the norm on the north side, but I'm getting killed on the Water/Gas bills, curious what others have done when you have boiler heating through the older chicago 2 and 2 flats?

     Who controls your thermostats?  I've switched mine to hidden censors in the property keeping the temperature at 70 degrees.  I had tenants who wanted to crank it up to 80 all winter.  

  • Residential Real Estate Broker · Chicago, IL · Member since 2014 · 155 posts · 42 votes
    6y

    Good post!

  • Property Manager · Chicago, IL · Member since 2019 · 4 posts · 0 votes
    6y

    @Henry Lazerow thanks for the fresh approach and the run down. Many great points that are easy to overlook!

  • Member since 2019 · 3 posts · 0 votes
    6y

    @Jeff Burdick

    https://www.landlordstat.com

  • New to Real Estate · Chicago, IL · Member since 2021 · 3 posts · 2 votes
    5y

    Thanks for the great insights!

  • Member since 2021 · 8 posts · 4 votes
    5y

    Excellent stuff. Thank you.

  • Rental Property Investor · Chicago, IL · Member since 2021 · 32 posts · 32 votes
    5y

    @Jake C.

    One important thing to point out is that the RLTO doesn’t apply to you if you live in the unit and it has six or less units. Many people are house-hacking these days, so it’s good to know you don’t have to follow any of it. Even all the security deposit stuff.

  • Rental Property Investor · Fremont, CA · Member since 2018 · 38 posts · 8 votes
    3y
    Quote from @Henry Lazerow:

    Thought this would be a fun post. Here is a list I created. This is targeted more towards beginner investors so I left out the advanced/high cost strategies. Feel free to add to the list with any of your own tips. Happy investing everyone! 

    • 1) The best bang for your buck value add is adding in-unit laundry. This will cut your vacancy rates down significantly and in many north side neighborhoods can bump the price of the unit up $100-200 per a month.
    • 2) The second best value add is new counter tops/sink and paint. These are things you can do cheap without pulling permits and make a world of difference in the rent you can achieve. I like to steer first time investors towards buildings that already have the modern HVAC systems (furnaces no boilers) so they can do an easy value add such as steps #1 and #2. Having to change HVAC can be $20k+ by itself if doing it legally.
    • 3) White is the desirable look for kitchen rehab rentals right now. Doesn’t have to be high end or expensive finishes but the all-white look with Stainless Steel appliances sells. 
    • 4) The Chicago market is seasonal. An identical property can sell for 5-10% higher in April-May then it would in October-November. Late in the fall around the holidays significantly less people are shopping for properties which means less competition and sellers start to get desperate accepting lower offers/doing price drops. To give some context had a $850k contingent in November which had sat unsold 2 weeks then broke contract mid January all of a sudden multiple offers sold for $900k. Potential $50k saving by shopping when others are busy with the holidays. If you want the best deal this is the time of year!
    • 5) Rentals are also seasonal in Chicago. The prime rental season is March to July. If you buy a building in the off season the best practice is to rent it up on leases that will end between March and July for example a 9 month lease or a 15 month lease. You may have to rent the units under market rate especially if you get stuck in the late fall.
    • 6) 5% down conventional is often the best option for your first house hack and available in many of the gentrifying Chicago neighborhoods. You can check the census track through this link to see what exact neighborhoods this loan is available in for non-income restricted buyers. http://www.freddiemac.com/homepossible/eligibility.html
    • 7) Property management on the north side is a lot cheaper than what you may see quoted on Bigger Pockets for other parts of the US. I can name a handful of managers that charge 5-7% for 3-4 unit buildings.
    • 8) Leasing fees in Chicago are 1 full month if you are buying from out of state, etc. be sure to calculate this in your analysis. The good north side property managers will open their portfolio up to all the little leasing companies in Chicago which gets these units rented quick vs trying to make more money themselves pocket listing both sides ask your manager what their policy is on this.
    • 9) Vacancy rates should be sub 5% if you are priced right in A or B areas. If units are sitting longer you may be over priced or lacking in unit laundry. Make sure to start marketing units 8 weeks in advance of a tenants lease ending. You should have a signed lease before a tenant vacates when done right. I helped lease 1100 north side managed condo/2-4 units when first got licensed so saw the vacancy trends on a larger scale. It's good to be conservative though so run 5-7%.
    • 10) Chicago is a very pet friendly city. Accepting pets will both help reduce vacancy and bring in pet fees. You can charge pet rent $25 per month or a one-time fee of $250-350. No aggressive breeds.
    • 11) In Chicago the norm is a move in fee and no security deposit. Chicago has strict laws with security deposits and most landlords choose to just take a non-refundable move in fee.
    • 12) Parking in Chicago can be worth a lot depending on area be sure to add this into your analysis. It’s not uncommon for parking to rent $100-150 per spot in class A/B. Do not include it with a unit always charge extra for it to max out your cashflow. Whether the parking is garage or a pad it will still rent well. Exceptions are areas with lots of street parking available a good trick to drive by property at a few different times of day.
    • 13) The real profits from north side investments will be over the long term as rents grow and your mortgage stays the same these are typically not high yield in day 1 properties with the exceptions of buildings that have an un-zoned extra unit. There may be ups and downs but over the long run rents will statistically rise. This is especially true in the gentrifying neighborhoods.
    • 14) Run your own market rent analysis. On the good deals you will often see rents very low from old mom and pop landlords. Look at this as an opportunity and don’t get scared when it’s $600 or $800, etc.
    • 15) My hot list of gentrifying neighborhoods…. Avondale, West Logan Square, Hermosa, Humboldt Park (North of North Ave. or between Western Ave. and California Ave.), Albany Park, Irving Park, Rogers Park, West Edgewater, Pilsen/Heart of Chicago, Little Village, Mckinley Park, Bridgeport and Bronzeville. These areas have a ton of upside and the numbers still work for house hacks if you find the right deal.

    Great tricks. Thank you for sharing

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