Best neighborhood to invest in MF in Chicago right now?

22 Replies

@Colin M.

I have a 5 unit in Beverly that cash flows $3,000 a month and a 2 flat in Morgan Park that cash flows $1,300 a month. Both were purchased in the past 4 years & didn't require extensive rehab. They also are in strong neighborhoods that tennants want to live in.

Deals are hard top find in the area, but if you watch the market closely, something pops up once a month.

Just my two cents.

Pulling listings from the MLS or Propstream that you like the numbers on. Then drive the neighborhood. There are so so many neighborhoods in Chicago, plus the suburbs. The integrity of each deal can also depend on the quality of housing on each block!

@Colin M. What is your goals here short/long term?  Are you looking for longer steady cash flow?   Are you looking to add value and sell in 18 months?  Are you going to hire a PM or not?  If not you may want to focus on lower labor intense areas when it comes to ongoing management?  Are you house hacking or making it owner occupied?

@Mark Ainley is dead on @Colin M. Chicago is a HUGE market, and there are a lot of different areas that offer opportunity to an investor. South Shore is very transnational right now, but you also have to manage profitably there. Several investors I know have had very little success actually making money in south Shore. The North Side is pricey, but you will get relatively safe investments if you want to house hack. The suburbs offer tons of opportunities for house hacking or apartment investing. I have personally picked up 25 units in Berwyn and Cicero in the past year, and both of my properties will cash flow very, very well once we are done stabilizing them.

Mark Ainley is spot on with those questions... It really depends what you are looking for. Also as John Warren mentioned just because the rent to purchase is high doesn't mean you actually will profit higher then lower ratio properties in an area with better tenants.

If want to sell eventually for a large equity play as well as cashflow areas such as Rogers Park and Albany Park we have been seeing a lot of luck in lately with a large margin to raise rents after renovations. If you have solid management in place and want highest cashflow lots of south side areas great. If you want to be by the hot nightlife while subsidizing your living doing a house hack Logan Square might be a good bet.

Little Village has a pretty healthy balance of cash flow with appreciation. The barrier of entry is lower than the north side neighborhoods. It's a strong rental community and there's a ton of development happening. Your close to public trans (pink line), close to expressways (55 to the south 290 to the north), it's next door to Pilsen, the Paseo trail should yield similar results as the 606, multimillion dollar developments in North Lawndale, 31st & Kedzie, etc... and it's very easy to get downtown. I'm also optomistic on McKinley Park as well.

@Colin M.   If you dont need to be super close to the Loop I like targeting any areas w.in the city limits but close to the borderline of Chicago and suburbs.  This sometimes allows you to get the benefit of lower Chicago taxes with the upside of suburban affordability and safety.  Example: I like Garfield Ridge area on the SW side or Jefferson Park on the NW side. 

I am a fan of investments on the south-side. Garfield Ridge is great, near transportation and you can easily rent to families in the area. Little Village, McKinley, Brighton Park is looking good, too. These are great rental markets. 

Little Village is too expensive now.  A 69k two flat I bought 3 years ago - before upgrades - is now selling for $150k.  Rehabbed it may hit $200k.

I got a great deal on a short sale, that was good luck and tons of "unorthodox communication" with the owner.

A 3 flat  I passed at $100k, went for $180k.

A 2 flat I passed at $80k, went for $140.

I think people are failing to understand this area is not the South Loop or Pilsen.  Rents are capped at $750 / $850 for 2/1s. Some 2/1 rent for $600 in the area.  There is no easy way to break that threshold and people don't have the income to pay more. 

El Paseo and healthcare improvements will only feed the fire. It's a textbook bubble with people paying more based on appreciation. That's gambling.  

I wish I could buy more units there, however  the numbers don't make sense to justify my time. I may need to wait for the new wave of shortsales in 7 years. 

Thank you all for your comments, Im an out-of-state, first time buyer/investor probably should have mentioned that at the beginning. South Side is looking more promising to me esp regarding what i can afford. Being from out-of-state though the only bad news i ever hear about chicago is the South Side and crime so I'm nervous on that front. What are your thoughts on South Shore area / Jackson Park / Hyde Park?


Gotta agree with @Frank S. here on the rents. It's going to happen, but no idea when. I still regularly see 2br units going for 850/month near my place, which has forced me to keep my rents down. Longterm, the money from Pilsen will 100% keep moving down the pink line, so if you're in it for the long haul, I'd still recommend it. There was a $1MM 7-unit building building near me that went on the market for a while, then just disappeared because you just can't pull enough rent to justify something crazy like that.

@Colin M. I would be cautious if you are looking at neighborhoods on the south side. Touch base with @Mark Ainley as his company manages a lot of units down there and he really knows what it takes to manage profitability in those areas. You also should touch base with @Ronan M. as he works those neighborhoods all the time and owns buildings down there.

I am partial to the western suburbs. One of my clients recently picked up a three unit in Cicero, and he just rented his three bedroom apartment for $1275. That rental rate is so much stronger than what I see in areas like Little Village. 

@Colin M.

Again I would point you towards Beverly, Mt. Greenwood, Morgan Park. My 2BR apartments are renting for $1225. My 3 bedrooms are $1600. Great neighborhoods, low crime, decent schools, lots of fire/police & people who want to catch the Metra who work downtown.

Belmont Craigin is a great middle class area I almost bought a place there. Prices have already shot up on 2 flats where it doesn't really make sense for the quality of tenant credit to pay that much. 3 and 4 units can work great though or 2+illegal 3rd unit buildings. 

The train tracks are dividing line there. Lots of sellers falsely market just south of tracks as Belmont Craigin so be careful of that. 

Bret, does the high rate of crime not deter you in any way from EGP? I know the play is to invest in fringe areas in the path of improvement but this area is still pretty rough in my recent experience. Let me know your thoughts.

Originally posted by @Carl Gieseke :

Bret, does the high rate of crime not deter you in any way from EGP? I know the play is to invest in fringe areas in the path of improvement but this area is still pretty rough in my recent experience. Let me know your thoughts.

 Crime is decreasing in the area, they are adding new amenities to the neighborhood such as the hatchery and passion house roasters. Of course the neighborhood still has rough sports but some of the bigger streets such as Warren, Washington and Fulton are getting a lot of rehab attention.  

Hi Colin!  It certainly depends on your investment strategy.  I've been loving East Humboldt for multis (west of western, east of california, north of grand).  You can get into properties for a relatively low cost to surrounding areas with rents that are not much less than Logan Square and UK Village.  Your best friend is doing a kitchen and bath rehab to bring the units to their current highest and best use.  If you can squeeze in a in-unit W/D it could make a $200 per month rent difference.  I know lots of people investing heavily in Avondale(east of expressway) right now, and the nook of Irving park just above it.  Feel free to let me know of any Q's, this is my passion.

JW

@properties

@Colin M. As an out of state owner, I would consider partnering with a property management company if you are buying on the South Side. There are many variables to consider -  crime/policing strategies, transportation, city development plans, schools/universities, etc. Hyde Park is an option while Englewood may not be the ideal blind purchase.

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