Rental Property Investor · Raleigh, NC · Member since 2019 · 15 posts · 6 votes
Due to passing of family member, I own a Bungalow in the Auburn Gresham District of Chicago. The house needs a lot of work. It still has a steam boiler, heating radiators, no upgrades to kitchen and bathrooms. Hard woods in decent shape, basement needs renovation, etc. The house is paid for, trying to decide on selling as is, rehab and rent, or rehab and sell to get the most out of it. Any recommendations on how to analyze the potential and guidance on best path forward. I live out out of state.
Rehabbed or not, the days on market for listings in that area are typically higher relative to other areas of Chicago. I would either do a minimal rehab to get section 8 ready and have it professionally managed (and then cash out refi) or sell as is to mitigate risks.
If you don't have anyone residing in the property right now, I would highly recommend moving quickly on whatever you do and install an alarm system. The area is prone to break-ins on vacant property. If using an agent, they might be able to supply one for you.
I personally use Ring on my vacant property in Chicago. Professional monitoring is only $10 a month and includes cellular connectivity. It's definitely worth it for my piece of mind due to a squatter or someone looking to scrap $100 of copper that will cost you $8K to fix.
Hey Henri, I don't have much experience, but thought this to be an interesting question and maybe can help in deciding.
It depends on if you actually stay invested in Chicago at all.
If you're interested in keeping the property, maybe BRRRR is a good option. You already own the property. You can rehab it and rent it out, then refinance it in order to leverage and continue buying more properties. (Read "Long Distance Real Estate Investing," by David Greene.
If you're not interested in staying invested in Chicago, maybe just sell as is and re-invest the money in the market you are currently investing already. It will take time to find someone in the local market to help rehab and sell. You can maybe save time and just put this money to work right away in your market instead.
My gut reaction is to sell. Chicago is no place for an accidental landlord doing single family home rental long distance, particularly where you didn't pick the neighborhood. Here are some considerations:
1. Chicago property taxes are going to soar as the City's economically illiterate government has pension realities forced upon them.
2. Chicago's government is corrupt.
3. Chicago's aldermen (city legislators) are both corrupt (see above) and have no backbone. Thus they pander to the unions (see pension realities above) and to residents who are just as, if not more, economically illiterate, than the aldermen are. Consequently, you have a strong possibility of rent control. Rent control plus high property taxes will crush you.
4. Cook County (Chicago is in Cook County) has already reduced your ability to screen tenants with a law saying you cannot discriminate against people with criminal records (some exceptions to that, yes).
So selling is the way to go in my book. Now the question becomes whether to sell as is or rehab and then sell. What do the appraisers say the value of the property would be as is and if rehabbed? What do general contractors say would be the cost to rehab? Is the increased value sufficient for the rehab expenses plus your carrying costs (taxes, insurance, etc.)?
When Chicago reduces its bloated, corrupt, government (starting with reducing the number of aldermen to 15, the same per capita as in New York City) and gets reasonably competent people up and down the ranks, sure, invest in Chicago and keep houses you inherit. Shrimp will learn to whistle first.
@Caleb Heimsoth based on my research, I think the house will sell as-is around $60-$70k. Depending on the level of rehab it could range from $25k - $75k. Thoughts on rehab range from:
- Kitchen and main (2) bathroom remodel including floors.
- Carpet in bedrooms
- Basement floor
House is currently a 3br, 1.5 bath
Could easily add (2) bedroom downstairs
- add central heating/HVAC
I have family in the area.
Estimated ARV based on similar homes in the immediate area range from $160k - $200k.
@Caleb Heimsoth based on my research, I think the house will sell as-is around $60-$70k. Depending on the level of rehab it could range from $25k - $75k. Thoughts on rehab range from:
- Kitchen and main (2) bathroom remodel including floors.
- Carpet in bedrooms
- Basement floor
House is currently a 3br, 1.5 bath
Could easily add (2) bedroom downstairs
- add central heating/HVAC
I have family in the area.
Estimated ARV based on similar homes in the immediate area range from $160k - $200k.
You have to nail down your rehab numbers. Look at it from a normal purchase. Spend 60k, rehab for 75k and sell for 160k. You’d make basically zero money. So you need to really narrow that down.
@Michael Montesino - Thanks for the quick reply, yes it's definitely an interesting question that I've been pondering for some time now. Investing in Chicago is something I've wanted to do but it hasn't been my top priority from an investing standpoint. I was born and raised on the Southside of Chicago and all my family is still there so I visit the city 2 -3 times a year so having investments there makes sense.
I think I've been leaning towards selling as-is vs. rehabbing and rental was not a preference but I wanted to check all options. As you also said, finding someone I can trust to rehab and sell will take time so selling as-is is definitely the easiest option.
@John Clark - Thanks for providing the additional insight, I've been away from Chicago a long time but I was aware of some of the issues that the city has dealt with. Both of my parents were City of Chicago employees, both retired with full pensions from the City of Chicago but they are dealing with reduction of benefits in their retirement which is related to the financial problems of the city.
Selling as is $60-$70k, ARV depending on extent of rehab $160k - $200k.
Rehabbed or not, the days on market for listings in that area are typically higher relative to other areas of Chicago. I would either do a minimal rehab to get section 8 ready and have it professionally managed (and then cash out refi) or sell as is to mitigate risks.
If you don't have anyone residing in the property right now, I would highly recommend moving quickly on whatever you do and install an alarm system. The area is prone to break-ins on vacant property. If using an agent, they might be able to supply one for you.
I personally use Ring on my vacant property in Chicago. Professional monitoring is only $10 a month and includes cellular connectivity. It's definitely worth it for my piece of mind due to a squatter or someone looking to scrap $100 of copper that will cost you $8K to fix.
@Henri Parker would like to connect with you and provide a solution. I’m a Chicago investor and would like to work with you. Whether it be to acquire or provide you advice.
@Henri Parker Hi Henry, DM me would love to help out and give you few options. Long time investor here and we did many projects in the area and all around Chicago land.
@Caleb Heimsoth based on my research, I think the house will sell as-is around $60-$70k. Depending on the level of rehab it could range from $25k - $75k. Thoughts on rehab range from:
- Kitchen and main (2) bathroom remodel including floors.
- Carpet in bedrooms
- Basement floor
House is currently a 3br, 1.5 bath
Could easily add (2) bedroom downstairs
- add central heating/HVAC
I have family in the area.
Estimated ARV based on similar homes in the immediate area range from $160k - $200k.
Depending on the exact in Auburn Gresham over the last 6 months renovated 3bedroom 2 baths have sold as high as $290K. Lots of sales over $200k. Also plenty of sales between $150K & $200K.
@Joseph Konney - Thanks for the kind regards. Appreciate the advice about protecting the asset. Fortunately, our neighbors are keeping an eye on the property and they also park in the driveway, take care of getting the mail and just keeping the house as if someone lives there. Thank God for good neighbors! Appreciate the advice about the minimal rehab and potentially renting via Section 8. I will definitely look into that option.
There are definitely many options. It all depends on how much risk you want to take. Flipping of course is going to be the most lucrative in the short term but of course that comes with risk. We have done many deals in South Side Chicago and have been through several contractors and realtors to find the best ones. That all of course cost us time and money. We currently have a flip in Southside Chicago that has been waiting for permits to continue from the city for 6 months. Frustrating to say the least!
If you want any help send me a DM and we can tell you more about our lessons learned on Southside Chicago.