Multi Family Investing in Chicago?

Question

I am looking to purchase a 3-4 unit property in Chicago. I am originally from NorCal and have been investing here but it's getting tougher to find cash flowing properties. I am currently in the process of locating RE agent and identifying areas that work. What part of Chicago would you all say is a good mix of price to rent ratios and can easily sustain the 1% rule.

Henry Lazerow · Answer

I have sold several deals for California buyers. West Town is a good option. It won't be 1% but you can get around .8% for class A area 700+ credit renters and very strong demand. The areas with 1%+ will be lower rents and lower class renters who cause more ware/tear which makes cap/ex take up a higher percentage. The management fees change too for class A I have managers who do 5% flat but for lower class areas you are typically looking at 8%+. For 1% rule you can do Brighton Park, Mckinley Park (harder and harder now there), Belmont Craigin, Bronzeville hard to find and super hot right now but pop up once in a while and then there is of course chicago suburbs (higher taxes in suburbs but higher % ratio of cashflow so some trade offs).

99% of deals aren't good. You buy the outliars. Most of my clients will raise rents significantly after purchase so knowing the market rents in an area is a strategy we use for an upper hand on finding cashflow potential. IL has no rent control here and many of these buildings have tenants who lived there many years and were not professionally marketed have seen rents go up 50%+ often on new lease up.

John Warren · Answer

@Umair Rizwan it seems like you are trying to find an area of Chicago where you can hit the 1% rule. I would say that, in general, there are still areas where this is achievable. The north side is a little slim right now, but if you travel just a few minutes north west, west or south you will find properties that meet the 1% rule.

Where are you looking to work or live? I always tell clients to start with their commute and then back track to find the area that makes sense for them based on their life. If you have to be in the loop every day, it may not make sense to invest an hour away just to get $200 a month in cash flow.

John Clark · Answer

"I’ve been looking at almost all the listings and a good deal is super hard to find in Chicago especially not wanting to live in high crime-rated areas."

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"Good deal" -- whatever that term means -- is always hard to find wherever and whenever, for the simple reason that a "good deal" for the buyer means that the seller is leaving money on the table and vice versa.

In an efficient market there are no "good deals," only transactions where the return on  investment compensates (just) for risk.

Henry Lazerow · Answer

He would be buying 25% down. Its easy to find nice area cashflow with that leverage and low 4.1% current rates.

For the low down with pmi its definitely harder but we have been finding deals that work.

Tricia Gatia · Answer

@Henry Lazerow I’ve been looking at almost all the listings and a good deal is super hard to find in Chicago especially not wanting to live in high crime-rated areas. I feel as though you’d have to raise your price in order to find good quality multi family homes in Chicago. Correct me if I’m wrong!

Multi Family Investing in Chicago?

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