Hey guys! Complete noob here. I am thinking of purchasing a rental property in Chicago. Any tips would be helpful. Would like to purchase something downtown or close to central Chicago so I can be close enough to put out any figurative fires. How does one find a good property? Any basic analytics that can be used? Best way to find good renters? How much to put down as down payment. Is FHA loan a good choice?
Thank you in advance!
welcome to BP @Jonathan Chung
Find a good realtor to guide you
In the meantime, make sure you get educated with the numbers, and network in your local REI.
FHA is an excellent way to get started with little money down, as long as the property/numbers make sense.
Search "house hacking" and "brrrr" on BP. Good luck!
Stop everything you're doing and start listening to the BP podcasts, specifically those related to buy & hold (rental) investing. There are lots of blogs here in the forum that you should read all the way through. If all of your questions aren't answered by doing that, you haven't read enough. I think you will be hard pressed to find something in downtown Chicago that will yield positive cash flow. Good luck.
@Jonathan Chung educate yourself on the 2% rule and stick by it, or really really close, to ensure your property really does cashflow after call expenses including Capex. My experience has been property managers who are also realtors are more knowledgeable about buying investment property than just your typical realtor. Find some local seasoned investors and ask if you can tag along to look at deals. Seasoned investors are always willing to teach. Best of luck and best of luck to the Cubs tomorrow night!
I am Realtor for 10 years and work with many buyers who buy investment properties. Are you planning on living in the property, such as a multi-unit for an investment property? If so, FHA will be a great loan product because it requires little money down and it will need to be your primary residence. If you are looking for a condo downtown and you do not plan on living there then a conventional loan will be the way to go. Many condos downtown are not FHA approved. I can definitely explain in more detail, as I would need to understand a little more about what you are looking for. We do criminal and credit background checks on all applicants.
I only represent clients buying investment properties in Chicago, most are "house hacking" and living in one unit while renting out the others.
- You need to speak with a lender first, find out what you will be approved for. This will greatly affect where you can buy and what you can buy.
- I recommend Guaranteed Rate, you can PM me for my contact's info. I also strongly recommend doing the 5% down conventional program, which you can only do if you don't own current property. Then on your second do the 3.5% down FHA and leverage two low money down programs
- In the mean time check these out:
- Once you know how much you can afford, you will know where you can buy. The closer to downtown the less cash flow you are going to get (but more appreciation potential) Most of my clients are in the $450k - $600k range and we are finding stuff in Logan, Avondale, Albany Park, ect. This is about a year old but you can check out properties I have run numbers on for clients so you can get an idea of what to expect
- In my opinion, condos are the worst thing you can buy. You have no control and they can stop allowing renters at any time and you will be SOL. If you can't afford to buy a 2-4 unit now, I suggest you wait to save more before buying a condo.
@Jonathan Chung , Welcome to BP where as you can see will meet great people and get great advice! Do you know what type of property you want yet? I see some great advice from Brie and other people.
My husband is active duty so we move a lot and therefore get to buy personal properties often. The key for us has been to make sure we put as little down as possible while still making sure we make our $200 margins. Our 8 rentals don't meet any of the rules yet it has done well for us.
The key for us was to figure out our goals and than our tools that we had around us. So if it was me in a city such as Chicago, I would look for a multiplex. I would maximize the amount that I could borrow by leveraging the rents. The goal would be to live rent free while someone else pays it down.
I would like to give you some recommendations on how to find good renters. It was of of your questions.
So, the best way to find qualified renters is to screen all applicants well. You should do a background and credit check on potential renters – it is worth the time. Although a credit score should not be the sole reason you accept or reject a tenant, it is a useful screening tool.
Don’t forget to ask for references from previous landlords. Call them and ask if the rent was paid on time and in full. Inquire if there was any damage caused during the tenancy beyond normal wear and tear.
You should also conduct an interview with the potential tenants to make sure you are comfortable communicating with them.
For more information you could read this topic https://rentberry.com/blog/screening-prospective-t.... I found it very useful, cause it describes all tools of tenant screening and explain how to use them.
I hope this helps!
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