Investor · chicago · Member since 2026 · 15 posts · 21 votes
Any insight into how to find a good house that I can rehab and keep for rent? I have been looking at the mainstream market (Zillow) and anything good gets outpriced to what they offer. Also they are gone within 1 week where as in 1 week I can barely get information about the structure of the house to make sure it is not damaged.
I thought I found one but it turns out it doesnt qualify for conventional loan because it is currently classified as unhabitable.
Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
7mo
Hi There @Isabel Rao - I think the best way to find good deals is counterintuitive - I'd recommend narrowing your search and buy box, so you are even more focused on exactly what you want.
Find a real estate agent who knows the Chicago neighborhood you are looking in and works with house hackers on a regular basis. Some already great agents commented like @Henry Lazerow and @Eudith Vacio. Also worth connecting with @Brie Schmidt!
Accountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
7mo
What's your buy box?
Instead of houses that are newly listed, I'd look to put offers on houses that are sitting on the market 60 days or longer.
You also want to look at places that might not be able to get conventional financing because of issues with the property. For these properties, I'd look into hard money
Lender · Member since 2022 · 1k+ posts · 494 votes
7mo
You can also get a fix and flip loan if you qualify based on the credit and the property that can finance up to 90% of the purchase price and 100% of the rehab done on draws (depending on where the property is located and the borrower profile). Then you can flip the loan to long term financing such as a DSCR loan after the property is habitable / rehabbed. For a conventional loan, the property has to be habitable per the appraiser so many properties for BRRRs don't fit in that box when first purchased due to the need for rehab that is more than cosmetic.
More on DSCR loans: DSCR loans won't use your income to underwrite the loan. DSCR loans are based off of down payment, credit score and either actual or market rents so it helps to supercharge an investor's real estate goals and net worth.
Here's a bit more in detail about how rates are calculated for DSCR loans:
1. Credit score- the higher the better. 760-780+ generally gets best pricing for investment property loans with most lenders. From there every 20 point increment affect pricing differently. So for example, a 761 credit score will be in the 760-779 credit category, then going down to 740-759 and so on.
There are loan options to a middle mortgage FICO score of 620 depending on the state and if the loan amount is at least a $100K. There are options for a middle mortgage 680 FICO score down to a $75K appraised value and $50K loan amount (depending on LTV) depending on the state.
2. Loan to value ratio: The higher the loan to value ratio (LTV) is, pricing takes a hit. So your pricing will be higher for a 80% LTV loan than for a 60% LTV loan.
3. Prepayment penalties- usually 1-5 year terms. The shorter the prepayment term has an impact on increasing the rate.
4. Are you cash flowing the property? More on how that is calculated below. Is your DSCR ratio greater than 1-meaning are you cash flowing (according to the lender's criteria of mortgage, property taxes and insurance (and HOA) if applicable). Many lenders will not do a DSCR loan unless cash flowing. If they will do a loan with less than 1, the pricing takes a hit. This criteria is for 1-4 and 5-8 unit programs.
I've included an example below to help illustrate this.
So different lenders have different rates (which do vary even for DSCR loans) but these are factors they all consider.
See example below:
DSCR < 1
Principal + Interest = $1,700
Taxes = $350, Insurance = $100, Association Dues = $50
Total PITIA = $2200
Rent = $2000
DSCR = Rent/PITIA = 2000/2200 = 0.91
Since the DSCR is 0.91, we know the expenses are greater than the income of the property.
DSCR >1
Principal + Interest = $1,500
Taxes = $250, Insurance = $100, Association Dues = $25
Total PITIA = $1875 Rent = $2300
DSCR = Rent/PITIA = 2300/1875 = 1.23
If a purchase, you also generally need reserves / savings to show you have 3-6 month payments of PITIA (principal / interest (mortgage payment), property taxes and insurance and HOA (if applicable). If a cash out refinance, many lenders will allow the cash out to satisfy the reserves requirement.
DSCR lenders generally let you vest either individually or as an LLC. It's a great way to increase your net worth and these loans can also be used to pull cash out of a property as it appreciates allowing you to reinvest money into new deals.
The MLS is difficult because everyone is seeing the same thing. Lots of competition. Here are a few choices.
1. Attend REIA meetings. There are other investors selling properties off market.
2. Get on wholesalers list. They sell properties at a discount. Be careful when you look at these. Run your own numbers.
3. Drive around areas and look for distressed houses and contact the owner. You will need to be creative with financing. Those homes may not be able to get traditional financing. Those properties have the biggest up side and the most work.
4. Agree with @@Aaron Zimmerman look up houses that have sat on the market for a while. Owners may be willing to sell at a discount. Since these have sat for a while, these will probably take significant rehab.
5. When looking on the MLS, focus on TLC or seller financing options.
6. Not sure if your only looking in Chicago, but the suburbs surrounding the city are great options as well. Chicagoland market is full of potential.
Using the BRRRR method where the rehab forces the equity in the building has the best up side for rentals, but also take the most work.
You're not alone! finding properties in this market is NOT easy. But you just have to keep looking and eventually you will come across something. Are you trying to do an extensive rehab? IF so, you can't do that with a conventional loan. The property has to be in pretty good condition in order for it to qualify for conventional financing unless you are doing a hard money loan. Have you done rehabs in the past or is this your first one?
Specialist · USA · Member since 2024 · 279 posts · 130 votes
7mo
You are running into the normal Chicago BRRRR wall where MLS deals are priced for retail buyers not rehab math. The fastest shift you can make is to stop hunting finished houses and instead build one or two off market channels like wholesalers or small landlords selling tired properties because Zillow speed will always beat your inspection timeline.
Quick check I use in Chicago is rent minus PITI minus management minus maintenance needs to clear at least 300 to 400 after refi or the BRRRR is just forced appreciation with no margin. On the uninhabitable one that is not a dead end, that is usually a bridge or rehab loan into refi problem not a deal problem if the ARV and rents support it.
What neighborhoods are you targeting and what rent are you underwriting for a 2 or 3 bed after rehab?
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
7mo
Sounds like you are pretty new. Chicago is a hot market no one will really take the time to tell you about a homes structure unless you are pre qualified and have toured it. Chicago multi units cost around 50k a unit with no permits to rehab or easily 100k+ per a unit with permits to rehab. It is hard to pull off a BRRR unless you are an experienced rehabber who can get stuff done below market costs. Very competitive for both on or off market deals here with a lot of peoples capital chasing anything that can create some equity.
Most of my clients buy multi units that need some light cosmetic updates, after doing this they raise the rents and create some equity that they maybe cash out refi sometime in the future. Rents go up every year if your in a gentrifying area, property appreciates, etc. Slower but works and if live there a year doing a house hack can buy in with only 3.5-10% down.
Sounds like you're hitting the typical BRRRR bottlenecks. Out of curiosity — is the constraint more on deal flow, funding, or finding rehab crews that can quote fast? I help investors with XYZ so I'm trying to understand where you're stuck.
Investor · chicago · Member since 2026 · 15 posts · 21 votes
7mo
Hello thanks for all the reply! I am indeed new to this, motivated to learn and get my hands into this.
To all the wholesalers out there reading this, please include me in your list here you might have a potential buyer. Same for other investors or anyone selling a property.
I think my most frustrating thing now is to find something where the ARV justify the work and the buying price. I know 2 contractors that can do amazing work. However that being said, more than happy to meet people and start building my team.
Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
7mo
Hi There @Isabel Rao - I think the best way to find good deals is counterintuitive - I'd recommend narrowing your search and buy box, so you are even more focused on exactly what you want.
Find a real estate agent who knows the Chicago neighborhood you are looking in and works with house hackers on a regular basis. Some already great agents commented like @Henry Lazerow and @Eudith Vacio. Also worth connecting with @Brie Schmidt!
Real Estate Broker · New York, NY · Member since 2020 · 2k+ posts · 1k+ votes
7mo
Hi Isabel,
What you’re running into is very common in competitive markets like Chicago. Most solid BRRRR deals never hit Zillow, and when they do, they’re usually snapped up quickly by investors who can move fast or pay cash.
One approach that tends to work better is focusing on off-market properties either by reaching out directly to motivated sellers in your target neighborhoods or by connecting with wholesalers who specialize in distressed or rehab-ready homes. That’s often where the real opportunities are.
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