House hacking MFH in south suburbs of chicago?

Question

My fiance and I are moving back home to the south suburbs of Chicago within a few months. We are trying to find MFH in the Frankfort/Mokena/Lemont/Lockport area. I can't seem to find any good deals on the MLS that will cash flow (we can't use any other methods since we are out of town). We have a $30k downpayment and looking to do FHA for our first home (still haven't talked to a broker or real estate agent). In our current jobs we make $60,000 and $75,000, that should increase a little when we move to the city.

We love the idea of getting a new house every year and holding properties for cash flow. Doesn't seem possible in the Chicago market. Should we expand our search? We want to stay out of Chicago as we don't really like the big city that much. We were looking at NW Indiana as well but, find the same issues. I have construction experience and would do everything myself until we got too many properties.

Would love any insight from investors in the area. We would love to connect and learn from anyone in the city.

Henry Lazerow · Answer

You can find good house hack deals there but you will need to factor in raising rent to market. I have already brokered 4 million in house hack deals around IL this year so the deals are forsure there. I always tell clients do basic updates line new cabinets, sink, stone counters, paint and this can get you a large rent increase plus hopefully some equity.

For financing there is a 10% down option that gets you around the self sufficiency test via a local credit union or FHA is popular for the legal 2 units.

For financing there is a 10% down option that gets you around the self sufficiency test via a local credit union or FHA is popular for the legal 2 units.

Eudith Vacio · Answer

I concur with everyone on here @John Warren, @Henry Lazerow, @Jonathan Klemm!

The deals are definitely out there. But it does depend on the submarket/ neighborhood that you are looking in. Also, I'm a huge fan of Northwest Indiana (Whiting, Hammond, etc) Agree, that in 90% of the cases,  you will have to raise the rents.

SFH may be a viable investment if you can find one that has an in-law suite and you can rent it out to someone you know.

Either way, best of luck!

Henry Lazerow · Answer

You can still factor parking depending what suburb and move fees should always be factored in. All my deals are mls, the wholesalers and off market 2-4s tend to actually be over priced unless your a really well known repeat cash buyer.

When you say boots on ground, how far are you currently from these areas. Im always down to grab coffee and network if your in area sometime just shoot me a PM.

Henry Lazerow · Answer

I second what John saying and think laundry can be a nice boost especially for 4 units. Also forgot to add look in the areas with higher ARV rents. Rehabbed 3brs in nice parts of town can get really high rents in those suburbs and often work better then the “cheaper parts of town”. I have regularly brokered deals where client is getting 30-50% rent increases few months later doing mainly cosmetic updates and sometimes 20% doing nothing but professional photographer and proper online marketing. Also be sure to factor in parking and the $500 move in fees.

P.S. 4 units are my favorite if budget allows it. They tend to cashflow highest and easiest to raise the value by raising rents.

John Warren · Answer

@Konrad Lach I agree with @Henry Lazerow. Great deals are made, not purchased. Look at the pro forma rents to see if you can push rents. Look for ways to add ancillary income (coin laundry, parking, garage spots, storage). Look for properties that have a lot of tenant paid expenses (separate utilities versus an old single boiler system). There are good deals out there for sure!

Zierry Eme Carl T. Tagbas · Answer

Hello Konrad! Welcome to BP!

If I was on your shoes right now, I would totally connect with an investor-friendly realtor in the area that you wanted to invest. If you arent able to find deals or an property in the neighborhood that you are trying to go, it wouldnt hurt to expand out a little. Have you thought about connecting to the REI groups in facebook or any meet ups?

Good luck out there and wishing you all the best. Feel free to connect with me if you have any questions!

Jonathan Klemm · Answer

@Konrad Lach - Those south Chicago suburbs are great long-term cash flow areas that will experience slower appreciation.

Deals are out there they are just hard to come by.  I'd just keep writing offers and if they need to be lower then write them lower and see what sticks.  I'd also worry a little less about as-is cash flow while you are living there and just know that if you are paying a lower amount then you would be to rent that it's a win.

As your experience grows it seems like better deals find their way onto your desk so I'd just close by saying be "patient and persistent" and good things will happen.

John Warren · Answer

@Konrad Lach you can factor in parking and garage spots and things like that in the suburbs that are close to the city. In the further out areas it could be tough.

Konrad Lach · Answer

@Henry Lazerow Currently sitting in a coffee shop in Idaho. Thanks for all of the insight, we should be moving before the end of the year so I'll keep you in mind!

Konrad Lach · Answer

@Henry Lazerow @John Warren Thank you both for your the replies. We are trying to stay further from the city. Struggling to find 2-4 unit buildings where we are looking. Thinking about changing our strategy to look for SFH that need a good amount of rehab. Rehab and owner occupy it for 1 year and then find another home to do the same thing.

I'm very much a beginner in REI and the Chicago Suburb market so, I'm still trying to find good properties on the MLS. Finding decent properties in Lemont but, I worry I'm not estimating the rehab cost and ARV correctly when doing my analysis. I wish I could be boots on the ground and drive for dollars/find off market deals but I'm currently out of town.

I assume I don't factor in parking and move in fees on the properties in the suburbs correct?

Thanks!

House hacking MFH in south suburbs of chicago?

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