Chicago Cap Rates for "3 to 4 unit" properties

[Mark Killion]

Hello Bigger Pocket members!

It has been a while since my last post on Chicago Cap Rates. 

I figured it was about time for some updated numbers. 

This post will look at Cap Rates for small multifamily properties. 

Specifically, we will look at "3 to 4" unit properties. 

The demand for smaller multifamily properties is very high. 

There is demand from both owner occupants and investors. 

Since this property type is considered Residential, 

there is ample financing available. 

This drives up demand and prices, while compressing cap rates. 

This is for the 12 month period ending Feb 17, 2021.

The cap rates were estimated and derived based on the following assumptions:

1) Net Income will be 50% of listed Gross Income.

Below you will find Chicago Cap Rates by neighborhood.

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• ALBANY PARK : 4.88
  ASHBURN : 5.98
  AUBURN GRESHAM : 7.03
  AUSTIN : 6.03
  AVONDALE : 4.32
  BELMONT CRAGIN : 4.96
  BEVERLY : 4.39
  BRIDGEPORT : 4.22
  BRIGHTON PARK : 5.96
  CHATHAM : 6.61
  CHICAGO LAWN : 6.5
  CLEARING : 5.01
  DOUGLAS : 4.48
  DUNNING : 4.17
  EAST GARFIELD PARK : 5.72
  EAST SIDE : 5.38
  EDGEWATER : 4.09
  EDISON PARK : 4.12
  ENGLEWOOD : 8.98
  FOREST GLEN : 3.85
  GAGE PARK : 6.09
  GARFIELD RIDGE : 4.43
  GRAND BOULEVARD : 4.81
  GREATER GRAND CROSSING : 5.92
  HERMOSA : 4.54
  HUMBOLDT PARK : 5.47
  IRVING PARK : 4.12
  JEFFERSON PARK : 4.23
  KENWOOD : 4.44
  LAKE VIEW : 4.15
  LINCOLN PARK : 4.27
  LINCOLN SQUARE : 4.08
  LOGAN SQUARE : 4.19
  LOWER WEST SIDE : 4.45
  MCKINLEY PARK : 4.44
  MORGAN PARK : 5.94
  NEAR NORTH SIDE : 4.37
  NEAR WEST SIDE : 4.64
  NEW CITY : 6.93
  NORTH CENTER : 4.28
  NORTH LAWNDALE : 6.52
  NORTH PARK : 5.15
  NORWOOD PARK : 4.59
  O’HARE : 3.55
  PORTAGE PARK : 4.47
  PULLMAN : 7.38
  ROGERS PARK : 4.9
  ROSELAND : 7.62
  SOUTH CHICAGO : 8.51
  SOUTH DEERING : 16.58 * (only 1 property sold, so this could be an anomaly)
  SOUTH LAWNDALE : 5.65
  SOUTH SHORE : 5.88
  UPTOWN : 3.97
  WASHINGTON HEIGHTS : 5.89
  WASHINGTON PARK : 5.11
  WEST ENGLEWOOD : 8.09
  WEST GARFIELD PARK : 9.11
  WEST LAWN : 4.82
  WEST PULLMAN : 9.93
  WEST RIDGE : 4.38
  WEST TOWN : 4.08
  WOODLAWN : 6.02

[Mark Killion]

@Jonathan Klemm  Thanks for the feedback.  I did this analysis on properties that were fully rented.  For Gross Income, you are correct...we are talking gross rental income.  I used the rent amounts that were given on the listing.  If a property was an empty fixer upper or had vacant units, they were not included in this analysis.  I may circle back later and add another comment which addresses a couple of your other questions.   If you search biggerpockets for Chicago Cap Rates, you should come across some of my older posts to get an idea of how cap rates were in the past.  Generally speaking, cap rates have compressed over the last few years due to low inventory.  One of my older posts even includes a Cap Rate Heat Map for Chicago.  I guess I had a lot of time on my hands that week.      

Thanks, Mark