Buying in the Chicago Area

[Trevor Fritz]

Hello to all my Chicago investors (and everyone else). I currently am looking for some guidance to help me narrow down my search for my 2nd property. I currently own a condo unit in the NW suburbs, but am looking for something different. I keep going back and forth and spending time researching 2 different avenues for my next deal.

1. Buying a SFH in the suburban area as a rental property, most likely a 3/2.

2. Buying a Multi-unit, preferably in an up and coming area in Chicago and using an FHA loan and living in 1 unit.

My price point varies, with the SFH I am looking to keep it under $275,000, while the multi-unit with the FHA loan, I would look for something a bit higher, close to $400,000. I am looking for value add properties. Anyone out there recommend one over the other and I would appreciate any reasons why! Thanks and I look forward to your responses.

[Kumar Paj]

****My thoughts are more applicable to Western suburbs; B- to B+ class neighborhood, and from Cash Flow perspective only****

With regard to SFH rental property, I am not sure if it is a good idea to go up to that price point. I always prefer to keep it under $150K since it makes more sense from CashFlow perspective. Also, if you get closer to $300K, you should expect fast turnover (your tenant will move out in couple of years) since most of the tenant who pays $2K-$3K rent, would more likely to consider purchasing their own house very soon.

To make it very simple, for $150K (3 BR 2BTH) you can expect rent around $1800 PM. However, if you buy a property for $300K, I am not sure if you will get $3600 ?? Would you? This will have significant effect on cash flow. I would rather buy two properties around $150K each. 

For me, the duplexes or townhouse style units with very low/no HOA works best for cash flow since they have lower tax and higher cash flow. Of course the strategy and thought process can be different if appreciation is your top priority.....