Where should I invest?

Question

Hello BP! I need your help. I'm looking to buy a multifamily property somewhere outside of Chicago. As much as I love the city, the prices here have gotten out of control and I feel like my money can go a lot further elsewhere. So unless the market takes a dip or I find a briefcase full of cash under a park bench, Chicago is off the table.

Now before you tell me to go take my money and get a one-way ticket to Ohio, I want to be close to Chicago. I want to be an hour to an hour a half drive from the property. That is the furthest distance I would go when it comes to long-distance investing. The reason being is because I have a background in carpentry and plumbing and love to work on my own properties. I also love being able to visit my properties since it gives me a sense of pride, motivation, and gets me out of the house.

One of the places I've looked into is Northwest Indiana, Whiting specifically. The properties seem to be in a great price range but then again I do not know if that's just the Chicago investor in me because personally, anything under 300k is a steal. Those prices can be overpriced for Indiana so I'm looking for advice. It has a large blue-collar workforce and I'm starting to see a trend where many people who work in Chicago are moving to parts of Northwest Indiana since it's a short drive away from Chicago and houses are much cheaper, along with much lower property tax and cost of living. Northwest Indiana is also investing 2 billion dollars in infrastructure to improve the connections to Chicago with better highways and also adding railways.

Do you have any insight about the area? What are some other places to look into around Chicago? Any Investors from Normal, Illinois, Aurora, Illinois, Rockford, Illinois, or Southern Wisconsin that can give me some advice? Thank you!

Tim Jensen · Answer

@Hans .Suljic

I've been investing in Rockford for 30 years. It has treated me well. It also has had its ups and downs. In my opinion, you will not get the massive appreciation you get near Chicago, then again the Midwest is not a big area for appreciation. As was pointed out, there is a big crime problem in Rockford. However, for the most part it's contained to certain parts of town. The property taxes are a real issue, and when you do finally pay off the property, you still will have high property taxes. Now with all this being said, I don't know many markets that cash flow as well as Rockford. Feel free to reach out to me.

John Warren · Answer

@Hans .Suljic a few years ago I was in the same boat as you and I bought a property in South Bend. I have since sold that property and I did a 1031 exchange back to Berwyn where I have since been buying properties. The thing is, cheaper properties tend to not appreciate as much and the rents don't appreciate as much which limits your cash flow and value over time. I missed this early on when I began investing as I was only focused on the purchase price.

One example of this is in the rents. I purchased a building in Cicero where the rents were $650 for 2 bedroom apartments at acquisition. I raised them to $900 and one of the legacy tenants just left. When I released the apartment after a modes rehab, I am getting $1200 plus a parking fee. I would never see this kind of spread in a secondary market.

Gloria N Gear · Answer

I lived in Rockford for 15 years and have a few friends that are doing well with investments there, but I personally would not invest there.  Yes, the prices are good, but look at the crime rates, job market, and school districts (enrollment is down because families are leaving the area).  Indiana is much more landlord friendly and the property taxes are much better.  If you want something close, go to Northwest Indiana -- there are several on here that can help you with that area.  If you are looking at Normal or Aurora, Indianapolis is about the same distance from you - I would be glad to discuss that area.  Janesville or Lake Geneva in southern Wisconsin are also great places to research.  Always look at the economic development and job diversification in any area and that will tell you if you should do long term HOLDS there.

Eudith Vacio · Answer

Hi @Hans .Suljic I am right there with you, buddy. I began investing in Chicago to later realize how high property taxes are in relation to other cities. While you can raise rent, Chicago has laws that are strictly geared towards tenants. I recently bought a 3-flat in Northwest Indiana all-cash for $35k, rehabbed it and rented it out. Beautiful cash-flow. I am now moving my investments to NWI and I am even thinking of moving out there now!

David Butler · Answer

I live right outside of Lake Geneva and love Walworth County for investments whether it be for rentals, flips and I am building my first spec home from scratch.  Property values have increased greatly with the fleeing of so many from IL.  Appreciation is great, but that means that there are fewer properties for flips--hence the new build.  Rents have started to catch up to home values in the past 2-3 years.  I purchased my first rental home about 6 years ago but quit buying rentals as the rents were not keeping up with appreciation and increasing purchase pricing--I couldn't find 1% properties any longer.  Now that has changed the past couple of years and I purchased two rentals in the past year.  I stick very close to home so I am in the Genoa City, Lake Geneva, Lyons, Linn and I do sneak into Twin Lakes which is Kenosha County.  I don't go any further into Kenosha County because I don't know the area as well and I like to drive by my places.  If I can help you in any way, let me know.

Soh Tanaka · Answer

Pretty much all the areas have pros and cons, and you just have to be the one to make the final decision. NWI market has been appreciating in general, just probably not as much as Chicago land.

Just outside of Chicago means Cook County. The county is proposing a new ordinance called Cook County Residential Tenant and Landlord Ordinance, similar to the one in Chicago. It does NOT mean you can not make money, but something to think about. I'm willing to trade my headache for some extra return, and NWI gives me that.

Crystal Smith · Answer

A few years ago we looked into places like Whiting because the properties were cheaper, but we never pulled the trigger on any deals because our evaluation of whether a deal is worthwhile pursuing is based on how much cash can an asset throw off either from a short term flip, monthly free cash flow or appreciation.  At the time when we explored Whiting, we could not make our numbers. This does not mean that there aren't opportunities there but I implore you not to just look at the acquisition price.

The same would apply to Normal, Aurora, Rockford or Southern Wisconsin- Make your decison based on Return on Investment. You can also bet on the future such as the investment in infrastructure- but you have to decide how long will that take & will you really be able to take advantage of it if it's a 20 year plan.

Amber McCarthy · Answer

Hello,

I'm currently from Indiana and I have some investment properties you would love.

Nicholas Hamblen · Answer

@Hans .Suljic Indianapolis and Grand Rapids might be some good markets to look at.

Brock Mogensen · Answer

The Kenosha, WI and Pleasant Prairie, WI markets are great.  Lots of job growth going on there.  There are some great opportunities for small multifamily in those markets.

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