OOS investor looking for advice for 1st Chicagoland 2/3 flat

[Ronaldo Marion]

Hi My wife and I are small buy and hold investors (we own 1 SFR) based out of DFW and have decided on the Chicago market to add to our portfolio as the SF numbers in DFW no longer pencil out and there is very little small multifamily inventory in TX. I don't really have any idea about Chicago neighborhoods other than to avoid the "south" and "west" sides. I have done some basic research on the near west suburbs, Summit, Berwyn, Oak Park, Cicero and get the impression there is more consistency in these areas meaning I wouldn't need to know as much about each block like in Chicago proper, but I could be wrong. I am also open to Chicago proper, but I would need help identifying a decent areas.

I do have some questions for experienced Chicago investors:

Is there any inherent benefit to having property in the city of Chicago over a close in suburb? Do you think Chicago properties will appreciate better long-term vs a close suburb? For example here a property with a Dallas, TX address is more valuable than that same property a block away in Richardson, TX even though you cant tell the difference between the two areas.

Are the near west suburbs, Summit, Berwyn, Oak Park etc. decent buy and hold areas? Any other near suburbs with small multifamily that are B to C quality with strong rent?

I have been looking at 3 flats as 2 flats don't pencil out as well. Are there any inherent benefits to 2 flats over 3 flats in terms of potential rent and longevity of the tenant? Do renters feel "more at home" or lease for longer in a 2 vs 3 flat?

[Chris Winslow]

Hi Ronaldo! There are definitely people that make nice returns on the South and West sides of Chicago, I do agree that it would be a very good idea to get the opinion of someone with boots on the ground in those areas as it can be block to block. For the western suburbs you mentioned, I hardly ever see something that pencils out for me in Oak Park, Berwyn can be good but deals are getting harder to find, Cicero can be good for sure for numbers but it’s more C class.

One big benefit of being in the city proper is that taxes are way lower than in the burbs. As far as appreciation vs the suburbs I think it really depends on which specific neighborhoods you’re looking at.

Personally, I think the near west suburbs are great buy and hold areas. You could also look into La Grange, Lyons, Forest Park, and Brookfield. I don’t have personal data on the total term that tenants rent for a 2 vs 3 unit but I would pick a 3 if possible because generally it pencils better and I don’t think there is a big difference in tenant quality.

I have a place in Berwyn and Little Village (west side of the city proper) so happy to help if I can but I’m still new, I highly recommend you to connect with @John Warren who owns and manages a bunch of units around the area!