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

Chicago, Illinois
General Real Estate Investing
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OOS investor looking for advice for 1st Chicagoland 2/3 flat

Ronaldo Marion
Rental Property Investor · Arlington, TX · Member since 2022 · 21 posts · 9 votes

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?

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Chris Winslow
Investor · Berwyn, IL · Member since 2018 · 104 posts · 71 votes
4y

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!

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  • Chris Winslow
    Investor · Berwyn, IL · Member since 2018 · 104 posts · 71 votes
    4y

    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!

    4Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    4y

    @Chris Winslow thanks for the shout out! @Ronaldo Marion I will send you a PM so we can connect and chat more. 

    1Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    4y

    Hey @Ronaldo Marion - I actually lived in the Dallas area myself for a little under two years.  I love their dart rail system.  I also love our Chicago CTA system.

    Chicago is a massive market and provides everything you could ask for as an investor.  Whether you are looking to fix and flip or buy and holds, Chicago has it.  Also, it offers excellent cash flow markets or longer-term appreciation plays.  I like the Berwyn & Cicero markets for cash flow and @John Warren above is the man to talk to about those areas.

    Also, some of the south suburbs offer great single-family cash flow rentals.   I am personally on the NW side and leaned more into the appreciation play.  Feel free to reach out and I'd be happy to connect to talk more about the Chicago real estate market.

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  • Paul De Luca
    Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
    4y

    @Ronaldo Marion

    Pretty much what @Chris Winslow said. 

    It's tough to find good cash flow in the western suburbs like Berwyn and Forest Park due to higher taxes & now that rates have risen. You also don't really see illegal units/ADUs in the suburbs due to stricter local compliance but in Chicago they are common (ex: legal 2-flat w/ finished basement unit). Oak Park is not a great area for investors to target in my opinion since it's an A class area with very high property taxes and high prices compared to neighboring Berwyn, Cicero, Forest Park (C class). I've found taxes are generally higher in Forest Park compared to Berwyn and the 2-4 unit is fairly low since it's such a small area. Summit is another C class area but rents are low compared to the other areas mentioned while the taxes are generally higher so it's often difficult for the numbers to make sense for a house hacker. Could be different if you're doing 20-25% down.

    3-flats definitely have an inherent advantage over 2-flats due to the potential for higher cash flow since there are more doors.

    2Reply
  • Forrest Williams
    Real Estate Agent · Chicagoland · Member since 2018 · 314 posts · 199 votes
    4y

    Hi @Ronaldo Marion,

    I see you have the usual crew of Chicagoland hype men, so let me add my voice and say it's a great place to invest. I have two multi units in the Berwyn area, one cash flows great and the other I've recently acquired, so it's in the process of upgrading but should cash flow quite well too. With rate increases the profit margins are smaller than they were at the beginning of the year, and taxes in Cook county are quite high. However, there is appreciation all over the Chicago metro area and we have many different neighborhoods depending on your risk tolerance.

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  • Ronaldo Marion
    OP
    Rental Property Investor · Arlington, TX · Member since 2022 · 21 posts · 9 votes
    4y

    @Jonathan Klemm I reached out to you to discuss your rehab capabilities. Check your Calendy.

    1Reply
  • Michael K.
    Investor · Chicago, IL · Member since 2018 · 352 posts · 176 votes
    4y
    Quote from @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?

    You've got lots of good questions packed in here @Ronaldo Marion. A couple of things to point out. #1 Some near suburbs of Chicago are still in cook county, so will share more similarities with the city than cities that lay in other counties. #2 Suburbs are often sprawling and can still change a lot from one area to another, just as neighborhoods in the city do. #3 The Chicago property tax rate is lower than a lot of suburbs, and  in some cases there is a lot of variation, see this chart http://www.tax-rates.org/illin... #4 There is generally more multiunit stock in the city and near suburbs. In Chicago, you will find entire neighborhoods of 3-4 flats. #5 prior to covid there had been a long period of people moving back to the city, and corporate relocations into the city. That has been turned around post covid and with the new WFH culture. It's still yet to see if that shift is permanent or not. 


    Hope this helps! 

    0Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    4y

    I'm not an agent in the Chicagoland area, so I don't have any skin in this game. I lived there for decades, all around the city and the burbs.

    Chicago and the greater Chicagoland area is super hit or miss. This isn't to say you can't make money investing there, but to serve as advice to hop on a plane and CHECK OUT any area you're considering buying in. Like, for a whole weekend. Make plans to see houses and just drive around the areas. How close is it to public transportation? They have a great public transportation system. 

    Chicago has some super strict rental laws. If you end up buying IN Chicago, read up on those. 

    Don't buy across the street from a great neighborhood - even street by street can change values and desirability. 

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