Chicago House Hacking Frustration

[Frank S.]

Howdy, 

I find this forum to be an excellent source of information! Thanks ahead of time. I've learned a few things as I explore diversification options in real estate. I need to learn much more.

Over several months, we had been looking for a two flat for house hacking.  I had been looking at Chicago north and northwest sides and haven't found anything with cash flow. I'm in the $350,000 - $410,00 range for B, B- areas.  I had looked at Albany Park, Jefferson Park, and Arcadia Terrace primarily.

The rents don't justify the asking prices, and it's surprising to see properties being sold at cap 2s and cap 3s.  Two flats don't have cash flow, and the illegal basements could add a little, but not too enticing. Forget about debt service ratios >= 1.0!  

The MLS doesn't show anything of value. At least, I can't find it. My agent doesn't seem to get our goal either. I feel we are dong all the heavy lifting, perhaps that's how it goes. Our agent is responsive, but doesn't provide much of input or recommendations from the investing perspective.

Is the Chicago market going through a bad time to invest, or is this the historical mean in the area?  

S&P/Case-Shiller IL-Chicago Home Price Index is at 134. However, this embraces a vast area.

http://us.spindices.com/indices/real-estate/sp-cas...

Do people buy these two flats places thinking they will make any money? If that's the case, they will be surprised later on. 

I would like to buy a place that needs a little work and increase it's value through sweat equity. However, I can't find anything.  So, I'm wondering if I have to look at higher costs, increasing my risk, but eliminating some of the competition.

I looked at a few foreclosures and the amount of work to repair was beyond my current financial capacity. I will keep searching. 

FSBOs are also overpriced.

If I must, I could dip into my 401(k) and get 50K out + $80K DP= $130k available.  The intermediate bonds are not paying much these days, anyway.  So, I could modify my asset allocation and use RE to pick up the bond return.  The bad news is two flats don't match the low return from bonds.

                                                                 1 year       3year     5 year     10 year       All

Intermediate-Term Bond Index Inv

2.80%

1.80%

3.76%

5.64%

6.24%

Well, that's my perspective. I will keep reading, researching, and learning. 

Thanks BP!

[Brie Schmidt]

I have said that same thing a million times.  @Frank S. - If you PM me your email, I will send you a list of about 20 properties I have analyzed on the North side this year.  I keep it because I feel it is a good representation of numbers to expect on the N side in various price ranges