Chicago Garden Units and General Market Questions
New to Real Estate · Chicago, IL · Member since 2022 · 4 posts · 4 votes
Chicago Garden Units and General Market Questions
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Rental Property Investor · IL · Member since 2015 · 165 posts · 107 votes
4yFirst of all, welcome to the forums! You're going to find a wealth of knowledge here to answer whatever questions you might have. My first purchase had a non-conforming garden unit, which I lived in after closing. With a garden unit, many times what the lender will do is require that the gas stove is removed from that apartment during their appraisal, so that the apartment is not considered a livable space. Sellers typically know this and play along, and after closing what you choose to do with the "non-livable space" (live in it) is up to you.
Regarding the market in general, there continues to be strong demand for rentals given how hot/competitive the housing market has been. Are you looking to invest specifically in Evanston or are you looking in Chicago as well?
House hacking is not only a viable option, but in my opinion it is the best option for getting started. Regardless if you cash flow or not (though hopefully you do) it's going to not only accelerate your ability to save money for a future purchase or renovations, but it also gives you on-the-job training of being a landlord. It's not something you have to do forever, but in the long run it is absolutely worth it. Feel free to PM me if you ever have questions.
9 Replies
- Rental Property Investor · IL · Member since 2015 · 165 posts · 107 votes4y
First of all, welcome to the forums! You're going to find a wealth of knowledge here to answer whatever questions you might have. My first purchase had a non-conforming garden unit, which I lived in after closing. With a garden unit, many times what the lender will do is require that the gas stove is removed from that apartment during their appraisal, so that the apartment is not considered a livable space. Sellers typically know this and play along, and after closing what you choose to do with the "non-livable space" (live in it) is up to you.
Regarding the market in general, there continues to be strong demand for rentals given how hot/competitive the housing market has been. Are you looking to invest specifically in Evanston or are you looking in Chicago as well?
House hacking is not only a viable option, but in my opinion it is the best option for getting started. Regardless if you cash flow or not (though hopefully you do) it's going to not only accelerate your ability to save money for a future purchase or renovations, but it also gives you on-the-job training of being a landlord. It's not something you have to do forever, but in the long run it is absolutely worth it. Feel free to PM me if you ever have questions.
- Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes4y
@Joshua Branovsky the non conforming garden unit is one of those things that you see everywhere in the city. I would continue to educate yourself on it by reading the myriad of articles and by listening to the podcasts about it.
In terms of cash flow, I think as long as a property cash flows after you move out then it makes sense. I am not a fan of buying something that is negative cash flow including the rent from the unit you are living in. Living "for free" is pretty tricky as a lot of BP folks will initially include 5% vacancy factors, 5% maintenance, 5% CapEx, etc. That is not realistic (nor does it make sense) for a house hack, but the numbers should work when you move out.
- Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes4y
1) If you're interested I could send you a few articles about the non-legal ADU (additional dwelling units) in Chicago. They are very common in 2-4 unit properties where an owner decides to finish a basement or attic & rent it out to generate more income. Your lender will not use the rents from the non-legal units as qualifying income and they can't assume you will move into that unit since it's non-legal and technically shouldn't be there. There are indicators that a unit may be non-legal such as utility metering is not separate, low ceiling height (below 7'), one entrance/exit with no egress window.
2) General advice for the Chicago market is to get specific & define what you want and be prepared to pull the trigger quickly because the attractive properties get snapped up fast.
3) House hacking is a very viable and attractive option for getting a property with 0-5% down. I'm a house hacker myself and plan on continuing to do so for as long as I can.
The property you posted probably wouldn't be a problem for VA since it's newly rehabbed but the appraiser could flag some minor things that are fixable.
- 4yEudith VacioPro MemberReal Estate Agent · Chicago & NWI · Member since 2015 · 860 posts · 521 votes
Welcome :) You have an abundance of solid advice on here so far.
1) You can live in the non-legal unit if you want, most house hackers will live in the unit that generates the least amount of income so you can maximize your profit. You can also try to legalize the unit through the new ADU pilot, if its in your area that might include pulling permits, and also raise your property taxes.
2) Chicago market is still generally HOT and properties (especially those in good condition) are going FAST but also depends on the micro level and which specific sub market you are looking into.
3) House hacking is a viable option - just keep in mind that offers with VA loans are not that strong in this market especially because of the extra fees the seller might incur from accepting your offer. I had a VA buyer and it took some time to get an offer accepted.
- New to Real Estate · Chicago, IL · Member since 2022 · 4 posts · 4 votes4y
I appreciate everyone's advice! It's all helpful and your posts are reassuring. I've read them all multiple times.
@Russell W. I am looking at multiple areas north of Chicago as my Fiancé is going to Northwestern for grad school. I'm looking for a W-2 right now so I would be learning real estate/land lording and starting a new job, and I'm ready. I don't know the area other than what I can see from google maps, so I think I'll be renting for awhile when I first move, but my goal is to close by the end of this year.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes4y
Quote from @Joshua Branovsky:
Hello BP, first time posting here. I will be moving to the north side of Chicago this summer around the Evanston area and want to buy my first investment property (I have tons of questions). My plan is to house hack using my VA home loan, I don't realistically see me getting cash flow while in the property and I'm fine with that.
1. I see a lot of these non-legal garden units that are finished. Does anyone know how these work regarding owner occupy, making them legal, whether my lender will allow me to live in it, and any other information about them?
2. Does anyone have any advice for the Chicago market in general?
3. Is my house hacking strategy a viable option? I will attach an example property I'm looking at in the area that has a non-legal garden unit. Although, it is probably a little out of my price range (400k-450k)
https://www.zillow.com/homedet...
Any and all questions/comments/concerns welcome!
Once you've closed on the loan the only thing a lender cares about is if you're paying the mortgage on time. With that said we advice owner occupants only to look at building where there is at lease one legal unit unoccupied, even if the plan is to live in the non-conforming unit. Also the rules in Evanston are most likely different than Chicago proper.
Regarding advice for the Chicago market- As an owner occupant you should live where you feel comfortable. I'd give different advice if you were not going to be an owner occupant.
The house hacking strategy is alway viable if the property will cash flow after you move. I - Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes4y
@Joshua Branovsky one more thing you should note is that if you are going to live in Evanston or one of the surrounding suburbs, you will be in Cook County and not Chicago. A lot of the Chicago specific advice will be a little different in the burbs. This is especially true when it comes to non conforming units. Many suburbs have their own process for inspecting buildings as part of the sale process, and non conforming units in the suburbs can rapidly become illegal units which is a whole different animal. Hopefully this helps as you start your search.
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes4y
Hey @Joshua Branovsky - Congrats on your first post! There is definitely a ton of knowledge here on the Chicago forums. I definitely think your plan is valid and you should lean into it to make it happen!
Definitely check out @Mark Ainley & @Tom Shallcross's Chicago investor podcast. There is also a list of local meetups that you should look into https://www.straightupchicagoi...
Talk with a lender like @Michael Facchini or @Zack Karp to see how they'd look at a garden unit.
Chicago advice in general, build an awesome team (tons of awesome professionals here in BP) and leverage them as much as possible.
Quality Builders4.966 Reviews - Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes4y
Hi @Joshua Branovsky, welcome to the BP community and congrats on getting the ball rolling with this first house-hack! To your question on the illegal unit, there are ways to navigate that, with some lenders being more comfortable and experienced on it, whereas most are going to stumble on it. A lender well-versed on multi-unit financing will know the right questions to ask and how to get this done, with there being a variety of routes that would be considered. I know that's vague, but it really does matter on the scenario and is thus case-by-case.
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