Looking to buy an Airbnb/STR in Chicago? Read this first

[Tom Casey]

So lately A TON of clients have approached me with the idea to buy an STR (Airbnb, Vrbo, etc) in Chicago, usually downtown or close to city center. The conversation almost always goes something like, "I'm looking for a one- or two-bed unit close to downtown that I can Airbnb out whenever I want and then use for myself when I'm in town." Sounds great doesn't it? On paper, the numbers for this are amazing, home run for sure! But as most of you probably know, nothing truly great in this life comes easy... and Airbnbs in Chicago are no exception to that rule. Here's what should be top of mind when thinking about STRs and MTRs in or close to downtown:

First and foremost, 99.9% of condo associations in Chicago do not allow short-term rentals. Even the ones that do usually limit minimum lease terms to 31+ days. There are specifically two full amenity buildings downtown that allow 31-day short term leases. Those are 30 W Huron and 545 N Dearborn. The prices are pretty high in these buildings though and oftentimes the numbers aren’t going to pencil out unless you’re buying cash as an appreciation play.

So if condos aren’t really a good option (without having to break the rules), what’s next?

Next option would be multi-unit buildings. These are going to give you a little more freedom because there won't be any association to worry about. However, you're still going to face some limitations/roadblocks here. For one, by Chicago STR regulations, you are only allowed 1 Airbnb/STR for 2-4 unit buildings and only up to 25% for 5+ unit buildings. Since you'll have to register all your Airbnb units through the City of Chicago, they are likely to catch on if you are not following this rule. Majority of people doing Airbnbs are doing it for one unit and then doing either MTR or normal 12-month leases for the others. However, even this strategy has implications. Technically, the City of Chicago ordinance states that you cannot operate an STR in your building if you're not living in the actual UNIT that is being used as an STR (not just in the building). Though I have some clients who are still operating Airbnb units without living in the actual unit (some don't even live in the same building), these clients are technically breaking the rules according to the ordinance. Will they get caught? Maybe, maybe not... But they're definitely taking on some risk there.

Airbnb/STRs in Chicago are great on paper, but they present a multitude of challenges. The regulations have been becoming more and more stringent and limiting over the years. In my opinion, if you're not too risk-averse, your best option is to buy a multi-unit and Airbnb out one of the units while renting the others out normally (if you can live in one unit, even better!). But I would definitely make sure that it at least pencils out to break even as a standard rental building, so that if the city decides to crack down, you at least have a solid investment property after all is said and done. 

As always, please feel free to reach out with any questions and/or responses. Let's all win together!