Investing In Chicago Area

[Account Closed]

I am new to real estate investing and am looking for some guidance from people in the Chicago area. I have read a few books including "The Book On Rental Property Investing" by Brandon Turner and it has really grabbed my attention on how beneficial investing in rental properties can be to your financial state. I have been scanning the Chicago area and the suburbs west of the city to look for duplexes and triplexes that could get my portfolio going. Unfortunately the properties i have seen do not seem like very good investments. On the other hand i have looked at foreclosed properties in the west suburbs that seem as if they have great potential. My main question is for investors that are in the chicagoland area. At the moment what type of real estate investing is this area good for? i have my thoughts but i wanted to get insight from skilled investors. 

[Eric M.]

I realize you are looking very broadly because you are new and have not focused in one some niche yet. 

The answer is the "Chicago Area" is good for all types of investments right now and most always. That is because the Chicago Area is very large and diverse. All areas of Chicagoland are not good for all types of REI but for every type of REI there are good areas and for every area there are good types of REI.

To get meaningful info you need to look closer and with more nuance. Some local areas are better for some strategies and some worse. The good thing is that you get to pick. The bad thing is there is not one answer to your question that fits all.

As a very general rule, the south side and more working class areas are better if you are a cash flow investor. Those areas and that strategy have pros and cons as all of them do. You tend to have more tenant issues and will have to deal with eviction laws, etc and you will tend to get less appreciation. In these areas, flips are lower priced and faster and make less money per flip so you need to do more of them.

In some nicer areas, you will see much lower cap rates and much lower cash flow. But you will generally see much great price appreciation and have fewer and different type of tenant issues. In these areas, flips are more expensive but if done right can make more per flip and you might need to do fewer to make the same total profit.

In the suburbs, it can be a mix of both depending on the area and the level of the property. 

In every area, there are always opportunities for forced appreciation by rehabbing and repositioning a property. But that is a skill in itself and not always simple and easy. The idea of forced appreciation is fantastic and powerful but there are a lot of ways to do it wrong, especially in multi-family.  Pretty much everyone knows the basics to flip a house to force appreciation. They know what features people want in a house. Multi is different and not as easy in my opinion. But the fact that it is not as easy also makes it an opportunity.

Auctions, foreclosures and distressed properties can be good opportunities or dangerous opportunities anywhere. Buying unseen at a foreclosure auction is a crapshoot, but it is also a legitimate, good strategy if you know what you are doing. In the past several years, there have been many many fewer foreclosures so some would say not as much opportunity there. Things may be starting to uptick there a bit. I am not sure how you are identifying the "forced appreciation" you are seeing in foreclosed properties. It is very hard to analyze these things from public data since you have no idea what type of investment was needed to "force" the appreciation you are seeing. This is also the flaw in ALL the flipping data you see in the news. None of it means anything because you don't know what the investor invested in the rehab.

I know people who only do vacant land and who only do commercial and those people think those are good. There is opportunity in all. None are necessarily easier or harder or better or worse, and there are no guarantees. There is no one right answer to "what is good".

The point is you need to focus a bit more on what you want or where you want to do it. Find something you are interested in and then look for the opportunity within that. There are many paths to success.