Fresh out of college and looking to purchase first property!

Fresh out of college and looking to purchase first property!

Chicago, IL · Member since 2017 · 40 posts · 17 votes

Hi all!  New to Bigger Pockets (discovered through listening to the podcast) and am excited to join the community.

Some background on myself - I recently graduated from the University of Illinois at Urbana-Champaign with an Masters of Accounting Science degree and am currently employed at one of the Big 4 accounting firms.  I'm currently renting an apartment in Lincoln Park, but given the nature of my work I've found myself staying at my parent's house in the northern suburbs for the majority of the time.  Having to pay rent on property that I'm not even living in is what prompted me to look into purchasing real estate, and as I started doing more and more research I eventually stumbled across this site.

Currently, I've got about ~$18k saved up after working for about 5 months and have started looking at property listings on Realtor.com/Trulia/Zillow/etc. and have noticed that I'm basically in the running to put a down payment on a 2-3 bed/bath condo in Chicago, but any multi-unit properties are basically out of the question based on cost.  This wasn't super surprising to me as I realize how expensive real estate gets in the city, however it was still somewhat disappointing as my ideal plan was to purchase at least a duplex and rent out the one half of it.

Given the position that I'm in (recent college grad/young professional who works in the city), what would you guys and girls recommend that I do?  I definitely plan to live in the first property that I purchase and would ideally like to live in the city.  However, if the potential for profitability is night and day between purchasing in the city vs. the suburbs, I would definitely be willing to make sacrifices to my personal preferences.

Is it worth it to be investing in a condo if I can rent out one or two bedrooms, or would my money be better spent on investing in a duplex in the suburbs?

If investing in a condo, where would be the best neighborhoods to look at?  So far I'm considering Logan Square, Bucktown, Lakeview, and Uptown just based on things I've heard, but have I already missed the boat on these?

If looking at the suburbs, where are the best spots to buy?  If I had to go this route the first place that comes to mind for me is Evanston (just because it's relatively easy to get to the city from there and I enjoy the "vibe" there).  However, I'm sure there are other (better) options available and I just don't know where I should be looking.

Thanks in advance for your help!

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Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes
9y

@Kevin Huang

You are thinking the right way. I would recommend a 3 or 4 flat. I know you mentioned loan limits at $365K and $417K, but that is only for a 2 flat

The loan limits for a 3 or 4 unit increases. 

You can leverage low money down as first time home buyer like i did

See this reply in the discussion

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  • Investor · Hawaiian Gardens, CA · Member since 2015 · 308 posts · 386 votes
    9y

    Kevin,

    I suggest exploring the areas near your work and seeing which neighborhoods you like or see potential in. Start going to open houses to get a feel for the market (they're free). If you have around 18k saved up, you have more options available than you think with an FHA 3.5% loan, (rough estimate around 400k depending on your income). I'm personally not as big on Condos because they have home owners association fees, but everyone has their own strategy. If I were you I would house hack a multi family property. Good luck

  • Chicago, IL · Member since 2017 · 40 posts · 17 votes
    9y
    Originally posted by @Derrick Dill:

    Kevin,

    I suggest exploring the areas near your work and seeing which neighborhoods you like or see potential in. If you have around 18k saved up, you have more options available than you think with an FHA 3.5% loan, (rough estimate around 400k depending on your income). I'm personally not as big on Condos because they have home owners association fees, but everyone has their own strategy. If I were you I would house hack a multi family property. Good luck

    Thanks for your advice Derrick! Apparently the FHA 3.5% loans cap out at $365,700 and conforming loan limit is $417,000 in Cook County, which is where I have been doing the majority of my research. These limits do go up outside of Cook, but then we're no longer talking about looking at property in the City.

    Have you had experience in the Chicagoland market (city, suburbs, or both)?

  • Real Estate Agent · Chicago, IL · Member since 2016 · 283 posts · 71 votes
    9y

    @Kevin Huang would love to connect to talk real estate strategy! You are definitely in a good position and your mind is in the right place investing in real estate at such a young age! I wish I had gotten started sooner

    FHA is a great method to buy your first property due to keeping your own cash. It is true you lose on MIP if your numbers work right it is definitely beneficial. House hacking a 2-3 flat would be the most ideal but you will definitely need to do research on this and many of these places are very competitive recently so closing FHA on these may be tough.

    I personally love the logan square area currently out of the ones you mentioned. 

  • Attorney · Elmhurst, IL · Member since 2016 · 255 posts · 161 votes
    9y

    @Kevin Huang Are you looking to invest or for somewhere to live?  IMO that's the key distinction, the big dilemma and the first question you should answer.  

    Where you invest, and what you in invest in, is markedly different from where you live. 

    For 18k, you could practically buy in some neighborhoods (Blue Island, Dolton) whereas that same amount of money equates to a 6% down payment in the neighborhoods you  would like to purchase in. Condos and duplexes have associations, many of which restrict the number of units that can be rented or outright prohibit (generally small associations - 20 units of less).

    Everyone wants to purchase a condo in the areas you're considering and unless you are drilling 100k fresh out of school, you may not qualify based on your income alone. 

    The best spots to buy in are those areas that you are familiar with.  Neighborhoods change block to block in the city and the burbs alike.  School districts affect resale, taxes erode profits, and as @Derrick Dill highlighted, association fees can really impact your ROI (model out the numbers to see for yourself) and house hacking is a good strategy as it contemporaneously affords you somewhere to live and allows you to invest. Best of luck in your search. If I can be of further assistance, feel free to contact me directly.

  • Real Estate Broker · Chicago, IL · Member since 2015 · 102 posts · 53 votes
    9y

    Kevin, if you are the type of person who is willing to live with tenants and deal with tenant issues I would highly recommend trying to purchase a 2 flat or 3 flat.  Sounds like you are saving money pretty quickly and if you have to wait until the summer to save up a bigger down payment then do it.  There is nothing better than having your first Real Estate purchase have a rental return.  It'll set you up well for the future. I'm a Realtor in Chicago and would love to help you if you'd like.  PM me and we can meet up for coffee.  

  • Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes
    9y

    @Kevin Huang

    You are thinking the right way. I would recommend a 3 or 4 flat. I know you mentioned loan limits at $365K and $417K, but that is only for a 2 flat

    The loan limits for a 3 or 4 unit increases. 

    You can leverage low money down as first time home buyer like i did

  • Investor · Chicago, IL · Member since 2016 · 515 posts · 247 votes
    9y
    Originally posted by @Syed Lateef:

    @Kevin Huang

    You are thinking the right way. I would recommend a 3 or 4 flat. I know you mentioned loan limits at $365K and $417K, but that is only for a 2 flat

    The loan limits for a 3 or 4 unit increases. 

    You can leverage low money down as first time home buyer like i did

     I agree with looking for a 2-4 flat.  I'd also recommend that the OP continues to save as much cash as he can as 18K is pretty light for down payment, closing costs, reserves.  

  • Chicago, IL · Member since 2017 · 40 posts · 17 votes
    9y
    Originally posted by @Syed Lateef:

    @Kevin Huang

    You are thinking the right way. I would recommend a 3 or 4 flat. I know you mentioned loan limits at $365K and $417K, but that is only for a 2 flat

    The loan limits for a 3 or 4 unit increases. 

    You can leverage low money down as first time home buyer like i did

     Which suburbs would you recommend looking in?  I need a location that's accessible to the city as well as the northern suburbs ideally.  I'd love to get into a 3 or 4 flat instead of a condo, but am concerned that they are out of my price range in the locations I would like.

  • Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes
    9y

    @Kevin Huang

    I purchased my property on the north-side of Chicago, specifically Jefferson Park. 

    My sister purchased a property in Logan Square

    Both of us have our mortgage (+taxes & insurance) covered from the other renters. So we are living "mortgage free"

    If your working @ the Big 4 I would recommend somewhere near CTA/Metra

    My family lives in Lincolnwood area

  • Chicago, IL · Member since 2017 · 40 posts · 17 votes
    9y
    Originally posted by @Syed Lateef:

    @Kevin Huang

    I purchased my property on the north-side of Chicago, specifically Jefferson Park. 

    My sister purchased a property in Logan Square

    Both of us have our mortgage (+taxes & insurance) covered from the other renters. So we are living "mortgage free"

    If your working @ the Big 4 I would recommend somewhere near CTA/Metra

    My family lives in Lincolnwood area

     Does your sister own a multi-unit in Logan Square?  I would love to do something like that but it seems well out of my price range.

  • Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes
    9y

    @Kevin Huang

    Yes, she owns a multi-unit in Logan Square- near the 606. She rents out the top 2 units and lives in the Ground unit. The top 2 units rent for roughly 1,600 mo/

    Its a brand new rehabbed building. Its very nice. Way better quality than mine. She did a 10% conventional loan. Ended up paying around $50K down. Closing costs were covered by sellers credit.

    I am sure you can do the same 5% down conventional loan, with your income and income from the property you should qualify

    Talk to @Brie Schmidt

  • Real Estate Investor · Fresno, CA · Member since 2015 · 133 posts · 9 votes
    9y

    1. Yes; real estate is a route to make people, corporations, come true. But never get off path with what your passionate about. Based on where your situated; college. Raise twice if not triple the amount of what you obtain in other more promising investments theirs lots of them. be certain could rent rent out rooms, for the time being. When you get more caliber (money) your age shall be flipping properties. Then when your at retirement age; passive income properties. But never give up on what your most passionate about thus; in other words: your major definite of purpose. Doing what you love to do. is life. Rather than placing your money in banks base them on properties. Don't do it trying doing everything yourself or multi tasking. So if your part time. Choose carefully your external group aka mastermind. The more committed you become consider forming your think tank aka your external group. Wether your an investor or an agent. I'm an Investor, me, Rigoberto PeraZa, i would still read, re- read a book from an author with same background as yours Gary Keller. Nothing; is better, planning, your life.

  • Chicago, IL · Member since 2017 · 40 posts · 17 votes
    9y
    Originally posted by @Syed Lateef:

    @Kevin Huang

    Yes, she owns a multi-unit in Logan Square- near the 606. She rents out the top 2 units and lives in the Ground unit. The top 2 units rent for roughly 1,600 mo/

    Its a brand new rehabbed building. Its very nice. Way better quality than mine. She did a 10% conventional loan. Ended up paying around $50K down. Closing costs were covered by sellers credit.

    I am sure you can do the same 5% down conventional loan, with your income and income from the property you should qualify

    Talk to @Brie Schmidt

     Thanks!  I'll definitely get in touch with her.  How long ago was that purchase?  50k at 10% down seems *quite* good, but maybe I just haven't been looking hard enough.

  • Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes
    9y

    I purchased mine in September 2016. It took me 1 year to get a place under contract.

    My Sister had better luck than me. She started looking in September 2016 and closed in December of 2016

    Have an experienced agent help you. 

  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    9y

    @Kevin Huang - I helped both @Syed Lateef and his sister buy their properties this fall.  There are a lot of moving parts with Chicago 2-4 units but with patience it can be done.  PM me and I can show you specific examples of properties and the numbers

  • Investor · Chicago, IL · Member since 2015 · 75 posts · 32 votes
    9y

    @Kevin Huang. If you have not listened to podcasts 72 (Mark Ainley) and 78 & 132 ( Brie Schmidt) do so. They provide great information regarding Chicago's real estate.

    Welcome to BP.

    Oscar

  • Chicago, IL · Member since 2017 · 40 posts · 17 votes
    9y
    Originally posted by @Oscar Jacome:

    @Kevin Huang. If you have not listened to podcasts 72 (Mark Ainley) and 78 & 132 ( Brie Schmidt) do so. They provide great information regarding Chicago's real estate.

    Welcome to BP.

    Oscar

     Thanks Oscar, I will definitely be listening those tonight.

  • Lender · Chicago, IL · Member since 2017 · 438 posts · 193 votes
    9y

    Hi Kevin!  Lots to touch upon here and don't want to leave a novel in this thread, so will be brief for now :-)  First off, I have a variety of thoughts on the neighborhoods you mentioned as well as the pros/cons of suburbs vs the city.  There are considerations from an investment aspect, but also lifestyle aspect since this initial investment will start as a primary residence (as it sounds).  Starting as a primary is a great way to ease your way into real estate investing.  A few of my investment properties now started as a primary for a few year.....and such is the case for many of my clients....and thus the utility of that purchase can serve several purposes.  If this will be a place for you to live in for a bit, you want to enjoy it...and often if you enjoy it, a renter down the road would presumably enjoy it as well (generally speaking). But of course the numbers need to make sense too.

    I think purchasing a condo as your first investment isn't a bad idea at all. It's certainly an easier path, more manageable (not just in terms of the first purchase and mortgage process, but also in terms of owning it whether you live there or it eventually becomes a rental), and is a great place to call home for a few years, then becomes a great investment once you decide to move out.

    Regarding financing, conventional/conforming limits on a 1unit are now $424,100 in Illinois, whereas FHA is $365,700. While FHA has its benefits, most often conventional is the better route to go. My primary occupation is lending, and we offer low down payment options that meet or beat FHA in most cases....and often we can do low down payment on multi-units too (non-FHA) if that's a route you end up looking at. Thus, lower down payment financing should be available for multi-units and 1-unit condos....and you therefore won't be restricted necessarily in that regard. However, a condo might be a easier bite to chew on this first deal as you get your feet wet. Having said that, I work with a ton of first time buyers that purchase multi-units. Just depends on your preferences, tolerances, etc. Happy to dive into any/all areas above whenever you like. Whether with me or another professional, the discussion is often more productive live as it becomes more three dimensional and easier to breakdown a lot of the smaller details and considerations.

    Congrats on graduating college and looking into purchasing!  As has been stated, the sooner you start the better in the long-run!

  • Zack KarpPro Member
    Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes
    9y

    @Kevin Huang

    If you are looking at 2-4 unit properties, the FHA max loan limits are much higher. 1-unit is $365,700, but 2-unit is $468,150, 3-unit is $565,900, and 4-unit is $703,250. You only need 3.5% down, regardless if 1-4 units. Also you can factor in seller credits to help with your cash to close. With your current situation, you have way more options than you think.

    @Brie Schmidt knows her stuff with city properties and understands investors and ROI, I highly recommend leveraging her knowledge.

    And please make sure you are working with a lender who understands working with investors and how to structure deals to make them work for you.

    Best of luck!

  • Professional · Dearborn, MI · Member since 2016 · 14 posts · 0 votes
    9y
    We own over 50 properties in downtown Chicago the rate of return at this point is not the best Hoa fees are very high and keep increasing taxes are getting higher we're doing a lot of work in Michigan and my returns are much better and we have turnkey properties with renter is already in these properties and the properties are top notch contact us if you're interested you can contact Us
  • Rental Property Investor · Mars, PA · Member since 2014 · 92 posts · 36 votes
    9y

    @Kevin Huang in 2014, I closed in a 4-unit building in the north side of Chicago. My wife and I still owner occupy the property and live for free. That's right, our three tenants pay all the mortgage and monthly expenses.

    Like you, I had an interest in Bucktown and Logan Sqaure. After surveying the Mkt and walking through dozens of multi-family buildings, I can to terms with the fact that I needed to look north and west of these hot zones in order to find a place that would work for my house hacking goals. I settled in North Park and has worked out very well.

    With low money down loans mentioned by others in this thread, you can get there, too.

    A partner of mine and I are working on rehabbing a 3-flat property in down the street from where I live. We are going to lease up the unites and then market it for sale afterwards.

    This property is only an 8-minute walk from the Kimball brown line stop. May be something that'd work for you to house hack.

    It probably won't be ready until April or May at the earliest. Send me a private message and we can chat.

  • Ludlow, Mass · Member since 2016 · 41 posts · 2 votes
    9y
    Kevin Huang What's up Kevin? I recently graduated as well. I'm working as a pharmacist in Massachusetts. Would love to do some work together as I think we are in the boat. Let me know if you're interested. Take care
  • Schaumburg, IL · Member since 2016 · 3 posts · 0 votes
    9y

    Hello guys, I am starting out as a young professional also in the chicagoland area. I don't have much experience yet in REI but I just wanted to say thank you guys for all the info in this post!

  • Investor · Indianapolis, IN · Member since 2016 · 26 posts · 15 votes
    9y
    Hi Kevin, Congrats on getting started! Every property requires thorough and correct due diligence. When the numbers work, everything is easy. When they don't work, everything is hard! There's a good notepad you can get that helps with assessing properties while you visit the houses called, "The Property Investor Notebook". I highly recommend this. I get them at Amazon for cheaper. Hope that helps...
  • Professional · Chicago, IL · Member since 2012 · 197 posts · 131 votes
    9y
    Originally posted by @Hudson Juma:

    Hi Kevin,

    Can you be intrested in investing in kenya,we have nice plots and houses that that will give you nice returns.

     Awesome Post 

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