How is Chicago doing?

Question

I'm planning to buy a fourplex for the long term (30+ years) and after researching a lot of places, found Chicago to be a potential candidate. I wanted to know from people who know the city how it's doing.

Chicago appears to have a lot of problems. Government debt. High violent crime. Cold weather etc. But it also has many positives. Tons of great companies and jobs are here. It's the 3rd largest city in the US, and without a doubt the largest in the Midwest. I don't think it will lose that crown anytime soon. Most importantly, its real estate is very cheap compared to cities of it's size.

So, from those who know the city more intimately, is it worth investing in for the long term given it's problems? I could see Chicago being a great play if they are able to solve their crime problem, and as global temperatures rise, the weather will become more ideal with time. I also don't want to buy into the next Detroit, because although it is cheap, that doesn't mean it couldn't keep dropping in value...

Frank McGovern · Answer

Personally, the cold weather is a positive. Many people like seasons and don't like high humidity places, even if temporary. The cold weather is what helps people actually enjoy the summer months here and get out. You will notice that more people are out in Chicago during the summer with many activities (street fests, food streets, concerts, packed bars, etc.) than you will find in places that are always nice weather.

One big thing about the cold weather is that is what keeps Chicago one of the last remaining affordable large cities. Every other city as big as Chicago is no longer affordable for many. You can still find 1-bed apartments here for under $700 in decent neighborhoods. You can still buy properties for under $500k in decent neighborhoods and sometimes even the better neighborhoods. Good luck finding that in LA, NYC, Paris, London, Miami, etc.

I can tell you that I'm from here and I have the means to easily leave and easily invest somewhere else. That I'm very aware of the problems here more than the average person and I don't even plan on building our single-family home here when the time comes. However, I'm currently under contract for first property and plan on buying more. I will be solely focused on investments in Chicago. It's still affordable, it's one of the best cities and growing in numerous business verticals, and it's a rent-friendly city.

The crime is bad but isn't as bad as the media makes it out to be. Look up the actual numbers on where it falls in the country. You'd think Chicago is #1 via the news, it's barely in the Top 10. There are many articles debunking why Chicago will never end up like Detroit and why Detroit was more prone to what it became. I recommended finding and reading those. One example is that Detroit put almost all its eggs in one basket: car manufacturing. Chicago is not beholden to one industry that could crash and take it down with it.

Are taxes going to go up? Absolutely, but it's going to be slow and long as it's political suicide every time. Everyone knows it's required, but no one wants it. I think this issue will eventually force politicians to make the real changes that are necessary to the constitution and our spending first, which is what most want before property tax raises. Even if property taxes do raise, they are already lower in the city than surrounding suburbs. Might not be as low as other cities, but that's where the tradeoff comes at still being affordable. Sure, you can maybe get lower taxes in Houston (for example), but the prices are higher for the property. It's 6 in one hand, half dozen in the other. Chicago's median property tax rate is 92nd out of 100 major cities in the U.S., placing it just below the national average (94th). So, again, is tax rates media hysterics or actual facts? Dig into the numbers of Chicago and not what the news tells you about Chicago.

Crystal Smith · Answer

In my opinion- The Chicagoland area is too large to give an answer at a Macro level on how is it doing today. What makes Chicago a good market is that it's not one market. There are over 100 diverse submarkets. Some of the submarkets are good while others are not as good. With regards to the "crime" problem- yes there's a problem but it is not all of Chicagoland. Even in the areas where the statistics show crime as a problem it's a block by block thing and people still live there.

Cold weather- We don't have cold weather. We just have to layer sometimes.

Why we invested in Chicago- We were investing around the country and Chicago became our base because it's a transportation hub. Direct flights everywhere, which is what attracts other commerce. It started with the lakes, then the trains now the airplanes. We agree- it won't loose it's crown anytime soon.

Michael K. · Answer

@Tyler D. I grew up in the city and have lived here for about 2/3rds of my life. Despite crime numbers seeming grim at times, there are plenty of neighborhoods that have drastically changed for the better over the past few decades. This map shows where gun violence was most prominent this past year. https://chicago.suntimes.com/c...  Looking at long-term data, homicides in Chicago have generally been decreasing for the past 30 years https://www.chicagotribune.com... The closure of a large number of public schools under Rahm Emmanuel and then Covid-19 are primarily what has contributed to recent spikes in the crime rate. Trump also contributed to cultivating a poor image for Chicago by constantly using it as his whipping boy, even if it's not actually the worst actor.

I like to call Chicago the Metropolis of the Midwest, which I believe is a fitting title. And, due to network effects, this is unlikely to change anytime in the foreseeable future. While there are some headwinds, I believe that Chicago continues to be a good place to put your money. And remember, those property taxes are being used to pay the pensions of retirees who primarily live in the state and city, so the money will eventually end up back in the local economy.

Marc Rice · Answer

@Tyler D.

Ohio offers some great markets also like Columbus

Forrest Williams · Answer

A lot of people looking at Chicago miss out on the suburbs, where there are plenty of deals as well. I flipped a house in Bolingbrook in 2019, it sold for ~$190,000. Last year the new owners sold it again for $250,000 with almost no further improvements than what I had done. I also own a 2-flat in Berwyn and it cash flows like crazy.

I will say the property taxes are high around here, but so are the rents, so it's not as bad as people say. And don't get me started on crime, it's incredibly overblown. Chicago ranks 28th in the nation for murder rate, slightly less than Buffalo, NY and Montgomery, AL. In fact, Indianapolis - which people on BP love to talk about as a great investment city, is higher on the list. So don't sweat it. https://www.cbsnews.com/pictur...

In terms of weather, Chicago has only gotten more mild. It's freezing January and February, but the lake keeps it from going to extremes that often. And the snow plowing infrastructure is there as well.

Henry Lazerow · Answer

I own a 4 unit on the north side of Chicago and it has been an amazing investment. Appreciated and rents have increased 20% in the 3 years I owned it. Chicago is a big city. The north side is seeing strong gentrification and population growth. Rents are flying up and old buildings are being torn down for million+ single families. There also are some areas on the south side such as Bronzeville, Mckinley Park, Bridgeport where this same thing is happening. If you want to hold for 30 years I would strongly suggest any of the gentrifying areas. Albany Park is my favorite right now, used to be working class and now lots of trendy millenial bars/restaurants opening and rents have gone up over 10% a year lately.

There also are areas you may want to avoid due to crime but they are far away from the good areas and almost like a differant city, I don't want to list them here as people can get offended but its pretty easy to stay out of those areas.

Scott Mac · Answer

Hi Tyler,

Your question might too big (geographically) to get any useful information.

It might be better to try to narrow down the area to specific neighborhoods.

Such as West Garfield Park or Forest Glen.

Good Luck!

Jason Albasha · Answer

I own investments in Chicago and they've performed well. The market is also hot for purchases as I've written more loans than I can count last year. Not only that, yet a lot of people are refinancing and staying in their homes. I like Chicago and the area in general as the ups and downs aren't as high and low as the coasts. Practically every other major city is on the coast and you can read about the real estate in places like California (in general), New York, Florida, Boston, etc. Chicago remains relatively somewhat stable and yet the demand remains.

When you hear about the "population exodus", just remember that more people does not mean more money coming and going. You can have a family of 7 leave, who live off a father's blue collar paycheck of $45k, only to be replaced by two single software engineers making $150k+ each. You'll read headlines that are written to get clicks and instill fear yet do not paint a full picture of the reality. This previous paragraph may sound grim yet it is what it is.

Brian Moore · Answer

@Tyler D. I commend you for taking the plunge into small multi family. I did the same thing 20 years ago and it was the smartest financial decision of my life.

In 2001 my wife and I bought a three flat in an up-and-coming neighborhood of Chicago known as Wicker Park. We were young and this was the neighborhood we liked to hang out in (bars, restaurants, etc.). Since that time, the value of the building has doubled (giving us a 4X on our equity investment). Plus, our annual cash flow is now 25% of our original investment. Chicago has a diverse economy with growth industries of tech, finance and logistics leading the way. Plus, Chicago has world-renowned universities and two national laboratories leading research in new industries such as blockchain, biotech and quantum computing.

Every year, 1,000’s of Midwest grads move to Chicago to take their first job. Many are starting at 6-figure salaries, and most are getting there in a few years at their job. These folks need apartments.

Find a building in a safe neighborhood, close to trendy restaurants and bars, near the L (or bus lines).

Growth areas that are still reasonably priced are: Logan Square (west Logan is more reasonable), West Town - west of Western (W. Ukrainian Village, W. Wicker Park, E. Humboldt Park) and the area south of the 606 trail, north of North Ave and west of Humboldt Ave.

Good luck!

Remington Lyman · Answer

I figured Chicago would be more expensive versus markets like Columbus, Ohio

How is Chicago doing?

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