Why does Chicago have so many vacant homes?

Question

Hi everyone,

I want to start a discussion on why Chicago is littered with zombie homes and how some blocks are  condemned with zero investor interest. I've always accepted the fact that Chicago's neighborhoods can go from good to bad at the flip of a hat, but I've never really questioned why until now.

So, to back up, I took a drive through South Shore last week to follow up on some potential leads.  I saw houses in great shape, with nice lawns, without litter; brick and mortar homes. These were nice and well kept. But driving down to the next block, I saw blighted homes in rows, abandoned lots with weeds and tall grass, and I got a very depressing feeling from the area. And again - this is the difference of a single city block.

I'm guessing that there are some areas that are just so far gone, and with properties that are beyond repairable, which creates a domino effect for the block, and later, the community itself.

But as an investor, is there any way to salvage this situation?  Or are the numbers simply not there?

Mark Ainley · Answer

@Elbert Dockery@Ken Yu

I agree with Elbert that the north side is pretty far along in this current real estate cycle.  Investors and their funds have already been flowing into areas like Bronzeville & Woodlawn the last couple of years and that development trickles south.  What we just said about the northside cycle is similar to say about the east and west coast real estate cycle.  Far more money will come into these areas from out of state investors as it has been for recent years then the north side.

Our company has taken entire blocks and turned them around but sometimes the reward isn't worth the risk unless you have the city and community leaders behind you and alot of people don't have those resources.

Ongoing property management is the toughest part about turning around a block....think about what type of tenant a bad block attracts....as a landlord/PM you can control only everything within your property lines and not items exterior to that.

Account Closed What keeps these properties attractive is the shiny returns on paper they can boast.  I say on paper because there is a reality to that and unless you have experienced management those tenants and blocks will eat you alive.

Jeff Burdick · Answer

IMO...Pilsen, Bridgeport, Edgewater, Uptown, Logan Square, Avondale, Irving Park, Albany Park, Lincoln Square.

Bob Crane · Answer

McDonalds and Caterpillar are joining the ranks of other businesses moving back into Chicago from the burbs and various parts of Illinois.  The common reason given is that millennial's prefer to live in a city and these companies prefer top young talent.

It's driving me crazy as I try to read the tea leaves on which neighborhood is emerging.  Would love to hear opinions on various areas or key indicators.

I watched this happen in the nineties leading up to dot com.  Back then it was a good El Stop with solid neighborhood bars.  Going forward it'll probably be the El stop with coffee shops and hipster microbrews.

John Casmon · Answer

Follow the population and employment trends in the area and the answer is clear. As an investor, you would want to see a committed investment from major institutions and the government to turn around those trends to be comfortable with the opportunity.

Mark Killion · Answer

Which part of South Shore were you driving in?

South Shore is a huge neighborhood.

Sure, some parts may be more attractive than others.

But that neighorhood is hot overall.

I showed a 3 unit apartment building listed at $290K a couple weeks ago.

It was on 71st and Luella.

It went under contract in like 10 days.

The inventory for apartment buildings is tight and demand is high.

When something good hits the market, it sells pretty fast.

Millions of dollars of real estate was sold in South Shore last year.

The media paints a bleak picture, but If it was really that bad,

would there be that much sales activity?

I think it all comes down to your budget, desired returns, and your appetite for risk.

Higher returns come with higher risks.

If you want lower risk, then you will have to settle for lower returns.

Just my two cents.

Matt David · Answer

I do primarily divorce work in Cook, Chancery work in some of the collars.  Because of ever escalating property tax increases (And generous appraisals, generous for the city of course), the liquidation value of the marital residences we're dividing is collapsing. Perhaps if the city/county can get their checkbook balanced there wouldn't be so much uncertainty.

Crystal Smith · Answer

If you're a small investor you cannot salvage the situation.  The type of investment needed & the timeline for a return on investment are beyond most small investors.  With that said, investing on the fringe of such locations is a good strategic move.  Change creeps in & before you know it 20 years go by and you won't recognize the neighborhood next door.   It's called a cycle.

Why does Chicago have so many vacant homes?

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