Is the Chicago Flipping Market Done?

[Demetrius Davis]

I've flipped two properties this year, with the most recent one sold in mid-September.  I was excited to line up my next deal, but after speaking to my agent I learned that the market has hit a strange slowdown throughout Chicago.  Suddenly, nearly no one is showing up for open houses, and many agents are reporting that they're getting few if any calls on their listings.  Also, prices for distressed properties have increased significantly, as banks are trying to get top dollar for their foreclosures.  Labor costs have increased significantly too.  So now we have higher investment costs and the potential for slow resale or depressed resale prices.  I've begun digging into research and am seriously considering shifting my strategy back to buy and hold, as I fear the window for flipping may be over.

I'm interested in knowing how other investors are thinking about approaching the Chicago market as we end 2017 and prepare for 2018.  Is the flipping market in Chicago done?  Is this the end of the cycle?

[Lumi Ispas]

@Demetrius Davis , I can see why you are concerned about taxes and people leaving town. What you have to be aware of is the business coming to Chicago. Google opened up their 2nd largest Headquarter in the city of Chicago. McDonald's is moving next year to their Worldwide Headquarters in the City. Pepsi, Boeing, United,  Walgreens, Statefarm, Kraft Foods, Budweiser, Glassdoor, Uber, Groupon, Abbott Laboratories, Motorola, Etc are located here.

Chicago is the top 6th most powerful city in the world because of all the companies that call the city home. Who you are seeing living is the low and middle-income citizen. 

Who is coming is the city is the high earners, which will switch things around in time. Chicago is the number one Tech destination in the nation today, not San Francisco! We have the infrastructure, and one of the best city transportation in the country today. All this attracts the millennials who are the most educated & powerful group at this moment. 

Taxes are part of the rent to live here, a city that offers a lot of jobs and might as well call them well-paying jobs.

I sell houses every day, and due to universities and hospitals in Downtown alongside all these above-mentioned companies, I see a huge stream of incoming people, and all making a lot of money.

When I buy houses, my focus is on the cash flow. If after tenants paying all expenses (including property tax) the cash flow is high - then that's a property for me. Regarding income tax, my depreciation offsets that, so there is nothing to worry. 

Plus, I better have lots of income to be taxed than low income and low tax!

Demetrius, City of Chicago's properties went up in value at least 7.9% depending on where you were buying and by at least the same the previous year. We are behind the growth rate in the other big cities: NY, LA, Miami, therefore, we can gain in catching up on value by owning properties.

And lastly, every time the property tax increase, most landlords pass the buck on the tenants, so the rents increase and the landlords make even more money! 

If I can give you one advice: when following the market trends and look at all the data and different statistics, as only one or two articles could be misleading. 

Good luck to you and hopefully you'll keep investing here at home, where a lot of out of town and out of country investors come to invest!