Student housing / room rentals in Chicago?

Question

I'm thinking of buying a 4-5 BR property near Bridgeport or Evanston in the 300k range, and would consider other areas too if they're close to Universities. My plan is to turn the house into student housing and rent on a per-room basis. I would live in the property at first.

Does anyone have experience house hacking like this? I have run a house before as well as an apartment complex, so I'm aware of the overhead / maintenance stuff -- looking for more specific experience with students or with house hacking in Chicago.

ROI looks to be the highest with this setup, since rooms are renting from 300-600 each in these areas for students. As an investor of course I'm looking for my highest ROI, and i'm still early in my analysis.

Thanks in advance!

Jason Albasha · Answer

@Charlie Van Norman

I graduated from and lived by IIT. I did this yet lived in one of the bedrooms. I essentially "rent-hacked" my first place. It is doable, and you could potentially charge more than if you were to rent it as a whole unit, yet you have to consider the damage that could be done to the units.

In this scenario, none of the tenants are the "true owners" so let's say something happens, you're going to get a lot of finger pointing and no one is going to step up and take ownership.

Listen to podcast #220:

https://www.biggerpockets.com/blog/bp-podcast-220student-rentalsmultifamilysilent-cash-flow-killer-jesse-fragale/

Henry Lazerow · Answer

I know someone who did this and it ended up in disaster. The tenants were all college kids/young professionals and would just move out with no notice when there was conflicts between roommates. Stuff happens like one person wants to study the other is too loud, someone leaves kitchen dirty, etc.

Since it's just a room rental no one was willing to sue each other over such a small amount so landlord would just have to take a loss over and over again. I think airbnb is the only way to go when doing this.

Sarah Cobey · Answer

@Charlie Van Norman, funnily enough, after literally weeks away from this site and thoughts of investing, I was just looking at numbers for that property and coming back to the forum to inquire about people's experiences with CII, which holds the property.

I am a prof at U of C and know the area and the student population pretty well. I definitely would not rent it to undergrads, especially because a new dorm is going up nearby, and also because... undergrads. They move a lot, beat things up, and don't understand or do basic maintenance. I house hacked in Ann Arbor, and the property manager I hired when I moved was very strict about hiring to "responsible" (read: non-MBA and mostly non-MD) grad students. I think there are better tenant populations, especially for that site.

Charlie Van Norman · Answer

@Marco Morales Thanks, this seems like a more "mainstream / normal" option, and I believe it is a good one. I may pursue this when I have more capital to obtain / rehab a 4 - 10 unit property near a campus, like this one:

https://www.redfin.com/IL/Chicago/6101-S-Kenwood-Ave-60637/unit-1S/home/26781542

Charlie Van Norman · Answer

Update: I did an experiment by listing 3 Craigslist ads for my house (one in Evanston, Bridgeport, and Woodlawn):

https://post.craigslist.org/u/To_X34CL6RGtVIXhQdSI...

Based on only one response after 4 days for all 3 ads, I am not enthusiastic about the appeal of this type of house.

John Clark · Answer

I recommend renting only to graduate students (masters and doctorate, law school, etc) at first. Once you get some experience, expand into undergraduates.

Marco Morales · Answer

It works when it's close to a college campus and you have at least 4 units.  I know someone who does this in Hyde Park. He rehabbed each unit (3-4 bdrm ea) and added private bathrooms in each room. He gets more rent for the rooms with their own bathroom.  You also have to factor in the cost of furnishings for each apartment and other costs (electricity, wifi, cleaning, management, etc).  This can cashflow well, it just needs to be in the right location, and your accommodations need to be nice if you want to get higher rents.

Jason M McNamara · Answer

@Charlie Van Norman, great question!  I'm actually from Chicago and lived in Evanston.  We had a two-flat and rented the bottom unit for the college students.  It's a great way to house hack.  We had out place on South blvd, so even the south side of Evanston works really well.

It was our experience that most students know who they wanted to live with, so rent it as an apartment but screen each roommate.  We did not rent out by room.  Hope that helps!  Good luck!