What gets you excited about real estate investing in Chicago?

Question

Hello BP family!

I'm new to the Chicago market and recently acquired my first investment property here. So far I’ve heard a few of the horror stories, mostly related to landlord-tenant issues.
Are there some unique advantages for people looking to get in the REI game in Chicago? What keeps you guys and gals going? (feel free to add your favorite neighborhoods to invest in)

All the best!

Wonderful

Tom Shallcross · Answer

@Wonderful Togbey - Everyone talks about the the negative macroeconomic trends of the city and it is a legit concern.  However, you need to drill down into the neighborhoods and the actual data.  There are plenty of great neighborhoods that have a positive net migration and economic growth.  There are also many areas I wouldn't touch. You need to immerse yourself into the city, figure out your area block by block, and find an area that hits your goals.

It is no doubt tenant-friendly, account for that in your underwriting and screening.

You asked for some sample areas and there are plenty of obvious answers on the Northside.  I'm going to pick a Southside neighborhood because so many people just wrongly lump the 1M people on the Southside into one neighborhood:

I love Pullman (Not West Pullman), specifically South of 111th. Below are a sampling of articles on the positive economic growth and why I'm bullish:

The Chicago Neighborhood Initiative is heavily vested in the area and has attracted more than $350 Million in investments and created an additional 1,500 permanent jobs, leading to a job increase of 43% for the area (Pullman Revitalization).

That 43% increase does not even include the potential hundreds of jobs Amazon is said to be bringing to the area (Amazon Coming To Pullman).

Similar to the older properties in Hyde Park, Pullman provides an architectural landscape that provides desirable, historic inventory, all while easy Metra access to downtown.  Pullman is Chicago’s only designated National Park and the American Planning Association labeled Pullman as one of the Nation’s Top Ten Neighborhoods (History of Pullman Neighborhood).

In addition to the CNI efforts, there are many other developments happening in Pullman and the revitalization is not finalized. The below article and link to PDF outlines the “Positioning Pullman” effort:

$56 Million Pullman National Monument Overhaul Has ‘Turned The Lights Back On’ In Historic South Side Neighborhood

Positioning Pullman 2.0-opt.pdf

There are plenty of great neighborhoods like this. Establish your business goals, see if the neighborhood aligns with those goals, do your homework, understand what you are getting into and underwrite accordingly.  Plenty of people have gotten rich investing in Chicago, while plenty of others have had poor experiences.

Marlen Weber · Answer

I am not a Chicago real estate investor, but thought I would come on here and share my love for this city. I took a spontaneous trip to Chicago with my husband about 2 years ago and completely fell in love. The vibe, the buildings, the culture, EVERYTHING. The first thing we did when we came back home was look at real estate in the area. Best of luck REI in Chicago.

LaJoi Royston · Answer

@Tom Shallcross I grew up in Pullman. Happy to see it highlighted so positively. Unfortunately the south side Is lumped together as a “bad” area in the city.

Francis Rusnak · Answer

I looked in Lake County (IN) for a good bit, but I found their taxes surprisingly close to similarly priced houses in Chicago. And you can't get nearly as high of rents there.

Tony Bohr · Answer

@Paul Shannon I think there are a lot of things to like about Indiana.  There are some nice, very affordable Indiana towns within an hours drive of Chicago.  I know a lot of trades people that commute into the city from IN.

Crystal Smith · Answer

When first moving back to Chicago we explored Indiana all the way to Indianapolis. It was a gut call but we just didn't like the burbs on the Indiana side of the border (Hence why we also explored Indy) Our primary problem with the numbers at the time was there just wasn't enough sales activity for us to pull the trigger. We were only looking at Single Family flips, not holding. We never explored holding multi's or commercial there. Since we could never pull the trigger we haven't looked at that market in over 5 years.

With that said, I'm sure there are opportunities, we just haven't explored it.

Wonderful Togbey · Answer

@Henry Lazerow thanks for your testimony. I’m planning on getting in on the flipping action as well, and currently looking to network and find reliable contractors, realtors... Would love to talk more.

Wonderful Togbey · Answer

@Tom Shallcross thank you for those articles. I can see why you’re bullish on Pullman. I’ll have to look more closely at the area. You really can’t discount the diverse neighborhoods in and around the city of Chicago

Henry Lazerow · Answer

I like seeing the value add. My personal deal should appraise $100k+ after my rehab cost+purchase price. In the underwriting right now. Have had similar with lots of clients properties where the appraisal comes out +$100k +200k even after some rehab+appreciation. You can't do this type of stuff to scale in every state.

Many people mention tenant laws. I find this a non issues in the areas I focus (north side) as the tenants are great credit/income and its very rare to have an eviction I have personally never seen one and my brokerage manages/leases many units on the north side. It's a night and day difference the tenants in an area like Logan Square vs small town C class areas.

Allan C. · Answer

@Wonderful Togbey I’m motivated to invest in Chicago because it’s a great city with rich culture and historically diverse employment base.

However, there are many aspects of Chicago that make it one of the lease desirable markets that I invest in. Greatest con is the very pro-tenant regulations that translate to risk that do not justify the cap rates for my preference.

What gets you excited about real estate investing in Chicago?

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