Househacking in Chicago

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Househacking in Chicago

Allen Bosbyshell
Investor · Member since 2020 · 16 posts · 5 votes

Housinghacking in Chicago with an FHA loan for $250K... Is it possible? Yes, it's possible! But how?? I am looking to buy my first property as a two or three flat in Chicago, IL. I am using an FHA loan and with a max purchase price of $250K. What areas should I look at? Where can I find these deals?

So far I am approved with multiple lenders. I have an agent, though he is not he best match for an investor. I have toured multiple properties on the South and West sides that are FHA passable. Nothing that I can imagine great tenants would want to move into.

Chase bank has a program that offers $10K DPA for the 10 neighborhoods in the City's "InvestSouthWest" initiative. The City also has a $15K incentive areas in certain blocks in certain neighborhoods. (The neighborhood that has really caught my eye so far is New City "Back of the Yards"). I will also be using IDHA's fogivable $6K loan.

My question is really, where should I look? How should I conduct my search? What are the potential trade offs between more bedrooms versus nicer area, etc. I would love to set up a phone conversation if possible.

Thank you.

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Zack KarpPro Member
Lender · Schaumburg, IL · Member since 2015 · 834 posts · 774 votes
6y

@Allen Bosbyshell if you make less than $71,280/yr, and you actually have a 5% down payment you can put down, you might want to rethink your strategy.  You may have been preapproved by a few lenders, but if none of them are trying to get you to use Home Possible on your first property, then you are talking to the wrong LO's.

Regarding the IHDA down payment assistance, did any of them explain to you that if you refinance your property in the first 10 years, you have to pay a prorated amount of that back? And if you are planning to house hack, in order to refinance a FHA loan into a Conventional loan, the max LTV is 75%. Which means if you put 3.5% down, you have to create 21.5% more equity before you can move on to property #2. Why? Because you can only have 1 FHA loan at a time (unless you relocate 100 miles away). So in order to buy another property with FHA, you have to refinance out of FHA on the first one.

If your LO's are not walking through all of your options and strategies with the lens of a real estate investor, explaining the pros and cons, and looking 2,3,4 moves ahead with you, again you are talking to the wrong people.  Sadly, most LO's and especially bank LO's are just glorified order takers just looking for a commission.  You might be setting yourself up to get stuck.

For all I know, you have already explored all of this, and this is your only option.  Just beware that the exit strategy is more important than the entrance.  Always.

And if you need a rockstar realtor that specializes with investors in Chicago, hit me up on DM and I can connect you.

Best of luck!

847-387-5513
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  • Andy Nathan
    Rental Property Investor · Chicago, IL · Member since 2019 · 203 posts · 119 votes
    6y

    Allen,

    it is not 100% possible to tell you where to live. That is based on your own specific requirements. If you want to talk, feel free to hit me up today. I can discuss possible opportunities. 

    Andy

    1Reply
  • Henry Lazerow
    Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
    6y

    Mckinley Park and Brighton Park would be my first picks. Both areas are appreciating like crazy and still have some properties in the $250k range that cashflow and can pass FHA inspections more so Brighton Park.

    Awesome work researching and finding the grant/programs that can help out!

    3Reply
  • Mia G.
    Property Manager · Aurora, IL · Member since 2018 · 45 posts · 34 votes
    6y

    @Allen Bosbyshell Are you set on staying within the city of Chicago? If not, moving into the suburbs could give you a lot more options within that price range. For example, I used an FHA loan for a 3 unit in Aurora, IL over the summer. The purchase price was $230k.

    2Reply
  • Zack KarpPro Member
    Lender · Schaumburg, IL · Member since 2015 · 834 posts · 774 votes
    6y

    @Allen Bosbyshell if you make less than $71,280/yr, and you actually have a 5% down payment you can put down, you might want to rethink your strategy.  You may have been preapproved by a few lenders, but if none of them are trying to get you to use Home Possible on your first property, then you are talking to the wrong LO's.

    Regarding the IHDA down payment assistance, did any of them explain to you that if you refinance your property in the first 10 years, you have to pay a prorated amount of that back? And if you are planning to house hack, in order to refinance a FHA loan into a Conventional loan, the max LTV is 75%. Which means if you put 3.5% down, you have to create 21.5% more equity before you can move on to property #2. Why? Because you can only have 1 FHA loan at a time (unless you relocate 100 miles away). So in order to buy another property with FHA, you have to refinance out of FHA on the first one.

    If your LO's are not walking through all of your options and strategies with the lens of a real estate investor, explaining the pros and cons, and looking 2,3,4 moves ahead with you, again you are talking to the wrong people.  Sadly, most LO's and especially bank LO's are just glorified order takers just looking for a commission.  You might be setting yourself up to get stuck.

    For all I know, you have already explored all of this, and this is your only option.  Just beware that the exit strategy is more important than the entrance.  Always.

    And if you need a rockstar realtor that specializes with investors in Chicago, hit me up on DM and I can connect you.

    Best of luck!

    847-387-5513
    7Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 3k+ posts · 1k+ votes
    6y
    Originally posted by @Allen Bosbyshell:

    Housinghacking in Chicago with an FHA loan for $250K... Is it possible? Yes, it's possible! But how?? I am looking to buy my first property as a two or three flat in Chicago, IL. I am using an FHA loan and with a max purchase price of $250K. What areas should I look at? Where can I find these deals?

    So far I am approved with multiple lenders. I have an agent, though he is not he best match for an investor. I have toured multiple properties on the South and West sides that are FHA passable. Nothing that I can imagine great tenants would want to move into.

    Chase bank has a program that offers $10K DPA for the 10 neighborhoods in the City's "InvestSouthWest" initiative. The City also has a $15K incentive areas in certain blocks in certain neighborhoods. (The neighborhood that has really caught my eye so far is New City "Back of the Yards"). I will also be using IDHA's fogivable $6K loan.

    My question is really, where should I look? How should I conduct my search? What are the potential trade offs between more bedrooms versus nicer area, etc. I would love to set up a phone conversation if possible.

    Thank you.

    312-681-7487
    0Reply
  • John Warren
    Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
    6y

    @Allen Bosbyshell you are on the right track as far as areas. There are not too many places where you can still find a good deal in the 250k range, but it can be done if you are patient. I am focusing a lot of attention these days on Little Village as the numbers are still making sense there. You might also check out neighborhoods like Hermosa, Portage Park or Belmont Craigin. 

    0Reply
  • Jonathan KlemmBusiness Member
    Moderator
    Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes
    6y

    @Allen Bosbyshell - Sounds like you need to connect with one of the rockstar agents above like @Henry Lazerow, @John Warren, or @Mia G.  If your agent is not a savvy investor themselves it's hard for them to help you to the extent you need.  

    Not their fault, but if you already don't feel like you have the right connection, you should find someone else for sure.

    [email protected]
    Quality Builders4.970 Reviews
    WebsiteView Page
    0Reply
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