4 unit properties are the best target right now!

[Henry Lazerow]

Thought this would be helpful for any investors having a tough time finding their next deal. Focus on 4 units! Over the last year I have seen absurd appreciation in 2 unit and 3 unit buildings. Many 2 units which were selling for $330k for example Irving Park/Albany Park are now selling $430k 1-2 years later. What we have noticed though is that 4 unit properties have not seen these price increases. 4 units which used to sell $550k to low 600s are now selling 580k+ which still work great for cashflow. I just got a 4 unit in Irving Park under contract for a Bigger Pockets member and have an offer pending on a 4 unit for myself right now too. 

The 4 units tend to be easiest to manage also vs having multiple buildings. I house hack a 4 unit on the north side.

[Jonathan Styer]

I think this is market specific, not seeing this in my market but glad to see you're having success there!

[Donnie N.]

@Henry Lazerow, that's a good point. Any recommendation on where to look and where to source the best deals? I've been looking at 2-3 units but have noticed the same as they are a bit high. 

[Henry Lazerow]

Irving Park and Albany Park are gentrifying fast and still cheap for 4 units. West Logan Square, west avondale all good neighborhoods for high credit class A/B+ tenants. More working class but still good tenants with strong demand Brighton Park, Archer Heights and Hermosa 

[Donnie N.]

Thanks. Looks like we're all looking in the same area. Hermosa is very attractive. 

[Jake Fugman]

Great insight @Henry Lazerow. Definitely easier to pass the FHA "self sufficiency test" when looking at 4 units. Any 3 units over $475,000 are VERY challenging these days if you are only putting 3.5-5% down. Typically we have the most success with legal 2 units (often with non-conforming basements or attics) under $500k that dont have to pass the SST. OR jump up to legal 4 units.

The SW side is becoming a solid alternative to those that dont demand to be on the NW side. Im a fan of areas west of Pilsen like Heart of Chicago and portions of Marshall Square to find 2-4 units that can still allow house hackers to put under 10% down. 

[John Warren]

@Henry Lazerow this is true in the southwest suburbs as well. I do tons of business in Berwyn and a lot of 2 units are selling for more than 3 units even. I think a lot of us investors forget that regular home buyers purchase duplexes all the time and they are not thinking in terms of ROI. They are thinking about where to put their couch!

This is related to why FHA doesn't require self sufficiency on the two units. Otherwise, all of the two units would instantly be worth 20-25% less.

[Tom Shallcross]

@Henry Lazerow, I also like that the Chicago 4 units on corner lots create an opportunity to duplex down both first floor units. This rehab cost vs the increased rent usually works in your favor and since appraisers will use both comps and GRM on 2-4 units, the appraised value increases strongly on the GRM calculation with the higher rents. Thus pulling out the original investment becomes much more plausible.

[Daniel Smyth]

@Henry Lazerow

I agree!

With 4 units, it's also easier to renovate one at a time to add value and increase rents because of the added value!

Kind of hard with a sfh or Duplex. I am currently scouting 4-family properties for this reason!

[Frank McGovern]

I've been on the same idea keeping it to 3/4-flat with a preference towards 4. I've been monitoring the already mentioned areas for several months. I've been very interested in Canaryville, McKinley Park, Brighton Park, and honestly a bit into Douglas Park and Marshall Square too.

My key is being .5 miles or less to a CTA station. I believe that is key to almost always becoming a valuable property. As more and more areas gentrify, the properties easily walkable to a CTA station will always go first.

[Andrew Holmes]

@Henry Lazerow @Jake Fugman @Tom Shallcross  All have made great point. The 2 unit seem to selling for astronomical prices. Yet for some smart investors some of the bigger buildings have been providing much better deals. I am not talking about 10 + Units but the 4-8 unit. They may be a bit out of the range of most house hackers but for investors with some cash or private money for the downpayment side with a commercial loans there are opportunities. Just looked at the numbers for 2 people on 4 flats for house hack they work with a good bit of cash flow and huge upside with very little rehab even a A market like Oak Park. Typically taxes makes some these deals not so juicy but there are things that keep popping up. Another 8 unit and 6 unit same deal. A lot of investors shy away because sometime they thing it's too big but there are some great opportunities to buy and refi out with 25% equity and great cash flow's.