Chicago Cap Rates and Questions from an OOS Investor

[Alexander Szikla]

Hi, I am an NYC/NJ based investor looking out of state for opportunities. Chicago has caught my eye due to all the development that is happening (i.e. Obama library, casino, etc.) in conjunction with affordable prices and no rent control regulations. 

Cap rates seems quite high; surprisingly so, in many low crime suburbs. 

What am I missing? Is +8% cap rates for 6-12 unit buildings normal? 

[John Warren]

@Alexander Szikla welcome to the Windy City! Chicago is definitely a solid place to invest, but I doubt you will find a true stabilized 8 cap in a safe suburban area. I typically see advertised 5 and 6 caps with actuals probably not matching that rosy pro forma. You can find some better deals if you sift through things though. 

A lot of out of state investors get sucked into the south side, but be careful as you really need good boots on the ground if you are going into rougher areas.