Rent or Invest in Lakeview / Lincoln Park Chicago

[Ryan O.]

Hello BP,

I am about to graduate from school this upcoming May and am going to be moving to Chicago for my first ever full-time job. 

While I have rented for the past 3 years in college (been paying on average $600 / mth) I am not looking forward to renting for another couple years especially in Chicago where its almost guaranteed to be at least $1000 / mth. Thus, I was wondering if anyone on here has an opinion on whether it would be wise to look into investing in a house, duplex, triplex, etc. in the Chicago area or renting. I have not done much research as of yet, just looking to get the feelers out there and see what some other investors have to say on the subject. Also, this doesn't necessarily be a home run house. I really would be happy getting enough money to cover the mortgage, so if this is possible that would be great.

As for costs, I will let you guys help me with this a bit as I am sure some of you are very familiar with the average cost of the houses, duplexs, triplexs, etc. in the area. I will say that the salary offer was 75k with 7k signing bonus so that's about all the money I will have. As of now, I have very little money to put down too, but given its a good investment I think I'm confident I could get the money. 

[Perry Farella]

To Add a bit of info here,

I would suggest an fha 203k rehab loan in a 2 to 4 unit property that is either an estate sale, rundown, damaged or a foreclosure in an affordable Chicago neighborhood outside of Lakeview or Lincoln Park. I have much experience in this area and many successful client stories. The way to finance closing costs is offer aggressively and with FHA you can ask the Seller to pay up to 6% of the sale price for your closing costs & prepaid items like an entire first years worth of home insurance, attorney fee etc. IE if a property is selling at 100,000 you offer 105,000 with 5000 coming back from the Seller to pay your closing costs and Seller is happy to get the 100,000 and you get 5000 for costs. You have effectively financed your closing costs. Still need your 3.50% down payment which can all be a gift from family or your money. The 203k allows you to add in the dollars needed to repair/restore the property to the same 30 year term loan. These days it costs about $5 in monthly payment to borrow each thousand dollars on a 203k. You can use the expected future value of the property based on the work to be done to get the loan approved rather than the current rundown value you pay for it. Appraiser will also project expected future rents of the rehabbed apartments even though they may be vacant now. Then 75% of the future rents is credited to you to help qualify for the loan you need in addition to your job salary. IE if rent is 1000 a month you get 750 as extra income to qualify. FHA only requires you live in the property yourself for 12 months before leasing all apartments to tenants. So 203k is a great way to buy a property at a discount, get funds to repair it, all with only 3.50% down and have Seller pay all closing costs. FHA will require you have up to 6 months of reserves ( house payment money) left over after closing however. This is a great way to get started as areal estate investor.