MFR vs Condo for 1st time RE investor

[Matt Szablowski]

Hi, I'm a new Bigger Pockets member looking to buy my first real estate investment property around Chicago. I'm having a hard time deciding between two options of what would be a better investment strategy in a rocky Chicago market. Background information on me, I have about $40,000 saved up for my down payment, home repairs an all other expenses. I'm a travel nurse and will not be home most of the year so I would rely on a property manager or friends/family. 

Rogers park, Avondale, Irving Park, Jefferson Park and Humboldt Park are all neighborhoods the have been recommended to me so far. Would love to find a place in Lincoln Park, Wicker Park or Lakeview but most likely it'll be too expensive. 

Option 1: I would house hack and purchase a MFR (Duplex/Triplex) with a FHA owner occupied loan and 3.5% down payment.

I'm looking for

Location: B/C Class neighborhood 

Price: $400,000 < 

Appreciation in value 

Condition: Ready to rent or in need of renovations that cost <10k or less.

I would ideally target mid term tenant/Airbnb but more realistically long term tenants. I would not expect any passive income and would just buy and hold till next year. 

Option 2: Buy a condo with owner occupied Conventional loan and 5% down payment.

I'm looking for A/B neighborhood

Price: $300,000<

Appreciation in value 

Condition: Ready to rent or in need of renovations that cost <10k or less. 

Tenants: target primary mid term tenants and Airbnb.

I'm new to this so I'm open to any advice/criticism. Also would love to hear recomendations for best neighborhoods to look at, thank you!!

[Tom Casey]

Hey Matt!

I live and specialize in downtown Chicago and surrounding areas, including some neighborhoods that you mentioned like Lincoln Park, Wicker Park, and Lakeview. Happy to hear that you're looking to buy here! Chicago is one of the most overlooked markets in the country. Our A-class neighborhoods have renter demand that is off the charts and so much room for appreciation it's nuts! If you're breaking even after all expenses in a Chicago A-class neighborhood, that is a homerun deal. Your property will appreciate, you will have close to 0% vacancy, and rents will almost surely continue to rise YoY.

Option 1: Multi-families below $400K are few and far between in Chicago's B/C-class, especially if you're looking for something mostly move-in ready/turn-key. Would you consider going up to around $650K if the numbers penciled out? The money you have saved would cover down payment and closing costs up to that amount (on a 3.5% down FHA) and I think you could definitely find something good if you expanded your budget! Operating STR and MTR would be a bit easier owning your own building because it would be less likely to get "caught".

Option 2: I may be biased because I'm downtown, but I absolutely love the A-class Chicago neighborhood condo market. You can find a very nice one-bed for under $300K (might sound like a lot but it's not compared to other big cities). As I mentioned above, appreciation, close-to-zero vacancy, and strong rent growth will be your best friends here. The STR market here is a bit complicated due to HOA regulations that almost never allow them, so I always recommend to make sure that the unit pencils out to at least break even as a standard rental in case the HOA makes a fuss.

I would love to talk more with you about all the considerations and neighborhood dynamics that make Chicago the complex and beautiful real estate market that it is. Feel free to reach out any time to discuss more!