Multifamily Investment in Chicago Pros and Cons

[Pranshu Adavadkar]

Hi, I was accidental investor of a townhouse in Chicago north suburb for 7-8 years and finally sold it last year with no loss. Fortunately didn't have any bad experience. Now, I am looking to be a deliberate investor. Looking for something which is already remodeled or need minor cosmetic repairs (not looking for extensive work).

Multifamily houses with 2-3 units make sense to me compared to SFH. Based on some basic research, for 250k SFH the rent is around $1400-$2000. But for $400k multifamily with 3 units in Pilsen or Lawndale or east Garfield or surrounding areas may get more than $4000 rent. Of course, it all depends on individual property, location and many other things, but does it make sense? If I were to pursue multifamily, what are the things I should be aware of while investing in multifamily properties in Chicago.

1. Is it better to have current tenants or no? 2. Any areas preferred and any areas to be careful about? 3. Any hidden costs or legal things to be aware of? 4. any good neighborhoods in north or northwest Chicagoland? 5. Any quick and dirty techniques during preliminary screening?

Any thoughts or suggestions are appreciated. 

TIA

Prad

[Jake Fugman]

1. Is it better to have current tenants or no?  -  FOR FIRST TIME INVESTORS I RECOMMEND TARGETING PROPERTIES THAT HAVE AT LEAST PARTIAL OCCUPANCY SO YOU HAVE PROOF OF CONCEPT FOR RENTAL AMOUNTS.  100% VACANT PROPERTIES ALSO RUN THE HIGHER RISK OF THEFT/VANDALISM. 

2. Any areas preferred and any areas to be careful about?  - THIS DEPENDS ON YOUR THRESHOLD FOR RISK/REWARD

3. Any hidden costs or legal things to be aware of?  -  TYPICALLY THE LARGEST COST THAT INVESTORS FORGET TO UNDERWITE IS LEASING EXPENSE. IF YOU USE AN AGENT OR PROPERTY MANAGER THEY WILL CHARGE YOU 1 MONTHS RENT.  ASSUME UNITS WILL TURN EVERY 18 MONTHS ON AVERAGE. 

4. any good neighborhoods in north or northwest Chicagoland? - THERE ARE A LOT OF GREAT AREAS ON THE NORTH AND NW SIDE THAT CAN STILL OFFER GREAT UPSIDE BUT ARE ALSO STILL "AFFORDABLE"

5. Any quick and dirty techniques during preliminary screening?  - FOR A VERY HIGH LEVEL TAX CHECK I TELL PEOPLE THAT IF THE CURRENT TAXES ARE <1% OF ESTIMATED PURCHASE PRICE THEY WILL LIKELY GO UP.