Differences in SFH Market from Chicago to Dallas for graduating college student?

Question

Hi BP community,

I'm a junior studying engineering and I'm starting to strategize for my first house-hack, and I hope to pull the trigger in about 12-18 months. I'm hoping to start my career in either metro Dallas-Fort Worth or Chicagoland, and my main priority to is to minimize my housing expense with roommates while building equity and learning how to be a competent landlord.

My questions span broad areas and as I continue to do my own research, I'd really appreciate any experienced investors and residents who can chime in:

1) For those who have invested in Chicago and DFW, or moved from one to the other, are there any qualitative differences in the way homeowners approach rehabs, structural issues, expenses requiring insurance claims, or any other major overhauls that a newbie must account and budget for?

2) While I live in Chicago and have a good grasp of the abundance of the duplex and triplex investing opportunities, I've heard that Dallas and Texas at large is known for its proportion of SFHs. If this is not the case, would you still recommend (as I suggested above) I start out in SFHs by renting out individual rooms on a 6-12 month long term basis?

3) Any other differences in property taxes, tenant laws (I will be doing my due diligence here thoroughly as well), and investment sentiment between the two regions?

Thanks so much for any responses in advance!

Bruce Lynn · Answer

Not sure about rehab differences.  Probably a rare person that can answer that or maybe even any of the real differences.  I don't think it is common people invest in both places.

My thought is that your most profitable house hack will be a single family with 4-5 bedrooms.  Live in one and rent the others.  Depending on your time you can either rent daily, weekly, monthly, or 6-12 months.  We don't have a lot of 2-3-4plex and normally they don't really make great house hacks. Likely due to price vs rent you will pay full rent on your unit and may even subsidize your tenant.  With 4-5 bedroom house, some chance you can live for free or at minimal expense.  If you are even willing to be bold in the right area, you might also be able to rent your room and live in the laundry, or an office, or the garage, or a trailer in the drive, something like that.

As far as structural issues we do have foundation issues in many parts of the city.  Everyone has a different opinion, but I would say avoid them if you can.  Should be plenty of homes to choose from.  Taxes here are 2-3% of the value normally, but can be higher/lower depending on the area.  We have lots of HOAs so that might be something to avoid if you want to rent 4-5 bedrooms.   Typically we are known to be landlord friendly, but things can be a bit trickier on renting bedrooms vs individual units.  I would guess there is more risk renting bedrooms and having people interactions.

DFW is #1 in growth in USA, so should be plenty of opportunity here.

One thing I'm thinking is when you get here do it yourself.  Spend a month at six different houses over your first six months.  Get a feel for traffic and areas before you buy.  See what works and what doesn't.  Talk to the owners and the roommates.

Jonathan Klemm · Answer

Hey there @Steve Onay - My first thought is that you are asking a pretty general question about two huge cities in Chicago and Dallas...

I think its easier to get started close to home but easier to scale if you are investing out state...what do I mean by that?

When you are investing out of state it REQUIRES (because you can't just go see the property or people involved) systems and proccess which allow you to scale, but if you are investing close to home you can get started easier but it doesn't require you to put the same systems in place from the get go.

John Warren · Answer

@Steve Onay Texas will likely be a bit more landlord friendly than Chicago, but as you referenced, the building stock in Chicago is just ideal for house hacking. Either city will likely allow for great success as they are both strong, primary markets. I have always focused on the Chicago area since that is where I am from. I would think through where you ultimately want to land for personal and family reasons and allow that to inform the choice as well.

The taxes will be higher in Texas on property than you realize, and obviously, they are high here in Chicago as well. Depending on which market you choose, this will be an area you will want to focus and understand deeply.

Ali Radoncic · Answer

Live in the laundry? That's aggressive hahaha