All Forum Posts by: Christopher S.

Hi Jennie,

The reason that the lots are near her house is that this is one of the requirements to qualify for the legacy programs. In brief, the concept was to make lots that are City-owned available via a quit claim deed to residents or community groups within the specific neighborhood on the same block in order to stabilize communities through local investment.

https://www.chicago.gov/city/en/depts/dcd/supp_info/large-lo...

There were a few other historic land sale programs in addition to large lots. The City spent the past few years consolidating the programs into a single program under the ChiBlockBuilder program. The program now offers selections of properties through an application process that is offered in windows of time.

The map of City-owned lots is here. If you are interested in knowing more I would reach out to the department directly and someone can give you additional information. You can also identify a city-owned lot through this map and work to incorporate it into a real estate deal with the traditional grant programs serving as a portion of the funding.

@Jennie Berger, glad you found it helpful. I want to go through each program in more detail eventually. If you had one that you thought you could use for your project, happy to start with that explainer.

The City of Chicago has recently streamlined its financial incentive programs for economic development within city limits. Historically, navigating the funding landscape was complex with differing program specific funding conditions and amounts, favoring only the most skilled large developers. However, the new Community Development Grant (CDG) program simplifies access to critical funds, offering three distinct grant categories:

1. -Small Grants (up to $250,000)
2. -Medium Grants ($300,001 to $5 million)
3. -Large Grants (over $5 million)

These grants can support a wide range of projects, including office, retail, cultural, industrial, and mixed-use developments of more than 10+ housing units with ground-floor retail. Grant funding can be up to 50% of total project costs of the proposed Development, depending on the need for assistance to create a viable development and adequate eligible project costs. (If your project is primarily housing or incorporates housing specific funding sources, you will need to apply through the Department of Housing rather than through this program.)

The funding sources that a project can receive include the Chicago Recovery Plan (CRP), Housing and Economic Development Bond (HED), Neighborhood Opportunity Fund (NOF), and Tax Increment Financing (TIF) which have all been combined into a single, streamlined grant program with unified rules and regulations. The Department of Planning and Development has created a handy program manual to assist developers who wish to apply for these funds.

Application Deadlines are updated on a rolling semi-annual process for each program, with the current upcoming deadlines as of this post shown below:

Small Deadline: 11:59 a.m. Friday, Nov. 8, 2024

Medium Deadline: 11:59 p.m. Friday, Feb. 14, 2025

Large Deadline: 11:59 p.m. Friday, Feb. 14, 2025

Caveats/Considerations before applying:

Time involved: These projects have long lead times between review, approval, and reimbursement. If your project has a tight deadline and is otherwise viable, this is likely not the program for that specific project to take advantage of.

Level of Review: Projects are required to submit a substantial amount of project specific information as part of both the application review, approval/legislative process and contract reimbursement process. Applicants should review the program manual for a detailed list of what the Department will expect in order to finance your project. (Note: These are non-negotiable requirements that must be provided)

MBE/WBE/Prevailing Wage: All projects that seek City assistance are required to have a certain percentage of Total Project Costs (TPC) that are being performed by certified Minority Business Enterprises (MBE) 26% and Women Business Enterprises (WBE) 6%, as well as have labor costs that pay prevailing wage as defined by the State of Illinois. (Note: These are non-negotiable requirements)

Other Incentive Programs

Small Business Improvement Fund: Best thought of as a storefront/small business rehabilitation program, this small grant program ($150,000 for commercial properties and $250,000 for industrial properties) is targeted for smaller renovation projects and can cover anywhere from 30-90% of the cost of remodeling a storefront facade, roof replacement, major systems replacements (HVAC, plumbing, electrical, etc.) or an individual interior space build-out within a larger building to get it tenant ready. These grants are a subset of the City's TIF program and applications are accepted for projects within specific TIF districts on a rolling basis.

Cook County Property Tax Incentives: Cook County has a tax incentive program that allows projects to receive a special property classification for a 12 year period that lowers annual property taxes by as much as 50% through the term of the incentive program. This incentive program is reviewed separately from the above grant programs and requires City support to be eligible for the Property class change.

The variety of economic development grants/programs and the process streamlining that has taken place to date in Chicago is meant to encourage access for smaller and newer developers and encourage the types of "missing middle" developments that have historically been to small or the process to burdensome to move forward. 

Matt,

If you are looking at historically built properties such as your classic bungalows, 2-flat and 3-flats in Chicago, many of those properties were built well before the modern zoning code was established. As such existing properties are often grandfathered in with their existing footprint, even if current zoning would require a smaller one due to lot size.

In RS-3 with single family, many of the original bungalows will have a larger lot footprint, but are allowed to be "hat-topped" in a rehab which can grant substantial new space since you are not changing to lot footprint and are largely grandfathered in. If you follow the Planning department's guidelines you should be ok.

Here's a great reference from the Chicago Bungalow Association https://www.chicagobungalow.org/addition-a

https://www.chicagobungalow.org/design-guidelines

Good luck with your project.

Chris

It's a combination of all those features. South Loop saw a lot of growth with new towers and substantial residential developed over the last decade which has increased local supply. Reassessments for commercial and residential properties increased substantially in the downtown over the last couple years with the new assessor.

Long term the demand in that area should rebound nicely, especially should the 78 really get off the ground, as well as the redevelopment of Michael Reese. It's proximity to downtown and the Lake make it more affordable than a comparable distance property in River North or Streeterville.

Also with many Chicago condo buildings outright ban AirBnB and even in some cases capping total allowed rentals in the buildings which has limited the investor potential of units so just be aware of what the rules are in any of the condos you are looking at.

HOAs in a number of the condo buildings are very high due to substantial deferred maintenance on many of the older towers where facades or major systems need replacement and HOA reserves were never increased to account for those eventual needs. If you want to see truly stunning, look at the old buildings along the lakefront in Hyde Park. This one comes with a lovely $2,500 HOA https://www.zillow.com/homedetails/1755-E-55th-St-APT-601-Ch...

Quote from @John Warren:

@Matt Smith the reality is that Chicago is full of "non-conforming" units. You wouldn't know if it is truly illegal or not without asking the city, which you would not do obviously. These units are perfect for owner occupants, and they are perfect for related living as you have described. If they are nice enough for AirBnB, then you are probably ok there as well since the stays will be short. 

This is a question that has come up a million times and will continue coming up forever in Chicago unless eventually things change one way or another. I personally would avoid over investing in this unit. I would keep the work very cosmetic, and I would enjoy the additional space and/or revenue from the unit without considering digging up, etc. 

 Hi Matt,

Good luck on your remodel project, I'm going to second John on this one and recommend less is better in this situation.

There is a big distinction on the variety of restrictions you need to be aware of with ADUs in Chicago specifically. Here's the City link for you to reference. https://www.chicago.gov/city/en/depts/doh/provdrs/homeowners...

1) ADU regulations specifically exclude Short-Term Rentals so don't do it if the intention is to short-term rental.
2) The ceiling height oh 6'10" is almost guaranteed to trigger digging a basement if you want to formalize as an ADU unit, especially if that height is further reduced by pipes or HVAC.
3)Ingress/egress is an issue for renting, as is that any bedroom also will need two (ie operable window/doorway). Make sure you have that
addressed just from a liability standpoint.
4) You could also look into a mid-term rental option with traveling nurses if you think the unit is truly rentable.
5) AirBnB restrictions have gotten much stricter as well in general in Chicago, so make sure you are on the right side of those if you put your unit up since you are required to register with the City.

I think having the space available as furnished space for family is a huge bonus and might just recommend not trying to overdo it if you don't need to.

Good luck,
Chris

Gabriel,

Logan Square is great and there is still a huge need for smaller units. Logan Square also has moratoriums in some areas against de conversions of the sort you are describing. I would be very cautious because it seems hard to make the math work. Here's my high level thoughts:

1) Basement units that are below grade are going to end up in the ADU ordinance category and likely only could have 1 in the building if you live there. Also, is that 7 ft with hvac/pipes below that? You might not have enough space and legally would have to dig which likely completely negates the rental units value for some time. https://www.chicago.gov/city/en/depts/doh/provdrs/homeowners...

2) Full building systems alone are likely to run you well over $120k if you are doing everything on a building that size and age in Chicago. That building will have all cloth wire, case-iron pipes, and other fun things like the condition of the roof you will discover plus if you were trying to get a forced air solution.

3) You wouldn't get any more units on net with your idea and would than starting with a huge cost to reconfigure. You might be better off as an investment doing the major systems and updating the existing units. Have you tried running this through the Bigger Pockets calculators yet to see what your returns would be? https://www.biggerpockets.com/investment-calculators

4) If you have cost questions you could talk to one of the local BP builders in Chicago like https://www.biggerpockets.com/users/jklemm.

Good luck with the project and happy to help any way I can.

Chris

Quote from @Jonathan Klemm:

Hi @Frank Ugboh - That's a really good question and typically one that is often asked of Chicago investors!

You got your answer more than once - use comps for a 2-unit, BUT i'll just add that if you are looking to get started and cashflow is more important than paying over a 2-unit comp price may not be the worst idea.

I'd also double-check to see if the unit happens to be in Chicago's pilot accessory dwelling unit (ADU) area....if so then you could legally convert a unit.

Lastly, it might be worth doing some zoning calculations to see how many units you could have by right, so that in the future if you wanted to you could re-zone to more units if you had the square footage.

Here's the link to Chicago's ADU rules that Jon referenced so you don't have to hunt. https://www.chicago.gov/city/en/depts/doh/provdrs/homeowners...
https://www.chicago.gov/city/en/sites/additional-dwelling-un...

I just would hightlight a big detail of the ordinance if you sought to make it legal under the ordinance is that it prohibits Airbnb/short-term rentals in the unit and the City will hit you here since you would be required to register the AirBnB with the City for that separately.

Second detail is around what is allowed because this ordinance was made to make it easier for primary-owner occupied buildings to add units, not necessarily investors dependent on the zone. Be very aware of what you are getting into before you try to make them official.

I really enjoyed when I lived up in Rogers Park. Both Rogers Park and West Ridge will be great long term stable options but the Northside of Chicago has really become more of a appreciation market over cashflow just because of the limited supply of properties and the aggressive property tax increases occurring due to the Assessor revaluing northside properties. You may be best off looking for a 2 flat that you could owner occupy at a break even or similar cost to you as a renter as a househack for a few years if the buy box is going to be having the Rogers Park vibe/amenities.

If I were looking for a 10+ unit building in Chicago that cashflows well and will appreciate, I would be searching in East Garfield Park to put yourself in the path of development that is pushing west from Fulton Market and around the United Center. You have other immediate issues in the neighborhood compared with Rogers Park but 10 years from now that area will be completely transformed.

Hi Shuvajit,

Melanie is absolutely correct that unless you are living there and will qualify for some of the new mortgage products that the Feds just approved you will need a minimum of 25-30% down for the project.

Chicago neighborhoods are unique and have many characteristics that make them special. When you are getting a better idea of neighborhoods, let me know.

I think if that cost range is your expectation you should probably re calibrate the number of units in your building. Especially in the B/C neighborhoods you are going to also need to put in substantial upgrades to get things up to code most likely. You might have an easier time finding the classic Chicago 4-6 flats and starting to learn the unique quirks of dealing with City Hall first before trying to take on a really big property.