Quote from @Sarah Patel:
Hello! I am new to the REI world and my husband and I's goal is to invest in a property by the end of the year and use as a STR. We live in the western suburbs of Chicago and have been weighing the pros and cons of investing in-state vs. out of state. While the current suburb we live in (Elmhurst) seems to be appreciating very well and surrounding comps support list to price ratios of 90% and up, we aren't sure if it's the best market for a STR (perhaps a flip).
While there may be better deals out of state, we worry that out of state investing may be too much for us to handle as our first property. I say this because we have a toddler and have another on the way and both of us work W2s. I work 40hrs/week while my husband works anywhere from 50-90hrs/week. Do people still invest out of state in our situation? Sure! And they have my utmost respect. I'm just not sure how feasible it is for us personally. That doesn't mean we aren't open to investing out of state further down the line. I'm just wondering if investing locally makes any sense. Of note, we would use our realtor who helps us purchase our current home, already have some contractor contacts, repairmen, etc- making our core 4 already in place here. Our ultimate goal (as is anyone else's) is to be able to scale back our time at our W2s and replace that with income from real estate. We know that's not going to come with the first property but want to give ourselves the best opportunity to learn we can.
Bottom line: anyone who has recently invested in the Chicagoland area think that there's still plenty of opportunity here? Or would you argue that the additional challenges that come with out of state investing are worth the potential of a better ROI? We are also hesitant about timing and whether or not to wait and see if the current administration actually restores the TCJA full bonus depreciation provision.
Any feedback/input is welcome. Thanks for reading! Excited to be here and learn.
Hey Sarah!
I'm in the same boat as you, well sort of lol. I just finished up my 2nd house hack which was a BRRRR and getting ready to do it again in 2026 here in Chicago. However, after this 3rd project I think I will be capped out of my DTI and will have to start putting 25% on projects, with that being said like you I want my dollar to go further then what it can here in Chicago. I love investing in Chicago because i think you can get cash flow, post remodel, and a good appreciation depending on the neighborhood you land in. In Chicago its really about making a good deal, its hard to find them on the MLS right now given the current market. I'm thinking about either investing further outside of Chicago or in a different market, IE out of state, all together. Part of me wants to stay 1-3 hours driving distance of Chicago so I can get to a project if need be and having the ability to get somewhat local referrals. Investing out of state I feel like I would need to get an entire team up off the ground and running when like you I have some elements of a team already in place. The only pro I've seen far about investing out of state, maybe lower price point to entry and probably lower property taxes, along with hopefully less pro tenant ordinances.
I really have not looked into what states I would invest in or what kind of capital I would need. I think how much you have to fund the project, down payment, closing cost, holding cost, remodel cost, will definitely direct you into a market that you can afford.
If i were to invest out of state, i would take my time finding a market based on population growth, jobs, housing, etc. After finding a good market I would then just look for a local lender/ agent and find a very small size project with very light remodeling just to get my feet wet, learn the permit process, etc. I would also visit the area multiple times, driving the city/town, meeting the agent & contractor, and then come back to the project mid project and at the very end. After that project hopefully I would make a good amount of connections to scale everything up.
