Finding leads is a challenge every new real estate investor faces. When I first began investing, I spent countless hours developing credibility packages and marketing to distressed homeowners. After spinning my wheels too long, I looked into how to buy abandoned properties in Chicago. Because our area was hit so hard by the housing crisis, there’s lots to choose from, and I want to share some of the top strategies I discovered for getting leads on local distressed properties that can bring a solid return on investment.
Acquiring a Foreclosed Property from a Local Bank
With the highest foreclosure rate in the nation, it’s not hard to find a bank-owned offering in Chicago. In fact, you may find yourself overwhelmed with options. Once you decide on what type of property and where you would like to invest, the easiest way to find a foreclosure is by reaching out to a real estate agent who is familiar with your target area and has experience with these kinds of transactions. You can also search bank and credit union websites or even purchase a foreclosure list to find institutional holdings for sale. Government agency websites, like Fannie Mae, HUD, and the Department of Treasury also provide foreclosed property lists.
However, the buying of foreclosures is a lengthy, heavily regulated judicial process in Illinois and, as a result, it can be tough to find a good deal from a bank. Remember, there may be hidden costs associated with the foreclosed property such as back taxes and liens that you will be responsible for. In addition, you may face steep budding competition from other investors if the house is actually a good deal. Banks will typically get an appraisal or broker price opinion (BPO) to determine the fair market value of the property before offering it at auction. Sometimes, banks will go with the best offer, but if there is good competition, they may require finalists to re-submit a “highest and best” offer. In a nutshell, buying foreclosures can be a time-consuming and uncertain process.
Buying Distressed Properties From Cook County Land Bank
The Cook County Land Bank (CCLB) provides an enticing opportunity for investors to purchase properties that need rehabilitation at a deep discount. CCLB acquires properties through donations and forfeitures, clears any taxes or liens, then sells them to investors who have the resources to bring them up to market value. Knowing that you are acquiring a property with a clear title can be a significant advantage both in terms of saved time and money. In addition, you can potentially save thousands of dollars with lower transactional and legal fees by buying a CCLB house.
Despite the apparent advantages, the risks of purchasing an investment property from this program may still outweigh the benefits. Since CCLB’s goal is to ensure that the houses are rehabilitated in line with their specific organizational goals, they currently place a “soft mortgage” on each sold property. There are basically two “soft mortgage” requirements that you should be aware of. The first provision necessitates that all renovations are completed within 12 months. That’s a pretty quick timeline for a new investor who does not have experience keeping an extensive rehab project on track! Second, the sale agreement contains a “right of re-entry” clause that allows the land bank to take back the property if the first requirement is not met. That means you could effectively lose a significant amount of invested time and money in a deal with CCLB if you are not prepared to meet strict project guidelines under complex contractual circumstances.
The City of Chicago’s Abandoned Properties for Sale
Through the Department of Planning and Development, the City of Chicago negotiates sales of a range of vacant residential properties to investors. They may sell a property to you at a significant markdown from its market value if you have a redevelopment plan that resonates with the city’s goals and provides the concrete benefit to the community by expanding affordable housing options, increasing local environmental sustainability, or other positive community contributions. You may also qualify for financial assistance to complete the project through their tax increment financing plan (TIF), which is a tool that promotes economic development in blighted or underdeveloped neighborhoods.
There could be a real downside for you to consider when using the city-approved financing plan—the long timeframe for actually acquiring the property. You will need to first complete the lengthy application, including detailed site plans, a listing of your project’s community economic contributions, and your outside financing abilities. That’s just the start, though. Then you have to apply for the TIF program, which must provide a local market analysis and an environmental impact study. When all the paperwork is in order, they city may take nine months (or more!) to actually review your application. That’s a long time to wait on a “maybe” deal—especially if you intend to make several transactions in a year.
Best Lead Conversion Solution in Chicago
You can secure the best real estate investment deals by generating leads on properties that have not yet fallen into the hands of banks or governmental programs. My HomeVestors® franchise business, for instance, receives solid leads regularly as distressed homeowners trust the nationally-known “We Buy Ugly Houses®” brand and reach out for help getting their homes sold quickly. If you are ready to fast-track your real estate investing business by sidestepping all the time-consuming requirements of buying from organizational programs and, instead, getting regular leads directly from homeowners, get in touch with HomeVestors® today.
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