In Brooklyn, it’s the brownstone. In Philly, it’s the row houses. But, here in Chicago, we are known for the two-flats. Two-flats are ubiquitous around Chicago; you know them as the two-story buildings with an apartment on each floor, usually with bay windows and a brick or greystone facade dressing them up. Most of them were built between 1900 and 1920 as affordable and aspirational housing for the growing immigrant population. Architects built two-flats by the dozen on spec and advertised to families as a money-making proposition: live comfortably in one unit while renting out the other. This “workingman’s palace” was a stepping stone in the quest to reach the American Dream.
Two-flats have a historic place in our city but they don’t bring in the returns for rehabbing to their original form. However, converting a two-flat to a single-family home can be a good investment. Let’s take a look at some of the reasons.
Reviving Chicago’s Charm and Your Investment Portfolio
Walking through the neighborhoods of Avondale, Humboldt Park, North Lawndale, or even Bridgeport, you’ll notice that more than half the houses are two-flats—and many of them were hit hard by the foreclosure crisis. In fact, between 2005 and 2011, 55% of two-to-four unit buildings were impacted by foreclosure, according to the Institute for Housing Studies at DePaul University.
But, even though distressed two-flats continue to be available, they do not necessarily make good investments—unless you turn them into a single-family home. As older buildings, two-flats are expensive to maintain. And, as lower-income units, the rents often do not cover the costs of ownership. Even more, it’s difficult to get a city permit to demolish them in order to build larger multi-unit complexes. But, with the current housing supply at a three-year low and prices climbing, turning a two-flat into a single-family home can potentially deliver good returns.
One of my HomeVestors® franchisees who I mentor, for instance, recently purchased a two-flat with the intent of converting it to a single-family home. He will spend to add modern amenities such as a master bedroom suite, update the kitchen, install all new appliances with CoMed’s Home Energy Assessment Program, and more. But comparable single-family homes in that neighborhood are currently going for almost double what he purchased the property for, so his investment is positioned very well for success when it’s ready for the market.
Of course, you’ll want to keep the overall neighborhood in mind when deciding to renovate a two-flat into a single-family house. Not all neighborhoods are in transition yet, and the market will probably not bear a strong return unless there are already comparables in that market. That said, turning two flats into a single-family house can be a smart investment strategy for a variety of reasons, including:
- More cost-effective than building new. Re-using the pre-existing outer shell of the house, which is usually made out of brick or limestone, is less expensive than purchasing new materials.
- Buy into high-demand areas for less. It’s difficult to find a buildable lot for a single-family home at a reasonable price point in Chicago these days.
- Retain neighborhood character. When finished, the house will continue to match the “Chicago architecture feel” of the rest of the streetscape, which lessens the likelihood of protest from neighborhood groups.
Even more rewarding, you can also play a hand in helping revitalize your community.
Getting the Best ROI
It’s no secret that two flats are out there—you can find them on foreclosure lists or even through a real estate agent. But, neither of those will provide you with the best deal possible. The key to optimizing your return on investment is to buy a two-flat from a distressed property owner who is ready to sell quickly. Getting those leads can be difficult, though. HomeVestors® franchisees have good leads come to them through the nationally recognized “We Buy Ugly Houses®” national brand and marketing tools for real estate investors. You’re probably familiar with it, too. It’s on billboards, commercials, and radio as well as in direct mail campaigns. It works—HomeVestors® franchisees have already bought over 140,000 ugly houses since 1996.
If you have the drive to step up your investment game and are ready for better leads, get in touch with HomeVestors® today!
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