I love it when I see the investors I mentor succeed. I was nearly as proud when my first student turned a profit as I was the day my boy graduated from Northwestern (go Wildcats!). Too often though, I see my mentees getting so bogged down in the theory of investing that they forget about everything else I’ve taught them. Take the idea of a cap rate, for instance. Having understood the principle of a cap rate, many novice investors get stuck trying to find an income property in Chicago with the “perfect” cap rate.
Guys, it doesn’t exist!
Instead, I look for the potential of a property. After all, if I can increase the rental income, I can increase the cap rate, thereby decreasing the risk.
There couldn’t be a better market than Chicago to do this in right now. Not only is our area’s housing market STILL undervalued, but swelling numbers of well-off Millennial renters mean that there’s a demographic willing to pay more for a home they love. Here’s exactly what I look for in an income property in Chicago in order to attract Millennials renters and achieve a solid cap rate.
Best Bet: Make Your Chicago Income Property Attractive to Millennials
In case you didn’t know, Millennials are mad about pets. In fact, according to research by GfK, more Millennials own pets than Baby Boomers, with over half (57%) of Millennial households owning a cat or dog. If most of your target market is likely to have a pet, you’d better ensure the property is suitable. Sure, you can renovate homes to make them more pet-friendly, but it will save you a heck of a lot of work and cash if the investment property is pet-friendly, to begin with. There are certain features I recommend keeping an eye out for when evaluating an investment opportunity:
- Hard surface flooring. Not only does it look better than carpet in most cases, but hard flooring also makes it easier for Millennials to clean up after their furry friends.
- Enclosed trash areas. No one wants waste strewn all over the yard. And no one wants pets choking on dangerous objects, either. Make sure trash can be kept out of the way.
- Horizontal blinds or curtains. If the property has vertical blinds with tassels, these will pose a choking and strangulation hazard for pets.
- Petscaping out back. You might have to research this one, but certain plants are poisonous to pets. It’s all for the better if they’ve never grown there.
You might be unable to tick everything off this list when searching for an investment property in Chicago, but the more pet-friendly it comes, the better.
Another major feature I look for when scouting potential investment properties is how easy it will be to bring the home into the 21st century. Most of the properties I invest in are distressed, often weren’t well-cared for, and come straight from the fifties. But that doesn’t mean they can’t be a great foundation for improvement. Before I even visit the property, I check broadband speeds in the area. I know from experience that if the local internet company can’t deliver fast and reliable wifi to my Millennial tenants, they won’t stick around. Details like this can make a world of difference to a 20-something tenant—and that’s just who I aim to attract with my rentals.
Finding Income Property in Chicago
Despite an undervalued property market, it isn’t always easy to find suitable income properties that will attract stable Millennial renters to support a more predictable cap rate. But if you are an independently owned and operated HomeVestors® franchisee, like me, you’ll be able to leverage the nationally-recognized “We Buy Ugly Houses®” brand to market your real estate investing business. I have no shortage of investment opportunities because local homeowners know who to turn to if they want to sell their house fast. I buy their homes at a fair price, knowing that there’s enough cushion in the deal to achieve a solid cap rate after I rehab it and rent it out to a younger generation.
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