Last week, I found out that one of my friends is engaged to be married. Nothing out of the ordinary—but this triggered a host of novel aspirations for him. With a fresh MBA in hand, my young pal plans on purchasing a starter home here in the greater Chicago area. That got him thinking a little deeper about real estate investing as a career instead of just getting a corporate suit job with one of the many firms in town. Knowing that I had experience investing in residential Chicago property, Chris sought my opinion on the best neighborhoods for first-time home investors. I told him where I thought all investors needed to look.
Where to Invest in Residential Property in Chicago
I advised Chris to do the same as I do: buy, renovate, and sell houses in an up-and-coming Chicago neighborhood whenever possible. Of course, there are plenty of established areas that still offer bargain buys from time-to-time, too. And, since Chris doesn’t yet have the kind of experience or confidence that I do investing in real estate, he shouldn’t dismiss move-in ready homes in these neighborhoods, either. Holding properties for the chance of producing a passive income from a real estate investment is always an option. Here are some of the places where I’ve executed successful buys on both ends of the spectrum.
When I choose my neighborhoods for investment, I like to look through the eyes of the buyer. Young professionals and couples, for example, like to be close to work and close to the action. So, these city dwellers cherish the downtown area for its restaurants, bars, and shopping. They also like having access to family-friendly amenities, like the Museum Campus. Yes, it can be difficult to find affordable neighborhoods to invest in around metro Chicago these days. But, in areas like the South Loop, opportunities do exist.
I was able to find units in this dynamic neighborhood for less than market value thanks to the lead generation methods I implemented years ago. Then, after performing upgrades, I rented them out at market rates. And, most of my tenants have been young, single professionals or newlyweds who want to live and work in the city. Some of those purchases even took place before developers helped to turn what was an overlooked area into a vibrant community with lakefront access and an easy path to Soldier Field. These changes, of course, have made the South Loop even more Millennial-friendly over the years—and, more expensive. On average, rents here are almost 10% higher than in other areas of Chicago and they continue to rise due to increasing demand. So, if you can find properties in which the financially-distressed owners need to sell fast, you could also find yourself in a position to take advantage of rising market rents for years to come.
In contrast to Millennial renters, some folks don’t mind a manageable commute into the city. For them, safe suburban streets, multiple beach fronts, and a little peace and quiet rule the day. And, home buyers who prefer a backyard deck to a row of sidewalk bars span all generations. So, it should come as no surprise that the northwest village of Winnetka attracts so many Chicago-area buyers who want to leave the hustle and bustle of the big city behind. It’s a pricey option, to be sure. Would-be homeowners have to spend between $750,000 and $1 million for the privilege to live in Winnetka. But, they often can—and, do. And, thanks to recent developments, you may be able to invest there, too.
As you know, Illinois residents pay some of the highest tax rates in the union—and, they always seem to be going up. Already, state, local, and property taxes eat up more than 10% of the average suburban Chicagoan’s income. For homeowners who lose a job, a spouse, their savings, or their health, one more percentage point added to their tax rate can equal the end of their ability to continue paying for an expensive house. That we’re again seeing high foreclosure rates across the state—even within wealthy communities—indicates that many homeowners are feeling pinched. The key to finding single-family homes at below-market values in Winnetka, then, lies in your ability to approach distressed homeowners before they’re faced with potentially losing their house. The opportunities may not come often. But, when they do, they will be worth it.
A few miles east of O’Hare International Airport and about a 30-minute drive from downtown, sits Jefferson Park or, as the locals call it, “The Gateway to Chicago.” A long-time transportation hub for the city at large, this family-friendly community is a popular landing spot for anyone who needs or wants a convenient conduit to downtown from the charm of living a small-town life. But, its appeal doesn’t end there. There is also good food, great shopping, and a lot of local Polish pride. And, the Copernicus Civic and Cultural Center—designed by noted architect Mason Rapp for art, theatre, and dance enthusiasts—calls Jefferson Park its home. I also like to call it a great place to invest.
In fact, finding fixer-upper homes in the area to rehab and resell has been a critical component to my investment success. Median home sale prices in Jefferson Park have risen by almost 8% year-over-year, currently coming in at around $339,000. Though these numbers fall below what luxury high-rises downtown or suburban houses in Winnetka go far, they can still account for good returns if you buy at a great price. And, because Jefferson Park has a reputation for being one of the safest places to live in the Chicago area, demand to get into the neighborhood is almost always high. Strong demand often equals a strong ROI, whether you rent your investment properties or sell them. In this northwest side of the city, you might want to consider doing both.
Finding Opportunities in Chicago’s Neighborhoods
While property investment opportunities in Chicago are everywhere, it can take time to discover promising locations—and promising properties in established communities—at the right prices. When I started to build my portfolio in the Windy City, getting quality leads was one of my biggest challenges. There were so many underwhelming options that I often felt overwhelmed—and, frustrated. But, things really turned around when I became an independently owned and operated HomeVestors® franchisee. And, I owe that turnaround to the nationally recognized “We Buy Ugly Houses®” ad campaign that brings motivated sellers from local neighborhoods right to me.
Surprisingly, Chris wasn’t surprised when I told him what a difference being a HomeVestors® franchisee had made in my career. After all, he’d seen the ads, too. So, after our talk, he became a franchisee himself.
To see how becoming a member of the “We Buy Ugly Houses®” team can give you a promising career in real estate investing, contact HomeVestors® today!
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