Chicago is rife with opportunities—and many would agree that real estate investing is one opportunity with some of the greatest potential for solid returns. Whether you are interested in single-family, multi-unit, or even commercial real estate, there are local companies that can help you get your foot in the door. Generally speaking, these investment companies acquire distressed or foreclosed properties at a low price point, but their different business models offer divergent costs and benefits. Let’s take a look at the top four Chicago real estate investment companies and their value propositions.
1) The KCI Companies
The KCI Companies assist real estate investors in buying, renovating, and either selling or renting out residential properties. They act as an all-in-one real estate agent, contractor, and property manager. Sounds pretty convenient for new investors, right? Well, their incentives are skewed.
First, their lead generation strategy is rooted in providing foreclosure counseling to distressed homeowners who are hoping to save their home. However, the bigger aspect of their business model is based on connecting investors with these distressed homeowners. This begs the question of who KCI is actually trying to serve: homeowners hoping to save their home or investors wanting to make a buck?
Then, there are a number of hidden costs that can eat into the profit margin. For instance, if you buy into one of their packages, you are obligated to use KCI’s contractor services at a potentially inflated cost. In addition, while KCI provides real estate services for re-selling the house, they make more money by steering investors into holding the property as a rental—and they charge an above-market rate for these services.
2) Elite Invest
Elite Invest offers turn-key rental properties to investors, along with property management services. They buy properties that need work, complete the rehab themselves, and then sell to investors at market value. Once an investor has purchased one of Elite’s properties, they will source tenants, collect rent, handle repairs, manage tenant turnover, and pay the bills for the property. In a nutshell, Elite promises “financial freedom” with “little or no effort.”
But making money in real estate investing with “little or no effort” is a catchphrase that “gurus” often use to draw in inexperienced investors. However, there is no assurance that any property an investor purchases from them will provide a positive return on investment. What’s more, depending on how their property management service fees are structured, Elite may not be focused on ensuring that the investor achieves the best rent returns.
3) Windy City RE, LLC
Windy City purchases large segments of Chicago apartment and retail buildings in the foreclosure, new construction, and redevelopment markets. The company then provides investors with the opportunity to go in with them on the projects. Windy City handles all of the contracting, real estate transactions, and property management for each project. Their goal for each property is an 8% return and they offer investors a 70/30 split on the positive cash flow or returns from the sale of a property.
The major downside of Windy City is the degree of trust that’s necessary for investor buy-in. While the company delivers quarterly reports, transparency with this type of company can be an issue. In addition, you have to trust that the company knows what they are doing and is handling the project well. Windy City is relatively new—started in 2010, after the housing bubble burst—so it is impossible to know how they will perform in uncertain markets going forward.
An investor looking for a turnkey investment with little effort may be satisfied with one of the above options. But, for an investor willing to put in a little elbow grease, HomeVestors® provides a tried-and-true real estate investment strategy to its independently owned and operated franchisees. HomeVestors® has an ethical business model that helps distressed homeowners without the conflict of interest that exists with KCI and similar business models.
The HomeVestors® franchisee retains full control of the scope of each renovation project as well as the choice of an exit strategy. HomeVestors® provides new franchisees with helpful tools and resources to evaluate investment opportunities and make confident decisions at every step. In addition, HomeVestors®’ Development Agents and franchisee network can potentially recommend contractors and real estate agents who will perform their services with greater neutrality and potentially lower cost than those offered by all-in-one investment companies. At the end of the day, you may find that you’re better positioned to achieve optimal returns.
Investment Opportunity Awaits in Chicago
If you are considering investing in Chicago, an independently owned and operated HomeVestors® franchise provides more benefits than risks compared to other local real estate investment companies. A turnkey investment can deliver modest returns with little or no input from you. However, you will also lack direct control over your strategy. In selecting a real estate investment opportunity, you will want to consider your personal financial goals, risk potential, and capacity for investment growth management. Investors who are truly hungry will turn to HomeVestors®, so give us a call today.
Each franchise office is independently owned and operated.