Building Wealth in the Chicago real estate market is a lot simpler than you may think. With a little money and knowledge, you will be surprised at just how fast you can start receiving passive income and building equity. While Chicago real estate can be different than real estate in other markets, there are many investors who built their wealth using the 3 strategies that I’m about to mention below.
Rent 2-4 Unit Properties
My personal favorite are multi-unit properties. For starters, I will only be talking about 2-4 unit buildings, because you can get these with your average residential loan. There are a ton of multi-unit, or 2 flats as we call them in them Chicago. A 2 flat is a great way to start investing because you can move into one unit while collecting rent from the others.
The reason I love multi units is because they offer better passive income than other strategies. I know a lot of investors who simply kept buying units until they had so much passive income, they were able to quit their 9-5. With a 2 unit- you should be able to rent out both units, and have that cover your expenses, and still have money left over. The more units you have, the better the cash flow.
When looking for a 2 unit, it is important to make sure the rental demand in the area is good. The good thing about Chicago is that the rental demand is always strong, so you should have no problems. Next, you want to see how much you can get by renting each unit, and see if the numbers work for you. More a more in-depth video on buying multi units, check out my video on how to buy investment property in the description below.
Rent Single Family Properties
The next way to invest in Chicago real estate is to buy and rent single family properties. Investors often like to take this route because single family homes are not as expensive as multi unit properties. Sometimes they start by buying a home to live in, then move to a new home while renting the first home out.
With single family homes, there are a few things to keep in mind. While rental demand is very strong in the Chicagoland area, it can be more difficult to rent out single family homes vs renting out multi unit apartments. The reason is that the rent you would need for some homes in order to break even would be too high for most renters to afford if you are not careful. So if you are looking for single family homes to rent, I would stick to smaller homes at a price point where the rent will be able to cover the mortgage, other expenses, and still give you some left over cash flow.
Flipping Homes
The third (and most exciting way) to invest in Chicago real estate is flipping properties. Surely we’ve all heard of this strategy: Buy a property cheap, fix it up, and sell it for top dollar. So what makes the Chicago market so special?
Because the rental demand is so high in Chicago, renting a home can cost just as much, if not more, than owning a home. This is great for landlords, but bad for renters. Now, renters are looking even hard to find a home that is affordable for them. That’s where the home flipper comes in, supplying the real estate market with move in ready properties. This demand should remain strong for a while, so if you can supply the properties, you can make a lot of money.
Also, flipping properties is definitely the faster way to make money investing, because if you do it correctly, you can make 10’s of thousands within a couple of months. However, remember that flipping also comes with a greater risk of losing money. I see it all the time: an investor buys a property, then realizes that the cost to repair it are a mot more than anticipated. Then, in an attempt to make up for the extra repairs, they try to sell the home at a higher price point, and the property just sits on the market.
Here are some things to keep in mind in order to successfully flip a property. First, make sure you buy the property at a discount. They say that the money is not made when you sell, but when you buy. Buying the property at a discount gives you protection from unpredictable repairs (that always seem to turn up after you get the property).
Next, make sure to estimate the cost of repairs as accurately as possible before you buy the home. To do this, try to bring a contractor with you and pick their brain about the costs. Also, with repairs, keep in mind that you don’t have to completely repair everything. You just have to get the home in move in ready condition in order for it to sell. No need to get fancy with everything. In the end, you want to sell it as fast as possible and make a profit.
Any questions or comments, please feel free to reach out to me. Thanks and have a great day!