Multi-Unit Properties for sale in Chicago: 3 reasons Why Chicago 2 flats are a Great Starter Investment
If I were you, I would immediately start looking into multi-unit properties for sale in Chicago. Why? In the book Rich Dad Poor Dad, the author Robert Kiyosaki speaks about how a lot of people are stuck in what he called “the rat race”. We go to work, collect our money every one or two weeks, then immediately have to use that money to pay all of our bills (rent, utilities, credit card debt, etc.). By the time we are done, we have no money left to ourselves, and we have to go back to work again to make just enough money to pay our bills for the next month. A lot of people are stuck in this cycle, unable to save up any money to ensure a better future for themselves.
So how can the average person start to work their way out of this cycle? One of the easiest ways to start is to invest in a 2 flat! You get all of the equity benefits that you would from owning a home, plus you get rental income that can go towards your mortgage. Imagine an investment that will allow you to live in an apartment for half the price vs in you just rented it out? On top of that, you can build wealth through equity by paying down the mortgage? Well look no further, because multi-unit properties are that investment. Here are 3 reasons why.
Easy investment to start with little money down
The first reason I love 2 flats as an investment is because you do not need a lot of money to buy it compared to how much the investment is actually worth. You can your first multi-unit with only 3.5% of what the building is worth as a down payment. So to buy a property worth 150,000, you would need to have 3.5% of that to get a loan to buy it, which is 5250. Now with all loans you will have to pay closing costs, which can be between 3-4%, so expect to pay around 10,000 total. That is actually really cheap considering you are buying something worth over 100k. Also, as a realtor, I have negotiated many deals where the seller will give you some money to help with the closing costs, so you may not even need that much. It will be hard to find another investment that is so expensive, and pay so little for it.
Think that money is hard to come by? Let’s look at the alternative. Everyone needs somewhere to stay right? If you renting an apartment for 1000 for instance, you are paying 12,000 a year. And getting no wealth building benefits from it. On the contrary, you are building wealth for your landlord! The fact is you are going to pay a lot of money to live where you are no matter what. With this investment, you can make that money work for you instead of just throwing it away. Let’s look some more into why it’s cheaper to buy vs renting.
Much cheaper way to live vs renting
Let’s do some quick math to see the benefits of owning the 2 flat vs renting an apartment in one. On one hand, you are paying 1400 a month to stay in this apartment. This will get you a decent apartment in the Chicago area. That’s it. You pay 1400 a month to your landlord, never to be seen again.
Now, let’s say you decide to buy the building, live in the same apartment, and rent out the 2nd apartment, which is identical. You buy the building for 275,000 (which will get you a pretty nice 2 unit). Estimating the taxes at 4000 a year, your mortgage will be around 2200 a month. Also, remember that you are getting 1400 a month from rental income, so that means you will be paying 800 a month out of your pocket. A good landlord always sets aside some money for repairs, so let’s set aside 100 extra per month for that. That leaves you paying 900 out of your pocket, which is already 500 cheaper than if you simply rented the apartment! This isn’t even the best part of the investment, which is the actual equity that you build by owning the building!
Building Wealth Through Equity
Now here is were you start to build real wealth in real estate. When you pay a mortgage, some of that money goes into what is called the principle of the loan, which is how you pay the loan off. So the more payments you make, the less you owe on the total loan.
The average price for a multi-unit property in Chicago went from around 240,000 in January ’18 to around 255,000 in May of ’19. So, theoretically, someone who bought a multi-unit property at the beginning of 2018 has already made 15,000 just by owning the property! On top of that, they have been paying their mortgage monthly, which means they will owe less on their loan. Think about how much equity they will have in 5, or even 10 years! If they decide to sell the building in 10 years, you will walk away from the deal with a nice chunk of change. Compare that to if you just rented the apartment for 10 years. You’ll be lucky if you walk away with your security deposit.
This is why I love 2 flats, or multi-unit properties, as a starter investment for someone who is looking to build some real wealth. Any questions or comments, feel free to reach out to me through my website. Thanks and have a great day!