I recently had the pleasure to speak to a new investor in the Chicagoland area. Like any good entrepreneur, he leaped at the chance to quiz me on the Chicago market and asked where I would look to buy investment property in Chicago if I were starting out again. It’s a question I bet many newcomers to the industry would also love to ask an experienced investor. So while I’ve let my new friend, Frank, get a few weeks head start on the rest of you, I thought I’d share what I told him: If I were to buy investment property in Chicago, here’s where I would look to get the best deal possible.
Finding Investment Property in Chicago
The first thing I told our friend was to do his homework. Before investing any money into Chicago properties, it’s vitally important that you have a solid understanding of the market climate. How else are you going to know you’ve got a good deal? Here’s the quick overview of the Chicago housing market forecast I provided:
Cheap homes are getting harder to come by. Between 2016 and 2017, inventory of the lowest-priced homes in the Chicago metro area shrunk by 45.6% from 10,948 to 5,958.
Chicago has more underwater homeowners than virtually any other metro area in the nation. Around 20% of Chicago homeowners have homes worth less than the amount they need to repay.
The market is rebounding slowly. Although home values in the Chicago area are still around 19% lower than they were before the crash, more corporations are taking up residence here. So, we’re likely to see a full recovery in the next one to two years.
Rents remain high. Chicago is in the top ten most expensive rental markets in the country. This is good news for investors with a buy-and-hold strategy!
Luxury home sales are jumping. Despite promising potential earlier in the year, with luxury home sales seeing a 26% increase, some compounding factors, like the ever-increasing glut of luxury stock and property tax impacts, may diminish this sector’s success going forward.
Limited inventory and a buyer’s market make great value opportunities hard to come by. But there are still deals to be had if you know where to look.
Distressed properties, I told Frank, are what you should be zoning in on. These are properties under a foreclosure order, for sale by the lender, or for sale by a homeowner experiencing financial difficulties. These properties can offer incredible value but the decreasing inventory of low-priced homes might be a source of concern. Of course, knowing to look for distressed properties is one thing; actually finding them is another thing entirely. That’s why many real estate investors start out by trying to buy from a government program or auction.
Acquiring a foreclosed property from a local bank is usually the first place new investors look. Chicago has the highest foreclosure rates in the nation, so finding a bank offering a foreclosed property shouldn’t be too difficult. But buying a foreclosed property can be a nightmare. The process is heavily regulated and can often be an incredibly drawn-out affair. There can also he undisclosed taxes and liens that will become your problem. Oh, and there’s a heck of a lot of competition. Long story short, many new investors completely fail to get a good property deal.
Novice investors typically turn to the Cook County Land Bank Authority (CCLBA) next. As the largest land bank by geography in the country, CCLBA acquires properties through purchase, donation, forfeiture and other transfers, extinguishes delinquent taxes and liens, and then sells the properties to investors for renovation. You can find distressed properties at good rates but there are two huge caveats to buying from the CCLBA. All renovations must be completed within 12 months—something that could prove tricky for novice investors. If the renovations are not finished within that tight timeline, the CCLBA can take the property back under a “right of re-entry” clause in the sale agreement. For many—especially inexperienced investors—it’s not such a good deal after all.
While many new investors are recommended to buy from banks and land banks, I told Frank to steer well clear. I know there’s a different, better strategy.
How I Buy Distressed Properties in Chicago at the Best Prices
I don’t rely on the CCLBA or other banks anymore. Over the years I’ve been able to find great deals on distressed properties in Chicago with relative ease. There are a couple of reasons for my success. The first is my knowledge of the Chicago property market. This has come from my years of buying, rehabbing, selling, and renting homes in the Chicagoland area. Unfortunately, this isn’t something new investors can obtain quickly. But the second reason for my success is that I became an independently owned and operated HomeVestors® franchisee. HomeVestors®, I told Frank, could be the secret to his success.
As a HomeVestors® franchisee for over a decade, I’ve been able to leverage the nationally known “We Buy Ugly Houses®” brand and the associated marketing campaigns on TV, radio, and billboards. As a result, I no longer have to go hunting for leads through local government programs or auctions; homeowners come directly to me. I can renovate the property and hold it to gain rental income while always having the option to sell the property should the market peak. The long and short of it is that when homeowners need to sell quickly, they know to call a HomeVestors® franchisee like me.
If you want to boost your investment business in Chicago, HomeVestors can help you, too. Get in touch today to find out how you can leverage HomeVestors’ proven brand and resources.
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