As a new real estate investor, I remember having a lot of questions and, at times, quite a bit of trepidation. Though I grew up with downtown as my backyard and felt confident I knew most of the up-and-coming neighborhoods pretty well, flipping houses in Chicago was not always as easy as I’d hoped it would be. I learned some things the hard way and even struggled a bit in the beginning. Until, that is, I got smart and leaned on those a little smarter than me. If you’re a new Chicago-area investor and want to learn to make more profitable decisions than poor ones, you’re not alone—especially these days.
Real estate investing has been going strong in several cities across the country since the housing bubble burst, including in Chicago. With the rising popularity of house-flipping shows, buying and renovating a property then selling it for a profit seems to have made everyone’s bucket list. And why wouldn’t it? Flipping houses is a good business and Chicago ranks as the 20th most profitable market for buying, rehabbing and selling homes. No doubt you’re hoping to see these kinds of returns as well. But, before you launch into buying that first house, let’s get you started with a basic to-do list of your own.
A Beginner’s Checklist for New Chicago House Flippers
I know, no one likes to begin at the beginning, especially career professionals like us. But as hot as Chicago’s real estate market is, it can still land you in a lot of hot water if you dive in before you’re ready. I don’t even like to use the term “house Flippers” because it seems to imply an easy process, when you know that it is anything but easy. So get out that pen and paper and be sure to jot these tips on buying, renovating, and selling houses down.
Get to know the neighborhood. When looking up and down your own street, you may have noticed a flipped house or two and even wondered if you should invest so close to home. If you’re an avid consumer of real estate news, you’ve probably also read that home prices from the River Loop to the Chicago Business District continue to rise and thought about buying there. Wherever you choose to invest in Chicago real estate, make an informed choice that’s not based solely on the profits you “see” others reaping.
Chicago has several historic overlay districts that could restrict or impede your intended rehab. Even if you buy in one of these areas with the objective of following the strict renovation codes, you’re opening yourself up to a prolonged and potentially expensive project. A neighborhood that falls under the guidelines of a Homeowners Association (HOA) may present similar problems. For your first flips, stick to neighborhoods where you can get in and out as quickly and as easily as possible.
Get to know the laws and regulations. In addition to the regulations imposed by the city or an HOA on certain neighborhoods, organizations from which you buy cheap property in Chicago may carry their own sets of rules about how you renovate, when you finish, and who you hire. The Cook County Land Bank, for example, institutes strict hiring guidelines and rigid timelines. And if you fail to follow the rules, you’ll lose bigtime— both the house and the funds you’ve invested. Plus, there are inspection, permitting, and licensing requirements that dictate everything from the additions you can make to the hours your team can work and even what kind of contractor you can hire. It’s a lot to manage. But better to know what you are getting into now, prior to buying, than after you’ve been slapped with fees and embarrassment.
Get to know the house. Even if you know a thing or two about home renovations, or are coming to real estate investing from a related field, it always helps to have a second pair of eyes on a project. Without them, serious issues are not always obvious and that can be a problem for your profit margin. Descriptions in the Multiple Listing Service (MLS), on auction sites, or with local government organizations rarely tell the whole story—and they’re not expected to. As the buyer, it’s your responsibility to perform due diligence on a house prior to sealing the deal. An appraisal, title search, home inspection, property survey, and repair/renovation estimates can guide you toward this end. If you spot anything along the way that spills outside of your comfort zone—or budget—give the property a pass. It is best to find fixer-upper homes for sale that you can handle.
Get to know the experts. By the time you make an offer on a house, and especially if you get accepted, you’ll want to have a reliable team at the ready to take you from project start to finish in a decent amount of time. Scrambling to line up a reputable inspector, contractor, or designer at the last minute can cause you to inadvertently sabotage your great real estate investment by choosing who’s cheap and available, instead of who’s right. It’s also unnecessarily stressful. Do the research, ask around, check credentials, and visit properties to find professionals you can trust ahead of time. And don’t forget to hire a real estate agent who understands the nuances of working with investors and has experience marketing investment properties. Surrounding yourself with experts from the get-go will save you time, money, and, sometimes, the deal itself.
It obviously takes a bit of know-how to set off on the right foot when you start house flipping in Chicago, but there’s really no way around it if you want to transition from investment novice to professional as quickly as possible. There is, however, a faster way through.
Invest in Chicago Real Estate Like a Pro
As an independently owned and operated HomeVestors® franchisee and Development Agent for new franchisees, helping new investors learn the real estate investing business in no time is exactly what I do. At HomeVestors®, we’ve been flipping houses—over 75,000 of them–throughout the U.S. since 1996. So we know the ins-and-outs of investing and are passionate about doing it. We’re also passionate about helping others do it too. In addition to the week-long training program and some of the best valuation and marketing tools around, HomeVestors has real estate investing mentors like me on hand to offer tips and provide guidance where needed. So investing smarter has never been easier for those just starting out.
After struggling as a new investor years ago, joining HomeVestors quickly moved to the top of my list. Make the smart choice and move it to the top of yours too. Contact HomeVestors and start investing like a pro today.
Each franchise office is independently owned and operated.