When I first became a real estate investor, looking for distressed properties in Chicago was a chore. I didn’t think trying to find cheap property in Chicago would be so hard. Yet, there I was, running all over town—and all over the internet—chasing down potential deals that always seemed to fall through for one reason or another. It wasn’t until my friends Bill and Lisa, who’d been successfully flipping houses in Chicago for a few years by then, intervened and helped me narrow down my options for finding better leads. Since then, investing in real estate has been a lot easier—and, for me, certainly more profitable.
Your Best Options for Buying Distressed Properties in Chicago
Looking at how the housing crisis has impacted Chicago homeowners is sometimes unsettling. In 2008, some communities, like neighborhoods on the South Side, felt the brunt of the crisis as foreclosure activity shot through the roof. Even when the country’s economy started to improve, Chicago’s crept along at a pace that wasn’t fast enough to help many homeowners keep their homes. And, as early as last year, the number of homes in foreclosure in Cook County was still considerable, with the highest numbers concentrated in and around Chicago.
On the flip side, the opportunity for finding distressed properties and revitalizing communities opened up after the crisis. Bill and Lisa, for example, started investing in Chicago’s South Side and have contributed to some of the more positive changes—like reduced crime and higher property values—that we’re now seeing there. But, with more investing opportunities came more real estate investors. So, what are the best options for finding these properties and improving your chances of getting them? Here are the ones I tried:
Homes that have been foreclosed on can be found in almost any neighborhood and, if purchased at the right price, can make great investment properties. They’re frequently in disrepair and often priced below market value. So, provided you can keep your rehab costs low, there is the potential to see decent returns.
But, buying foreclosed properties in Chicago, whether from a bank or a government agency like the VA’s Chicago Regional Benefit Office, is time-consuming, competitive, and sometimes costly. Lenders take more time to respond to an offer than a homeowner usually does and they can bury you in extra paperwork. If they decide to perform any upgrades and remove encumbrances on the property, like back taxes or unpaid utilities, they could bump the asking price to full market value. But, if they leave the home as-is, you’ll have to absorb these costs, which could bottom out your returns if you don’t perform due diligence. And, because foreclosures are relatively easy to find, investor competition is strong. So, in the end, you could end up with nothing.
Before a property returns to the foreclosing lender, a judge may order that it be sent to auction. But, homes in the process of foreclosure aren’t the only properties that get auctioned. Homes in probate, part of bankruptcy or divorce proceedings, and for-sale-by-owner can also go to auction. Since these properties tend to be sold under distressing circumstances and can be left vacant for long periods of time they usually need significant repairs. If you can buy them at a low enough price and renovate cheaply, your ROI may be higher than if you invest in foreclosed real estate.
Unfortunately, the likelihood of getting a good deal from an auction isn’t great. The organizations that hold them, like the Cook County Sheriff’s Office or the Judicial Sales Corporation rarely, if ever, let you inspect a house before you bid. So, you could win a money pit of repairs that cost you your returns and then some. If there are liens against the property or tenants on site, they become your problem too. And, the terms of sale, like full cash payments due within 24 hours, carry stiff penalties if you fail to follow them. Plus, like lender-owned homes, auctions attract a lot of interest, which can drive bidding above what a property is worth. You’re better off looking elsewhere for the best deals.
Programs like the Cook County Land Bank and Chicago’s Forfeiture Program provide distressed properties at a discount to potential buyers. Chicago City-owned property is also sometimes sold at a discount to investors who are willing to develop the property so that it benefits the community in some way, like by creating affordable housing. These programs are designed to help facilitate our community’s recovery, reduce neighborhood blight, and boost property values. They’re popular avenues for easily finding distressed and undervalued investment housing inventory.
Of course, it’s because these government programs have such strict rehab guidelines, in addition to a lot of red tape, that seeing returns isn’t promising or even probable. The renovation required on many of the properties is extensive, making it difficult and costly to complete within the timeframe the county or city gives you. And, if you don’t finish on time, they may fine you or take the property back. In addition, the application process for each of government programs can also be lengthy and it doesn’t guarantee you’ll get the property you want or at a price you can afford. The county, for instance, is backlogged up to a year with cases, which makes buying a forfeited home time-consuming—if the court approves the sale at all. And, it takes the city up to nine months to review an application for one of their properties, after which they publish the intent to sell to attract competition. So, though the intentions of these programs are good, the deals they offer to investors often aren’t.
I’ve known some investors who, after buying a house from an auction they couldn’t afford to rehab or losing a city-owned property to a competitor once the sale was published, decided to throw in the towel. And, I get it. Despite all the ways you can find distressed homes for sale in Chicago, the search is not always easy and the properties are not always profitable. But, flipping houses is a good business to be in if you can approach your lead generation strategy another way—by letting the leads come to you.
A Better Approach to Finding Chicago’s Distressed Properties
I was never really willing to throw in the towel, but at one point I wondered if I might have to go back to my corporate job for a while to make a full-time living again. I didn’t like dealing with banks and trying to buy property from one of Chicago’s government programs was even worse. Thankfully, Bill and Lisa saved me from having to return to my old job by turning me on to becoming an independently owned and operated HomeVestors® franchisee.
By becoming part of the nation’s largest home-buying team, who’ve purchased over 95,000 houses in 46 states since 1996, I gained access to leading marketing tools and resources. For instance, HomeVestors’ widely-recognized “We Buy Ugly Houses®” national ad campaign kept me from giving up on my real estate career by bringing the owners of distressed properties to me. It’s the best approach I know for more easily finding real estate investment leads. And, it’s great for helping homeowners in distress before they lose their homes to a lender or a local government agency.
Narrow your search for finding distressed properties by choosing the option that brings homeowners to you. Contact HomeVestors today!
Each franchise office is independently owned and operated.
I first became a Homevestors Franchisee in October of 1999 when my cousin and I bought a Franchise in Dallas in the great state of Texas. We did well and were ‘Rookies of the Year.
In 2003 Homevestors opened up in the Chicago market and along with my daughter, son and wife moved back ‘home’ to open the first Franchise in the greatest city on earth.
In 2010 I became a Development Agent to help mentor and teach new franchisees this incredible business and to this day I still love the career path I chose and the opportunities that continue to be available.