One of the key secrets of real estate investing in Chicago is that there is never a bad time to pick up an investment property. We’ve always been a city of renters-—51% of the population lives in rentals, from apartments to two-flats to homes in the bungalow belts. People are always coming into the city. They may live in a neighborhood for a few years and then, maybe, buy a place of their own. Because of that, it’s always good to have investment property in your portfolio.
That doesn’t mean every Chicago investment property is good, of course. Or, that every method of picking up one is worthwhile. Take short sales, for example.
As a long-time investor here in my hometown, I’ve picked up properties in nearly every way, including working the angles on short sales. Short sales seem really tempting, like they offer a great way to get a cheap investment property. But, they don’t always work out.
Understanding the limitations of Chicago short sale listings is key to giving yourself a chance to get some solid ROI.
How Chicago Short Sale Listings Work
Short sales are, in essence, when you as an investor come between a distressed homeowner and the bank. The homeowner is about to be foreclosed upon and you make a deal with the bank to buy the house if the bank will forgive the rest of the debt. Sounds great, right?
In theory, this is a win-win-win. For one thing, the seller walks away without being foreclosed upon. That would be a huge black mark on their credit and could impact their possibilities for a decade or more. Avoiding it is a big motivator.
Second, the bank can avoid foreclosure. It’s rough on them, too. They stop getting any payments and have to go through the costly legal hassle of pursuing a foreclosure. With a short sale, you pay the bank a lump sum so they at least get something.
And, of course, you get a property you can start renting out. That is a great opportunity for an investor. But should you go with short sales?
The Problems With Chicago Short Sales
You know how I said that a lot of people think short sales are a great deal? Well, that’s one of the main problems. There are three big ones.
Competition running up the price
When a lot of people are looking to buy houses, they are competing. And, there isn’t going to be a point where the bank says “OK, everyone. We don’t need that much money. Let’s just cool our heels.” Have you ever heard a banker say that?
So, the price goes up. At some point, it stops being worth it for you because, remember, you still have to make some ROI on your investment property. You’ll have to be able to make repairs and start renting the place so you can get some money back. The higher the bidding goes, the longer it is before your investment gets in the black again.
Cost of a major fixer
Of course, your investment property needs to be nice enough to rent out. A lot of those bungalows looked pretty nice from the street. But, a homeowner who is underwater might stop doing even normal repairs and maintenance. The longer the house is on the market, the more work you might have to do. Again, that eats into your returns.
Is it really for sale?
Have you verified if the house is available for a short sale? It might not be, even if you find it in the Chicago short sale listings. Why? Because it might be listed there before there is lender approval. And, that is the biggest sticking point.
The bank doesn’t have to accept a short sale offer. They might reject getting pennies on the dollar. In Illinois, they have 90 days to decide. Do you have three months to wait? Do you want to chase deals that might not even be there?
This city is too big and there are too many great properties to spend time trying to buy houses that cost me too much money and far too much time. So, I’ve found a better way.
The Better Way To Turn Distressed Property Into Investment Property
You don’t want to get money tied up in a Chicago short sale listing that may or may not actually be for sale and, if it is, could empty your pockets of any potential upside. That’s why someone like you might think about becoming an independently owned and operated HomeVestors® franchisee.
As a HomeVestors® franchisee, I have access to distressed homeowners that don’t want to face foreclosure. They know who to call for help because of the nationally-known and trusted “We Buy Ugly Houses®” marketing campaign. When they call, I can inspect the house and make them an offer that puts cash in their pocket quickly. And, I don’t have to deal with the bank. It’s much easier and faster for everyone.
If you’re interested in avoiding the Chicago short sale listings and finding great investment properties, request information about becoming a franchisee today.
Each franchise office is independently owned and operated.