In my years as a real estate investor, Chicago has proven time and time again to be brimming with profitable opportunities and great people. Overall, the Chicago investment property market is on the competitive side, which means that you’ll need all the help you can get when you’re launching your business. Deals tend to be made quickly, financing terms tend to be aggressive, and while there isn’t any shortage of attractive opportunities, there’s going to be at least some competition in nearly every niche of the market.
So, when you approach a prospect, you’ll need to be organized and ready to act. And when you approach a potential source of financing, you’ll need to show them that you’re the real deal. But, don’t let any of the above discourage you from looking for investment property in Chicago.
Despite the challenges you’ll face, the Chicago market is a great place to learn the ropes of real estate investing. You’ll be getting exposure to everything from feeling out new neighborhoods to learning how to value everything from mini-mansions to hardcore fixer-uppers. Plus, there’s a vibrant community of fellow real estate investors that you’ll get to become a part of, which is something that every new investor should aspire to.
Let’s dive in and look at some of the things you’ll need to do to get your business off the ground in Chicago.
How To Find Leads
When you’re a new investor in Chicago or anywhere else, a lot of your energy will be spent on hunting down leads for new investment properties.
You should incorporate a variety of different lead sources, including:
- Foreclosure auction sites
- Multiple listing services (MLS)
- Real estate wholesalers
- Your professional investor network
At a minimum, you should be cruising the county’s foreclosure auctions and have subscriptions to several MLS feeds. Between those sources, you’ll get a regular drumbeat of new leads to peruse. Still, everyone has access to the same information, so you should expect a lot of competition if you decide to place a bid in a foreclosure auction or put in an offer on a home you found via an MLS feed.
In the long run, using your investor network and working with a wholesaler is how you’ll find the majority of your highest-quality leads and highest-profit opportunities. When you’re just getting started, however, your network will probably not be powerful enough to provide much help with finding quality prospects for investment property in Chicago.
Know Your Financing Options
Rather than waiting to find financing until after you’re ready to put in an offer on a promising lead, you should figure it out upfront. By understanding the limits of your purchasing power from the get-go, you’ll cull your lead funnel more aggressively and focus on the opportunities you can approach.
In general, you’ll have a few options for how to get financing for fixing and flipping homes, such as:
- Credit lines or bank loans
- Fix-and-flip loans
- Teaming up with co-investors
- Hard money loans
Credit lines and bank loans are probably the things that many new investors go to first, but they aren’t as helpful as they may seem. Your credit limit might not give you enough borrowing capacity to actually close a deal and then successfully renovate the home after. That’s where a hard money loan can be helpful.
With hard money loans, the lender’s cash outlay is secured by holding the property’s equity in the collateral. That way, if borrowers default, the lenders generally can still recoup the value of their investment. As it’s individuals and businesses rather than banks that disburse hard money loans, there’s also an expedited underwriting process that doesn’t require good credit.
So, finding a reliable partner who can give you a hard money loan is vital for getting help with buying investment properties in Chicago. Just be sure to keep an eye on the repayment terms that hard money lenders offer, as they can easily eat into your profit margin.
Finally, working with co-investors may be the easiest way to get help with financing your investment property in Chicago. With someone else to pay a majority of the cash and no bank to underwrite the financing terms, you can get in on much larger deals than you would otherwise.
But, most people who are just starting don’t have a robust network of potential co-investors. And, some co-investors can be predatory, so you’ll need to watch out and choose your partners carefully.
Preparing To Close the Deal
Once you’ve secured the finances and found a worthy lead, you’ll need to close the deal.
To close the deal, you’ll need to:
- Get your lenders or co-investors to put their commitment to providing financing into writing
- Alert your renovation contractors to standby
- Set in an offer with the listing agent or agency
- Send your home inspector to the property
- Sign the paperwork to transfer ownership and initiate financing
- Collect the deed and the keys
Compared to closing on a home for personal inhabitants, the most significant difference with closing on investment property in Chicago is that you won’t have the help of a real estate agent to navigate the process. The second-biggest difference is that your financing will be at a less forgiving rate and repayment schedule than a mortgage, so be sure to have all of your ducks in a row.
That means you can’t wait until after the deed is in hand to reach out to your contractors if you plan on doing any renovations. Get a feeling for their availability and cost estimates first, then get something in writing with them on paper as soon as you have legal possession of the property.
Growing Your Business
Suppose everything I’ve mentioned so far seems like it’s going to be more than you can handle. In that case, I suggest that you find a mentor and set of experienced business partners to help with your investment properties in Chicago. In that vein, Chicago investors have the opportunity to start an independently owned and operated franchise with HomeVestors, which can energize every portion of your business.
HomeVestors® franchisees can get advice from expert real estate investors like me. They can also get rapid access to several kinds of financing on demand, not to mention a knowledge base that can answer questions about everything from neighborhood selection to deal flow. Furthermore, HomeVestors franchisees get the benefit of the HomeVestors’ “We Buy Ugly Houses®” national marketing campaign, which furnishes franchisees with plenty of high-quality leads.
As if that weren’t enough, HomeVestors franchisees also get access to real estate valuation software that’ll reduce the uncertainty of appraising your prospects. In sum, becoming a franchisee is a great way to give your business a boost right out of the gate, and it’s an excellent way to help you compete more effectively in the Chicago market.
If you’re considering starting a professional real estate investing business, request information about becoming a franchisee today.
Each franchise office is independently owned and operated.
HomeVestors of America® is the nation’s only real estate investing franchise, providing business opportunities to real estate and investment professionals across the nation.