My best friend’s son, Dave, recently started investing in real estate, and a few days ago he invited me to lunch at Mr. D’s so he could pick my brain. I love mentoring new investors (and steak sandwiches), so I was happy to meet with him and answer his questions about the Chicago real estate market.
One of his first questions was about free houses in Chicago. He’d heard that it was possible to legally acquire a house for free from sources like the Cook County Land Bank Authority (CCLBA). To him, that seemed like the perfect opportunity to invest in a property with low up-front costs, then flip it and sell it for a massive profit.
My advice to him, and to any other new investors out there, is this: if something seems too good to be true, it usually is. That’s true for most aspects of life, but it’s especially the case with real estate. The “free” houses you get in Chicago are never really free, and often cost more in the long run than just purchasing a distressed home for a modest price. But first, let’s take a look at how you can get free houses in Chicago before I explain why it’s a bad idea. Then, I’ll introduce you to some better options.
How To Get Free Houses in Chicago
There are a few different ways that investors can acquire a free house in Chicago:
Real Estate Agencies
There are some Chicago-area real estate agencies, such as URB Chicago, that specialize in foreclosures and distressed properties. Sometimes, they’ll acquire a property that has a lot of issues, such as back taxes, unpaid utility bills, code violations, and major damage. Rather than try to handle these issues themselves, they’ll instead offer up the property for a steep discount, or even for free.
You’re unlikely to find these properties listed on their website or on the MLS, so you’ll need to call them up and ask if they have any free houses available. And, since these agencies don’t give away free houses very often, you’re unlikely to have any luck on your first (or second, or third…) call. So, right off the bat, you’ll have to waste quite a bit of time calling around to multiple agencies on a consistent basis until you find an available property. And then when you do finally find a “free house,” you’ll have to deal with the major outstanding issues that made the house unsellable in the first place (more on that later).
Cook County Land Bank Authority (CCLBA)
The CCLBA purchases vacant and distressed properties in some of Chicago’s worst neighborhoods then sells them to investors who are willing to fix them up. Their goal is to revitalize areas dealing with neighborhood blight by turning abandoned properties into affordable housing and attracting more businesses. The CCLBA also sometimes acquires properties with significant outstanding issues and will offer them to investors for free.
Again, these free houses won’t be publicly listed on the CCLBA website, so you’ll need to call them to ask if any are available. You’ll probably have to compete with a lot of other investors for these free properties as well—and I don’t mean you just need to be the first to call. The CCLBA prioritizes first-time homebuyers, non-profit groups, and experienced investors with a proven track record of purchasing distressed properties specifically for neighborhood revitalization and affordable housing. So, if you’re a new investor, or your primary goal is to maximize your ROI, you’re probably not going to convince the Land Bank to hand over a free property. If you do end up winning the property—because you’re lucky, or nobody else wants it, or you have experience with Chicago neighborhood revitalization—you’ll then have the monumental task of clearing the title and performing renovations to make the property livable again.
Homeowners of Distressed Properties
Sometimes, the owner of a distressed property is so overwhelmed by back taxes, liens, and repairs that they’ll be willing to sign their house over to you for free to avoid bankruptcy. However, you need to be very very lucky, an amazing marketer, or a known quantity in your neighborhood for this to become a possibility. Most people don’t respond well to unsolicited visits from investors, especially ones who tell them their house is in such terrible condition that they should give it away for free. Getting a free house in Chicago directly from the distressed homeowner—unless you’ve already established a solid reputation as an ethical real estate investor—is thus extremely unlikely, though technically possible.
Why a “Free” House in Chicago Isn’t Really Free
Once you do get your hands on a free house, you’re going to need to spend a significant amount of time, money, and effort to resolve its outstanding issues before you can consider selling it. Some of the free properties in Chicago have six-digit tax bills, for instance, in addition to requiring thousands of dollars in repairs to make them habitable again. When you add up the costs involved in getting a “free” house ready to sell, you’re likely to realize that you could have saved money in the long run by paying for a cheap distressed property in Chicago that doesn’t come with so much baggage.
A Better Option for Investing in Chicago’s Distressed Properties
My recommendation to Dave, and to all new investors, is to focus your energy on finding cheap distressed properties that you can renovate and sell with less hassle. The best strategy for getting leads on distressed properties in Chicago is with inbound marketing—using marketing tools such as billboards, radio ads, and word-of-mouth to get your name out there, so distressed homeowners know to call you when they’re ready to sell. Instead of spending all your time and energy chasing down leads on “free” houses, you can generate the motivated seller leads that can come to you.
And the best part is, you don’t need to start from scratch, because you can take advantage of a nationally-recognized inbound marketing campaign like “We Buy Ugly Houses®” by becoming a HomeVestors® franchisee. HomeVestors is a large network of independently owned and operated real estate investment franchises with some of the best marketing and lead generation tools in the industry. Plus, as a new franchisee, you’ll get the one-on-one mentoring and support of a Development Agent—a real estate industry veteran like me who loves helping new investors succeed.
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.