When people ask me about becoming a real estate investor in Chicago, I tell them to read Working, by Studs Terkel. It’s a great chronicle of real Chicagoans and the hard work they do every day. Chicago is a city that rewards hard work and big dreams.
If you are starting a real estate investment business in Chicago, you need to be smart, hustle, learn as much as you can, and work as hard as possible. The good news is that being your own boss in the Windy City can be fun, rewarding, and the experience of a lifetime.
The Joy of Being Your Own Boss in Chicago
As Carl Sandburg said, Chicago is a city of big shoulders. Everyone wants to carry something, and not everyone is content to carry things for someone else. That’s why the dream of being your own boss is so prevalent here. And, unlike a lot of things involving City Hall, it is surprisingly easy to start your own business.
Running a business—especially a real estate investing business—is no small feat. It takes a lot of work. But if you have the drive, determination, and the (metaphorical) big shoulders to carry the load, it can be done.
Why Now Is a Good Time To Become a Real Estate Investor in Chicago
The question is always: is now a good time to start my business? Currently, there is pent-up demand and an uptick in real estate buyers. In addition, mortgage protections are beginning to be lifted, which should add more to the supply.
The real estate market in Chicago is poised to be hot for the next couple of years at the very least, as more businesses are moving into the city thanks to reduced office rent. And the truth is, for the smart real estate investor, the market can always be good.
Finding Good Real Estate Leads in Chicago
What do I mean by a “smart real estate investor”? Someone who knows that people are always buying and selling, no matter what the general market is doing. Some neighborhoods are always rising. Look at Wicker Park or Logan Square—two areas that are growing. Logan Square grew during a market downturn.
What you should do is find an area where you can sell a house for more than it cost to buy and rehab it. That can be in the next Wicker Park (which is probably Humboldt Park), or it can be in an area that isn’t as hot.
It’s always good to be in a hot neighborhood. But it is always best to make a profit. And that can be done just about anywhere. You just need to find leads.
How Not to Find Leads in Chicago
Chicago likes people who hustle. Unfortunately, that means everyone else is hustling too. There is a lot of competition in Chicago real estate investing, which means that you have to be smart about finding motivated seller leads.
You don’t want places where there is a lot of competition. So, the Cook County sheriff’s auction isn’t the best place to find properties. Everyone is there, the prices go up, and people get really competitive. You might end up with nothing for your time, or worse, a money trap for which you greatly overpaid.
There can also be a lot of dead-ends, scams, and false hopes when it comes to online lead generation, especially on Craigslist. A good lead is when the owner is ready to sell and there isn’t a ton of competition to impact the deal.
Should I Join a Real Estate Investing Club?
There are a lot of Chicago real estate investing clubs, including the Chicago Real Estate Investor Association, the largest of its kind in the Midwest. There are also a lot of more or less formal meetups and other groups. There are literally hundreds of groups in the area on Meetup.
These can be good. It’s good to know people and to make connections, especially if you are wholesaling. You can learn things, too. The problem is that it is really hard to tell which ones are worth your time and which ones are not. Some are valuable, some are people just gabbing. Remember, the last thing you want to do in this business is waste your time.
Got the Lead? Get the Financing
After you’ve gotten a good lead, analyzed the deal, and decided it is a good one, it’s time to make an offer. There is one thing you need to back up your offer though: money. And the problem is that banks generally don’t like to lend to investors; they often think it’s too risky.
Sure, Chicago was built on risk and speculation but the banks aren’t game for risk. You’ll likely want to find a hard money lender. Hard money lenders are made for real estate. They are fast with their loans and will oftentimes lend even if you have bad credit. The rates can vary, based on your credit, your available cash, and your history in real estate. But finding the ones with the best rate is the best way to get the investment property you want.
What Happens After You Get the House
So now that you have your investment property, you will do one of three things:
- Rehab and sell it (the fix-and-flip)
- Rent it out as an investment property (become a landlord)
- Wholesale it to another investor
These are all valuable options, and they are what you should decide on before you buy your house. Have an exit strategy and know what you are planning to do before making a deal. Selling isn’t always easy, and you have to be a good marketer to do so.
The most important thing is to make sure you understand the laws and regulations of selling real estate and/or being a landlord in Chicago. There are rules and regulations from both the city and the state, especially when it comes to wholesaling, so you want to be extremely diligent in following them.
The Best Way To Be a Real Estate Investor in Chicago
About 10 years ago, I invested in an independently owned and operated HomeVestors® franchise. Becoming a franchisee was the best business decision I ever made. My business went from good to great, and if I had started earlier, I would have had more success earlier.
HomeVestors has a powerful lead generation tool: their well-known We Buy Ugly Houses® marketing campaign. Everyone in Chicago knows it, so when they need to sell fast, they call the number. Then I can get the lead. It’s a quality lead with little-to-no competition.
There are also other proprietary tools that help me do everything from gauge the ARV on a lead to getting the best financing from hard money lenders. It takes a lot of the tedious work out of the business, and allows me to focus on closing deals. HomeVestors® training and mentorship programs are also just about everything you’d want out of a real estate club and nothing you don’t.
If you’re considering becoming a real estate investor in Chicago, request information about becoming a franchisee today.
Each franchise office is independently owned and operated.