The Best Chicago Neighborhoods for Real Estate Investing in 2018
Everyone has a different approach to real estate investing. Some like to focus on a particular type of property. I know investors that will only touch multi-family apartments, for instance, while others are only interested in renovating distressed family homes for sale. Then there are the investors, like me, who also like to focus their property investments onto a certain neighborhood. Not only does this make it easier to spot great deals, it also makes property management so much easier. The less time I spend running across Chicago, the better!
The trouble with narrowing your approach, however, is that you can potentially run out of opportunities in your specialty areas. Soon, you’ll have no choice but to expand prospecting leads in other neighborhoods if you want to grow your business. As it happens, this is exactly what I’ll be doing in the New Year. It’s an easy decision to expand, but a harder one to choose which neighborhood to invest in next. I don’t mind an abundance of choice giving me a headache though. And that’s the great thing about investing in Chicago real estate—there are plenty of different neighborhoods to choose from. All have something special and different to offer. That being said, here’s what I think the best Chicago neighborhoods for real estate investing will be in 2018.
What Are the Best Neighborhoods for Real Estate Investing in Chicago?
Chicago has a neighborhood and a property type for every investor. From luxury apartments in The Loop to distressed houses in the suburbs, you can even still find a few up and coming neighborhoods still flying under the radar. There’s a good chance you’ll find your perfect investment property in one of the neighborhoods listed here, no matter your desired niche.
Best Up and Coming Neighborhood: Logan Square
We see it happen across the country, as soon as one neighborhood gets popular, neighboring communities quickly follow suit. If you’ve been keeping your eye on the Chicago real estate market, it will come as no surprise that I expect Logan Square to soon become as trendy as nearby Bucktown and Wicker Park. In fact, it’s a surprise that it hasn’t happened sooner. As well as having trendy hipster bars similar to those found in Bucktown, Logan Square can also boast some popular shopping destinations, including Target and Home Depot. In addition, the neighborhood is close to I-90 and the Blue Line of the L Train, So, you can see why Logan Square’s popularity is growing. Sales prices have slightly decreased over the past year, making it a good time for investors looking to implement a buy-and-hold strategy. You can expect above average rental income on your rental as the median rent in Logan Square stands at $2,600, well above Chicago’s median rent of $1,700.
Best Neighborhood for Attracting Millennials: Pilsen
If you like to diversify the types of property you invest in while remaining in one location, Pilsen is the place to be. This neighborhood, located in Chicago’s Lower West Side, boasts a mix of single-family homes, condos, and multi-family properties. It’s also a big draw for people looking to escape the city. Lined with fantastic boutique shops and great restaurants,18th Street is a huge hook. Most importantly, however, are the huge numbers of students and young professionals looking to make the move from student accommodation to rental apartments. The University of Illinois at Chicago and the UIC Medical District are practically on your doorstep in Pilsen, so you’ll never be short of would-be tenants.
And the entrance barrier is relatively low for real estate investors. Low property prices and high median rents make for a great opportunity, especially for novices. According to Trulia, the median sales price of a property in Pilsen is just $206,250, yet median rent is as high as $2,700 per month. If investors can find an undervalued property, renovate with an eye on Chicago’s Millennial market and then rent it out for the short-term, a healthy return on investment is possible.
Best Neighborhood for Speculation: Avondale
Avondale could become Chicago’s next hottest neighborhood if Lonely Planet has anything to do with it. The travel guide recently ranked this northwest neighborhood as one of the country’s top 10 neighborhoods to visit right now. It’s quite an honor and one that investors should take seriously. Now that word has gotten out, gentrification may start to knock at this working-class suburb’s door. Sales prices, which have a reasonable median of $347,500, could skyrocket in the next few years as Avondale follows in the footsteps of Logan Square and Bucktown. Should you buy into this neighborhood speculatively, you could even achieve solid rental income over the short-term as the median rent prices are sitting at $2,600 per month.
Best Value Neighborhood: Humboldt Park
It took until 2012 for prices in Humboldt Park to finally hit rock bottom, but since then the neighborhood has experienced an increase in sales prices of about 15% each year. Such dramatic prices increases may leave investors feeling like they have missed the boat, however, there’s still plenty of time to jump on board. Prices in the area are still down nearly 50% from their peak in 2006. Like Pilsen, Humboldt offers a mix of properties to invest in, but the opportunity to purchase distressed or foreclosed properties may catch your eye in particular. There are a number of foreclosed homes available in this area and this number may increase significantly in the year ahead. Humboldt is one of the poorest areas of the city by median income and residents may be hit hard by Senate Bill 9’s increase in property taxes. Buy, renovate and sell strategies could be employed with success in the new year, while holding your investment may also prove profitable should prices continue to rise towards pre-recession levels.
Best Neighborhood for Resident Appeal: West Town
All too often we get caught up in looking at areas from our own viewpoint—from that of an investor. Sometimes we need to turn the table and consider where we’d want to live if we were a resident. If you know Chicago well, there’s a good chance you’ll say West Town. Why? Because it checks all the boxes. Low crime, check. Great amenities, check. High livability rating, check. West Town may be a tad more expensive than most of the neighborhoods on this list, but that doesn’t mean it’s necessarily a bad place to invest. Over the last three years, the area has seen a steady 15% price increase. That has taken median resale price to just shy of $800,000 a month. It’s an expensive investment but high rental rates, buoyed by the neighborhood’s growing popularity, helps to make the cost more palatable. The median rent in the area is healthy $2,200 per month. This makes a buy-and-hold as good as a buy-and-sell strategy.
Regardless of where you choose to invest in 2018, attracting the right demographic will be key to obtaining the maximum sales price or rent possible. It’s not just Pilsen property owners that should be focusing on Millennials. For much of the Chicagoland area, Millennials already make up a significant portion of the sales and rental markets—and they look set to play an even more important role in the year ahead. Much of your investing success could hinge on appealing to these young professional renters and first-time home buyers.
Boost Your Exit Strategy Options by Buying the Right Property
In most cases, catering to the Millennial market will mean renovating your investment property, whether you bought a distressed home or not. Understanding the potential cost of renovations before you pull the trigger on a deal is, therefore, crucial. Underestimate the costs and you could end up paying more than a property’s true market value. This is something even the most optimistic investor will wish to avoid. It’s not an easy thing to do, however. Many experienced investors have developed a knack for estimating costs. Good for them; but I prefer to rely on a more mathematical approach than gut reaction. Instead, I trust Valuechek®, HomeVestors’® proprietary property valuation software. With Valuechek® I can get a quick estimate of expected renovation costs as I inspect the property and evaluate the after repair value. So, not only can I make sure I buy at the best possible price, I can close the deal quickly, too. If truth be told, ValueCheck® has stopped me from making a bad investment more times than I’d like to admit.
There’s only one way to get your hands on ValueChek®, and that’s by becoming an independently owned and operated HomeVestors® franchisee. Take your property investment business to the next level in 2018 by requesting franchise information today.
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