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 in a certain neighborhood. Not only does this make it easier to spot great deals, but 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 2019.
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 Logan Square is closing in on nearby Bucktown and Wicker Park as the place to be. In fact, with all of the attention it got last year, 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 now boasts some popular commercial shopping destinations—like Target and Home Depot—much to the chagrin of old timers. Sales prices dipped slightly early on in the year, but have been rising overall, making now a good time to implement a buy-and-hold strategy. You can expect a decent rental income on your property, as the median rent in Logan Square stands at $2,050—still above Chicago’s average rent overall.
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 for you. 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 large 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 potential tenants.
And the entrance barrier is still relatively low for real estate investors. Low property prices and rising median rents make for a great opportunity, especially for novices. According to Trulia, the median sales price of a property in Pilsen is just $306,250, yet median rent is as high as $1,600 per month. If you 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. But, because eyes have been on Pilsen for some time, it’s better to buy now so that you don’t get priced out of investing in this eclectic Chicago neighborhood later.
Best Neighborhood for Speculation: Avondale
Avondale has been making the media rounds as Chicago’s next hottest neighborhood since mid-2018. That the travel guide, Lonely Planet, ranked this northwest neighborhood as one of the country’s top 10 neighborhoods to visit back in 2017 undoubtedly helped. Visitors took it seriously, but so did Chicagoland residents who were getting pushed out of nearby hipstervilles with high price tags. With the word out, gentrification is starting to knock at this working-class suburb’s door. Sales prices have been rising and could skyrocket in the next few years as Avondale follows in the footsteps of Logan Square and Bucktown. And, should you buy into this family-friendly neighborhood speculatively, you could even achieve a solid passive income from your investment over the short-term.
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 a significant increase in sales prices each year. By last fall, median sale numbers shot up by almost 45%. Such dramatic price increases may leave you feeling like you have missed the boat. There’s still plenty of time to jump on board, however, since prices in the area remain far below 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. Buy, renovate and sell strategies could be employed with success in the new year, while holding your investment may also prove profitable as prices continue to finally 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 relatively steady increase in home prices. Even with a slight dip mid-2018, median sale prices reached close to one million by January of this year. It’s an expensive market, true. But, high rental rates, buoyed by the neighborhood’s growing popularity, helps to make the cost more palatable.
Boost Your Exit Strategy Options by Buying the Right Property
Regardless of where you choose to invest in 2019, 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.
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 2019 by requesting franchise information today.
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