We have worked with Chicago’s top real estate investors, realtors, and wholesalers in the last few years. We have seen people come and go as you could expect in such a unstable market. Fortunately, we have seen what has made other successful and other investors fail. Whether you are a wholesaler or investor looking to get into the Chicago market, there are rules that will help you get started in the right direction which we will share exclusively with you. Below we have complied five tips that can help you tame the beast that is Chicago real estate investing!
Use a good Realtor in the area and wholesaler.
Go to http://www.chicago.blockshopper.com and under the Chicago tab you will easily find the best agents in any given area. Not all agents will know how to work with investors, but some may, either way it’s not that important. You want to find agents who are doing a lot of business in any given area because they will know what is selling and could help you sell or find investment deals. Having an agent that knows an area on your side is a great way to get started. Have them start sending you listed REO’s and short sales in the area. Tip number 2 will help with finding a good wholesaler.
Know the area.
Pick an area of interest and drive around, look at properties with for sales signs outside and start getting familiar with the properties, prices, and agents who sell there. If you find a “we buy houses” sign, call that number because that is how you will find a wholesaler. If your wholesaler is any good, they will call back and give you an idea of what to look for. DISCLAIMER: Not all wholesalers call back because they are no longer working that area. Either way, work with the ones that do call back. Ask them about the prices and get their opinion on what to look for and what price range.
Know how to get comparables.
Here is the criteria we typically use for our deals. Look for sold properties within .5 miles of subject property. Make sure the properties have similar exterior and style. (Comparing brick to frame is a big no-no.) Try your best to keep bed count the same and look for properties that had similar square footage (20% above or below).
In addition to knowing how to determine good comps, make sure the numbers work in that area. If you are getting REO’s for 50-60K, and the comps are 100-110K, there is not enough spread for you and/or your investor to turn a profit. I would look for a minimum of 90K cushion between the retail sold comps and bank owned properties. This leaves room for rehab costs, carrying costs, closing and realtor fees.
Watch out for pocket dividers.
Bridges, train tracks, and major intersections can split an area up. These natural dividers happen to include or exclude properties from your comparables list. If there are great comps within the criteria we provided, yet a property is not selling or has been listed forever, see if it lies on the other side of these dividers. Train tracks and bridges are a good indicator of a change in neighborhood.
Make sure the property is brick.
Simply put: In Chicago, brick is for flipping and frames are for renting. You should not make an offer on a frame property as you would a brick. The ARV between properties that are identical in everything but exterior is about 30-40K. At the end of the day, you should ignore frames unless you are looking to rent or wholesale to landlord.
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