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Profit from Rentals is a BBB Accredited Real Estate Investor in Skokie, IL

Profit from Rentals is a BBB Accredited Real Estate Investor in Skokie, IL
San Diego County vs Chicago Cash Flow Investments

Investors often ask: Why Chicago? Simply put, it is because the cash flow numbers work. The rents relative to the purchase price of the homes are very high relative to other areas of the country such as San Diego County, and the Chicago metro area continues to experience excellent appreciation in rental prices. Chicago is one of only a few markets with abundant supply of 2-4 multi-family units with high rents and low acquisition prices. See the difference below comparing Chicago, Illinois versus San Diego County, California..

     
Property Type 3-UNIT MULTI
Beds / Baths 7 bed / 3 bath
   
Purchase Price $145,000
Down Payment (25%) $36,250
Amount Financed $108,750
   
Down Payment (25%) $36,250
Closing Costs $4,000
Cash Invested $40,250
   
Interest Rate 5.5%
Debt Service $617
   
Monthly Rent (+) $2,600
Monthly Debt Service (-) 617
Monthly Property Tax (-) $215
Monthly Insurance (-) $73
Vacancy Rate (-) $130
Maintenance Rate (-) $130
Property Mgmt Rate (-) $200
Monthly Cash Flow (+) $ 1,235
Annual Cash Flow (+) $14,786
   
Cash-On-Cash ROI 37.21%
5-Year IRR 52.33%
CAP Rate 15.31%

vs

Property Type 1-UNIT SFR
Beds / Baths 4 bed / 2 bath
   
Avg Purchase Price $580,000
Down Payment (20%) $116,000
Amount Financed $464,000
   
Down Payment (20%) $116,000
Closing Costs $8,000
Cash Invested $124,000
   
Interest Rate 5.5%
Debt Service $2,635
   
Monthly Rent (+) $2,600
Monthly Debt Service (-) $2,635
Monthly Property Tax (-) $308
Monthly Insurance (-) $100
Vacancy Rate (-) $130
Maintenance Rate (-) $130
Property Mgmt Rate (-) $130
Monthly Cash Flow (-) $ 833
Annual Cash Flow (-) $9,996
   
Cash-On-Cash ROI -8.7%
5-Year IRR 13.39%
CAP Rate 3.6%

The typical investment property offered by PFR ranges from $70,000 to $150,000 depending on the property type, number of bedrooms, units, and rents generated. As you can see in the side-by-side comparison above, Chicago vs San Diego County generates the same rental income however Chicago is 4x less expensive to buy. In this example the investor purchasing a rental income property in San Diego County would have to come out of pocket $833 each month to pay all the property expenses vs a Chicago rental income property generates $1,235 in positive cash flow each month. To further demonstrate the numbers, a typical investor purchasing a single family rental property in San Diego County would have to spend out-of-pocket almost $10,000 a year just to cover the property expenses whereas in Chicago the same investor would net before taxes almost $15,000 a year and spend $435,000 less to buy the same cash flow. Clearly Chicago is the #1 market for cash flow investments measuring purchase price vs monthly cash flow.

Seen enough? View a list of investment properties or contact one of our sales representative at (800) 341-0576.

Chicago Statistics

According to the 2000 census, the population of the Illinois was over 12,000,000 people, of which about 2,896,000 live in Chicago metro area. Approximately 37% of metro Chicago is African American, 42% are Caucasian, and about 21% are Hispanic and other minorities.

The 2000 census indicated that the city of Chicago median single-family / condo home price was $132,400 which has increased to $191,800 as of the fourth quarter of 2010. The median home prices in the suburbs of Chicago are much higher than the city. Property taxes are also relatively low, because the low tax rates and the low housing prices combine to hold down annual taxes. Most of the homes in Chicago are older than average, with many built before 1950, and a striking 56% of the homes are rented.

Despite the low housing prices, rents, relatively speaking, are much higher. According to HUD statistics, the 50th percentile rent for a 3-bedroom dwelling in 2006 was $826 per month. Therefore it is not surprising that many houses can provide positive cash flow, even with servicing a 90% mortgage.

The economics in Chicago are clearly favorable for investment. The key to investing in Chicago lies in careful selection of homes in the right locations and neighborhoods, and carefully selecting tenants and property managers. Some areas are prone to higher theft and vandalism so there is some important due diligence that must be performed. At PFR, we have concentrated on becoming experts in the area, so we perform the due diligence on behalf of our investors to get the right homes with the right tenants to earn safer, high yield returns on investment.

Chicago Housing Authority - Section 8. The demand for good quality, yet affordable housing is high in Chicago. Chicago has the second largest public housing program in the U.S. with the administration of over 36,000 Housing Choice Vouchers that allow low-income families to rent in the private market. HUD's Section 8 housing voucher program encourages the disadvantaged to seek safe, decent, affordable housing in the general community where they are from.

The advantage to landlords with Section 8 tenants is that the rent subsidies are paid directly to the landlord, not to the tenant, so there is virtually no risk of non-payment of rent. There are certain unique HUD standards that properties must meet to qualify under Section 8. Some of PFR ’s properties have been leased to Section 8 tenants, and we can specifically seek such tenants upon request. PFR always ensures homes sold with or for HUD tenants have passed or will pass all HUD requirements.

 

The information displayed above is for informational purposes only, and is provided to give investors a general understanding of real estate investing using industry standard numbers and calculations. Investors are advised to obtain advice from qualified legal and real estate professionals before making decisions concerning investment properties.

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