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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
Chicago #1 for Cash Flow

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, 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 single family and multi-family housing with high rents and low acquisition prices. See the difference below comparing Chicago, Illinois Single Family Homes versus Anywhere, USA Single Family.

chicago income 

property
     
Property Type 2-UNIT MULTI
Beds / Baths 6 bed / 2 bath
   
Purchase Price $165,000
Down Payment (25%) $41,250
Chicago Best For Cash Flow Investments
Amount Financed $123,750
   
Down Payment (25%) $41,250
Closing Costs $4,000
Cash Flow Investments
Cash Invested $45,250
   
Interest Rate 4.25%
Debt Service $609
   
Monthly Rent (+) $2,200
Monthly Debt Service (-) $609
Monthly Property Tax (-) $210
Monthly Insurance (-) $108
Landscaping (-) $80
Vacancy Rate (-) $88
Maintenance Rate (-) $85
Property Mgmt Rate (-) $169
Cash Flow Investment Properties
Monthly Cash Flow (+) $ 777
Annual Cash Flow (+) $9,323
   
Cash-On-Cash ROI 20.60%

vs

Property Type 1-UNIT SFR
Beds / Baths 3 bed / 2 bath
   
Purchase Price $125,000
Down Payment (20%) $25,000
Passive Income Properties
Amount Financed $100,000
   
Down Payment (20%) $25,000
Closing Costs $3,000
Chicago Best For Cash Flow Investments
Cash Invested $28,000
   
Interest Rate 4.25%
Debt Service $492
   
Monthly Rent (+) $1,100
Monthly Debt Service (-) $492
Monthly Property Tax (-) $117
Monthly Insurance (-) $75
Landscaping (-) $20
Vacancy Rate (-) $60
Maintenance Rate (-) $40
Property Mgmt Rate (-) $79
Cash Flow Investments
Monthly Cash Flow (+) $206
Annual Cash Flow (+) $2,476
   
Cash-On-Cash ROI 8.84%

The typical investment property offered by PFR ranges from $160,000 (2-Flat's) to $280,000 (3-Flat's) 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 Anywhere USA generates approximately 3x more cash flow each month by purchasing one property with multiple units for approximately the same price and cash invested into a Single Family property. Each two unit investment property offered by PFR rents for an average of $950 to $1,350 per month generating between $1,900 to $2,4000 per month in rental income which is not available in most markets in the U.S. To further demonstrate the numbers, a typical investor purchasing a single family Anywhere USA would have to spend $375,000 (purchase approximately 3 properties) to create the same monthly cash flow as one investment property in Chicago for $165,000. Clearly Chicago is the #1 market for cash flow investments measuring purchase price vs monthly cash flow.

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.

Disclaimer:

This real estate information has been designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal or other expert assistance is required, the services of a competent professional person should be sought. The author specifically disclaims any liability, loss, or risk, personal or otherwise, incurred as a consequence directly or indirectly of the use and application of any techniques or contents in this website.

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