Chicago has a mix of several types of multi-family investment properties ripe for financial opportunities. Rental properties are a good source of cash flow and real estate appreciation plus tax deductions for expenses.
The most common type of multifamily property and one seen in large and medium-size communities around the world is the multistoried, modern apartment building. Chicago has plenty of those. But it also has a huge inventory of 2-10+ unit multi-family buildings. Any rental property with more than 5 units is considered commercial real estate.
Thirty percent of the City of Chicago housing stock is made up of two-to-six-unit buildings, also known as ‘flats’. They are called flats because the apartment units generally cover one floor of the building.
The Chicagoland rental market is strong with more than 50% of residents living in a rental unit. Vacancy rates are low. There is a demand for subsidized housing rentals.
Smaller multi-family real estate is perfect for investors, both well-seasoned with a large portfolio and new investors just starting out. The initial cost of an apartment complex will be higher because you are dealing with a larger building and multiple units instead of a single-family home but your cash flow will be greater when the property is fully rented out. When a five-unit building has one vacancy and the other four tenants are paying their rent you still have cash flow. If a tenant moves out of a single-family home it is 100% vacant and non-income producing until a new tenant moves in.
One of the advantages of buying a multi-family building is access to better financing opportunities. In addition, a building with more rental units can help to grow a portfolio quicker: buying one building with five units versus buying five separate single-family homes.
I was speaking to an investor with a large portfolio of single-family homes. He has decided to sell several of the homes to purchase one multi-family building. His reasoning is there is one negotiation, one inspection, one loan, less commuting between properties to check on each building, there is just one roof to maintain, one water bill, one tax bill, etc.. Instead of multiple ‘everything’ to deal with, he has just one. This will save him time and energy which he appreciates.
Multi-family buildings have more focused issues for a property manager or owner to deal with than single-family homes. Several families can be affected when something goes wrong at a building, such as having a single boiler for the heat that is not working. It is important to have ready maintenance personnel who can get to the property quickly and efficiently to get the building up and running again.
Simple things like mowing and snow removal must be handled by the owner. Unlike a single-family home where the tenant is responsible, the property manager will need to arrange for that maintenance to be done.
With several families in one building, there is a larger possibility of clashes between tenants. Firm diplomacy must be available to get the issue resolved quickly.
MF Cashflow Team has been named one of the Top Ten Best Property Management Companies in the Chicago suburbs. MF Cashflow Team/M Property Group LLC has been managing both multi and single-family properties for several years. We know the rental market, the neighborhoods, the processes to get property cash flowing quickly and smoothly. We also have access to turnkey rental properties for sale to help you get started.
