Chicago Multi Unit Buildings for Sale

Vacancy rates in Chicago’s rental housing market are at an all-time low. Median rent has risen for seven months in a row.

Now is a great time to look for multi-unit buildings for sale in Chicago.

Investing in multi-family homes has many benefits. You can find bargain-priced opportunities, especially in Chicago’s South and West Side neighborhoods.

Learn more here about why you should consider investing in multi-family buildings in Chicago and where to do it.

Benefits of Investing in Multi Unit Buildings for Sale

Multi-unit buildings have several advantages as investments. One of the main benefits is monthly cash flow from the rental income.

A multi-family home gives you more protection against vacancies. If one unit is vacant, you still have income from the others. A vacant single-family home doesn’t give you any income until you find a new tenant.

Another benefit is that you can usually get better investment financing terms than for a single-family home. The bank considers the cash flow from an apartment building to be more predictable than a single-family home. The loan is less risky for the lender.

A multi-family building is a good way to build a larger portfolio of rental units. Buying an apartment building with ten units is much more efficient than buying ten individual houses.

Finally, you get significant tax benefits. You can deduct maintenance, repair, and operating costs from your taxable rental income. You can also take advantage of depreciation and cost segregation.

Residential or Commercial Property?

Chicago categorizes multi-unit buildings for sale into residential or commercial categories. Buildings with two to four units are considered residential. Buildings with 5 or more units are considered commercial.

Mixed-use properties, with a store or office on the first floor and apartments above it, are commercial real estate.

You usually get better terms for a mortgage loan with residential properties. You have basically the same loan options as for a single-family home.

Lenders consider commercial real estate loans to be riskier than residential ones. For this reason, you’ll usually need a larger down payment than for a residential property.

The loan term is shorter, too. You typically have a 10-year term instead of the 30-year term for residential real estate.

Investment vs Owner-Occupied

You can buy multi-family homes for sale in Chicago purely as an investment. You may also choose to live in one unit in the building and rent out the rest.

Owner-occupied properties have better financing options than investment properties. The criteria for owner occupancy can vary by lender, though, so be sure you understand the loan terms before signing.

Classes of Multi-Family Properties

You have different classes of properties to consider when you start looking for multi-family homes for sale in Chicago. Each type has a different level of risk and potential return on your investment.

Property classes consider factors like how old the property is, tenants’ income level, growth potential, appreciation, amenities, and rental income.

Class A

Class A properties are the highest quality apartment buildings in their market and area. They’re newer with top amenities. The tenants have high incomes. The vacancy rate is low, and rents are high.

These properties are good buy-and-hold investments.

Class B

Class B properties are somewhat older. The tenants have lower incomes, and the rents are lower. These multi-unit buildings may have some deferred maintenance issues.

Class B properties are often a “value-add” investment opportunity. Renovations and some improvements can upgrade them to a higher value.

Class C

Class C properties are usually more than 20 years old with locations that are less desirable. The buildings need renovation and updates. Class C properties have some of the lowest rental rates in their market.

These types of multi-family homes are much less expensive to buy, but they’re a riskier investment. You usually have fewer financing options. With significant improvements and ongoing management, though, Class C properties can be very profitable.

Class D

Class D properties are in worse condition than Class C properties. They need substantial repairs before anyone can live there. They’re often located in undesirable areas with problems like crime and drug abuse.

These types of properties are a challenging investment. However, you can buy them at very low prices. For experienced fix-and-flip investors, they can be a good opportunity.

Foreclosed Properties

Multi-unit foreclosures in Chicago can be another good way to get a better price on an investment property. Sellers need to offload these properties quickly, so they’ll often accept an offer below market value.

Special financing is available to buy a foreclosed multi-family home if you qualify. The federal government sponsors options like 203(k) loans, the HomeSteps program through FreddieMac, and financing through the VA for military families.

Multi-family foreclosures often need repairs and renovation. The lower purchase price means you can get a valuable return on your investment, though.

Chicago Neighborhoods to Consider

Chicago’s South and West Sides have great potential for real estate investing.

The city of Chicago recently announced mixed-use development projects worth $200 million as part of its Invest South/West initiative. The South/West initiative is a three-year program that will invest $750 million in ten neighborhoods. This investment is just one is one sign of the potential in these areas.

South Side Neighborhoods with Growth Potential

South Side apartment buildings for sale in Kenwood and Woodlawn can be a good growth opportunity. The Obama Presidential Center will be on the east side of Woodlawn. The University of Chicago is trying to attract residents with incentives for faculty and staff to relocate to these areas.

Austin and Lawndale are other South Side neighborhoods to look at.

West Side Neighborhoods with Growth Potential

Pilsen and Humboldt Park are two West Side neighborhoods with good investment potential. The University of Illinois and the UIC Medical District attract students and professionals to Pilsen. Rental demand is high.

Humboldt Park saw a steep drop in real estate values during the Great Recession. Prices are now rising rapidly, but they haven’t fully recovered. Humboldt Park has many opportunities to invest in foreclosed and distressed properties.

Finding the Best Multi Unit Buildings for Sale in Chicago

Chicago has a wealth of multi-unit buildings for sale. Whether you plan to be an owner-occupant or purely an investor, multi-family housing can be a great choice. Finding the right opportunities is the key.

URB Chicago has a portfolio of multi-family buildings for sale that includes move-in-ready properties as well as fixer-uppers and foreclosures. We specialize in South Side and West Side neighborhoods. Our property specialists are ready to help you find the right opportunity for your investment goals.

Contact us today and let’s find your next real estate investment.