Foreclosed Multi Family Homes for Sale in Chicago

Chicago had one of the highest foreclosure rates in the US in August 2021. If you’re looking for investment opportunities, now could be the right time to look for foreclosed multi-family homes for sale in Chicago.

Buying a foreclosed multi-unit building has several benefits. The process has some additional steps compared to buying a traditional property, though. Find out more about buying a foreclosure and why you may want to get into the market.

Why Buy Foreclosed Multi Family Homes for Sale in Chicago?

A multi-family home can be a smart real estate purchase for several different types of buyers. Investors and owner-occupants can benefit from buying a multi-unit building. You can save money by choosing a foreclosed property.

Advantages of a Multi-Family Home

A multi-family home can be a good investment. You’ll gain income from tenants paying rent. A multi-family home diversifies your portfolio if you have primarily single-family rentals.

Living in one of the apartments as an owner-occupant has benefits as well. Financing options are better for owner-occupants than for investors. You can still get rental income from the remaining units.

You may choose a smaller multi-unit building as a family building. An adult child or older parents are under the same roof with you, but everyone has more privacy than in a single-family home.

Advantages of Buying a Foreclosure

The most obvious advantage of buying foreclosed Chicago apartment buildings for sale is that you get a lower price. Banks don’t want to be in the landlord business. They want to recoup their money as soon as possible, so they’re likely to sell at a lower price.

A lower purchase price means a lower mortgage payment. You may also be eligible for special government-sponsored financing like a 203(k) loan or the FreddieMac HomeSteps program. Veterans and military families may qualify for VA financing.

Buying a property below market value means you’re likely to make a large return on your investment when you sell it.

Types of Multi-Family Homes

Chicago has two types of multi-family properties: residential and commercial.

Buildings with 2 to 4 units are considered residential properties. 2 flats and 3 flats fall into this category. You can generally use the same financing options as for a single-family home.

Properties with 5 or more units are considered commercial properties. Mixed-use properties, with a store or office on the ground floor and apartments above, are also commercial. These types of properties need commercial financing.

Types of Foreclosure Sales

You can buy distressed multi-family homes in any phase of the foreclosure process. The stages include:

• Pre-foreclosure
• Auction sale
• Real estate-owned (REO)
• Government-owned

Most people choose to purchase an REO property. Some buyers do choose the auction process, though.

Auction Sales

Buying auction homes for sale in Chicago can give you more properties to choose from. You may be able to get a lower price than an REO multi-unit home.

You may have less competition to buy an auction house, but the other potential buyers will be experienced investors. Other risks include the fact that you’ll have limited knowledge of the properties for sale. You rarely have the opportunity to conduct an inspection or see the building’s interior.

REO Multi-Family Housing

The risks of buying auction homes and the amount of knowledge necessary for the auction process make many potential buyers choose REO properties. REO gives people a greater sense of security.

You’ll be able to have an inspection and visit the apartments before you commit to buying anything.

How to Buy Foreclosed Multi Family Homes

Buying a foreclosure is similar in many ways to any other real estate transaction. If you plan to buy using financing, you should get preapproved. You’ll need to find properties you’re interested in.

The main aspect of buying a foreclosed multi-family home that differs from buying a standard home is that you have to thoroughly research any potential hidden costs.

Get Preapproved for Financing

If you plan to buy a foreclosed multi-unit home using a mortgage loan, you need to prequalify and get preapproval. Preapproval tells you exactly how much you can spend. It makes you a more attractive buyer because the seller knows your financing will come through.

Find Foreclosed Multi-Unit Buildings for Sale

You can help narrow your options of foreclosed properties by focusing on one or two neighborhoods. Choose areas that have the most potential for a good return on your investment.

To find specific properties, you can drive through your target neighborhoods looking for broker signs that say “Foreclosure” or “Bank Owned.” You can check individual bank and credit union websites. Most major financial institutions have a list online of their properties for sale.

To simplify the process, you can work with a real estate professional who specializes in foreclosures. An agent can save you significant time and frustration if you’re new to buying foreclosed properties.

Research Potential Repairs and Hidden Costs

You’ll need to carefully calculate a budget for repairs before you buy a foreclosure. Most foreclosure properties have been neglected. The former owners weren’t able to make their payments, so it’s unlikely they kept up with maintenance and repairs.

Foreclosures often sit vacant, which adds to the potential repair bill.

You also need to research any additional costs, like back taxes and tax liens. You may be responsible for paying condo association fees and other expenses. Finding out what these costs will be before you commit to a purchase can save you from an expensive surprise.

If these costs seem acceptable compared to what you can reasonably expect in terms of rental income and/or resale value, it’s time to make an offer.

Make a Quality Offer

The seller wants to find a buyer quickly, but that doesn’t mean they’ll take a lowball offer. The bank wants to get as much of their money back as possible. The agent selling the property wants to maximize the commission and keep a positive relationship with the bank.

Do enough research to know you’re making a reasonable offer.

Choosing the Right Real Estate Professional

Buying foreclosed multi-family homes for sale in Chicago can be a great investment. The process can be more complex than buying a traditional property, though. The right real estate professional will help ensure you get the best value for your money and avoid costly mistakes.

URB Chicago provides home buyers and investors unmatched opportunities. Our inventory in Chicago’s South Side and West Side neighborhoods can include foreclosures at bargain prices. Contact us today and let’s start planning your next real estate purchase.