Chicago is definitely a beautiful place for investors to invest their money on. Effective cash flow management in a city like Chicago can bring in anywhere from a few million to a few hundred million dollars in investment income each year.
According to the City Government of Chicago, the City of Chicago generated $224 million in investment income in 2019, accounting for approximately 3% of total revenues. Furthermore, the city has played a key role in three major migrations in the United States: the influx of European immigrants, the transfer of black families from the South, and the transition from rural to urban areas.
Need more convincing how beautiful Chicago is for investors? A recent report in 2020 Chicago is once again the greatest city in the US for VC investor returns. It is, by far, a quintessential American city.
Despite a rush of negative headlines, Chicago has remained economically viable and lively. Chicago real estate is a no-brainer for property investors searching for an approachable gateway location. It has a strong economy, similar to that of coastal economies New York and Los Angeles, while some people may find it cleaner and friendlier than the former.
Here are the different reasons why Chicago real estate is still a good investment:
A. You can invest in Chicago properties for 3-5% down payment
Home investors can buy on a large margin, with as little as 3% to 5% down in some situations. That's a great value that you won't find in other major cities like New York or San Francisco. In Chicago, the price-to-rent ratio is likewise affordable.
B. Upward trend of rental prices
Since the beginning of the pandemic, rent costs have been significantly rising, and this trend is expected to continue beyond 2022. In most locations, there just aren't enough rental apartments to match demand, and with more demand than supply, rent rises are all but inevitable.
The trend is the same for industrial rentals. The demand for industrial assets is very high. Because of the epidemic, the desire for more warehouse and industrial space by e-commerce enterprises will very probably continue into 2022 — and beyond, resulting in more investors and corporations picking up these locations. The change from in-store to online buying that has occurred in the last two years has aided the rapid commerce growth. As a result, there has been a significant increase in demand for industrial assets, such as warehouses, to store all of the things sold by these shops.
C. Chicago is the city of renters (over 54% rent homes here)
Rents in Chicago are expected to rise gradually until 2021, putting landlords in the driver's seat. Rents in Naperville and Arlington Heights, both in suburban Chicago, have risen by double digits as residents seek more space and a less congested environment.
In the Chicago metropolitan region, renter-occupied households account for 53% of all occupied housing units. In Chicago, millennials and Generation Z account for 41% of the population. New City, Pullman, and Riverdale are the cheapest areas in Chicago for renters, with monthly rates of $1,200 or less.
Rising Chicago property costs are possibly another reason why more residents in the Chicagoland area prefer to rent rather than own their homes. These figures contribute to the rental market in Chicago being appealing to both local and remote real estate investors.
D. Home price appreciation
The historic price changes and the affordability of housing in the metropolitan area are two of the most important criteria rental property investors use to examine the demand for rental housing in a market.
Workers and small companies are being priced out of coastal communities as housing prices continue to rise at an exponential rate. Meanwhile, people looking to buy a single-family home, condo, or multi-family complex can do so in Chicago. To highlight the disparity in housing expenses, compare Chicago's $325,000 median home price to Miami's $485,000, New York's $919,000, L.A.'s $949,000, or San Francisco's mind-boggling $1.2 million.
And Chicago homes increase in value year by year, contingent on market conditions and property upgrades.
E. Growing working population
According to a 2017 analysis of U.S. census data conducted by the Central Area Committee and cited by Crain's Chicago Business, Chicago has one of the most educated workforces in the country. Each year, thousands of college graduates from top-ranked colleges in Illinois, Michigan, Wisconsin, and Indiana flock to Chicago to work for the best corporations.
An influx of new jobs in the industry, banking, agriculture, and retail at the turn of the century not only drew millions of people to Chicago but also created the basis for the city to become a significant transportation center for both passengers and freight. As a result, businesses may access a large pool of talent at a lower cost than on the coasts, making Chicago a particularly appealing headquarters location.
So as the worker population grows, so does the volume of renters looking for a place to live while working in the different industries operating within Chicagoland.
F. Best Sports City
The Windy City has an endless supply of entertainment possibilities. Many of those events, fortunately for sports enthusiasts, revolve around athletic competition.
The abundance of sports teams, Midwestern charm, and rich history of Chicago makes it a fantastic spot to be a sports fan. You will always see someone wearing Bears, Bulls, Hawks, Cubs, or Sox gear if you go through downtown Chicago on any given day of the year. "The Windy City's" residents live and die by their teams.
Chicago is one of 10 American cities with clubs in each of the five major professional team sports (baseball, football, basketball, hockey, soccer). Sporting News has named Chicago the "Best Sports City" three times.
This makes a prime place for athletes and sports fans to congregate.
G. Outstanding locations with diverse sceneries
Chicago, as one of the top cities in the United States, offers some of the most spectacular sites to see once in a lifetime. The city attracts visitors from all over the world because of its vibrant arts scene, numerous cultural attractions, excellent shopping, and interesting architecture. These locations provide unparalleled appeal to newcomers, encouraging them to move into Chicago.
H. Hedge against inflation
An inflation hedge is a financial instrument designed to safeguard a currency's purchasing power against a loss of value caused by rising prices, either macroeconomically or due to inflation. It usually entails purchasing an asset with the expectation of maintaining or increasing its value over a fixed length of time.
And now more than ever, in these times when inflation is out of control, you feel like your money loses its value. But if you invest in an asset such as real estate, you will better protect your money. As I’ve mentioned before, home values generally appreciate over time so this is a perfect way to invest and fight inflation.
But as with any venture, there are some risks involved.
And the risks in Chicago are
A. High taxes
Chicago is one of the places where there is consistent increases in income and property taxes. These taxes could seriously eat into your profits. Illinois ranks 48th out of 50 states, and currently has the eighth-highest cost of homeownership in the US, up from 25th in the pre-housing-bubble period. Homeowners in Illinois now pay $10.15 in annual costs associated with owning their property for every $100 in home worth - more than in 42 other states.
B. Tenant-friendly legislation
Because Chicago has one of the strictest landlord climates in the country, Illinois is considered a tenant-friendly state. Illinois' landlord-tenant regulations are reasonably basic, while Chicago's laws are more complicated.
Landlords withhold money more frequently for property damage than for late rent or utilities. In fact, 82 percent of Illinois landlords withheld a portion of the security deposit for property damage.
Security deposits are a good technique to see if a tenant is careful with their money in addition to covering expenditures at the conclusion of the tenancy. Landlords frequently demand a security deposit to determine whether tenants have saved enough money to cover the entire security deposit.
A tenant has taken 19 percent of Illinois landlords to court. Unpaid rent, reluctance to pay rent, and late rent are all common causes for going to court in Illinois.
C. Disaster prone so high maintenance costs
Natural disasters, ranging from hurricanes and earthquakes to droughts and floods, have the potential to disrupt not just the lives of local citizens but also to cost governments, businesses, and individual residents a significant amount of money. Individual property owners in the impacted region bear the brunt of these costs.
Large-scale natural disasters have become more common in recent decades, resulting in higher financial costs than at any other period in history. There were 50 such events in Chicago between 2018 and 2020, causing a total of $237.2 billion in damage.
Should You Invest in Chicago Real Estate? YES!
As the city's housing demand grows, sales prices are expected to rise in the next years. It's remarkable to watch how prices are soaring not only in the metropolis but also in the outskirts, despite the pandemic.
With a population of over 3 million people, there is always a demand for rental apartments (which is a great opportunity for investors). The property market in Chicago is significantly less expensive than in New York or Los Angeles so many people there move to Chicago.
The median rent in Chicago for a 3-bedroom home is $2,250 per month, and rental households account for 53% of all occupied units in the metropolitan region. So it’s a solid investment!
Furthermore, Chicago and the Chicagoland suburbs provide a high standard of living. You can choose different neighborhoods and communities to invest in and enjoy high home appreciation.