Rental Demand Higher Than Ever in Chicago

Rental Demand Higher Than Ever in Chicago

The rental demand for quality rental properties in Chicago is arguably higher than ever.  Structure Management Midwest’s Fred Latsko and Apartments.com senior vice president Dick Burke were interviewed on July 2013 by the Fox Business Network.  They essentially said that there are not enough properties/units to go around for renters in Chicago.  Burke was quoted as saying “There’s not enough inventory, so we are seeing vacancies come down, they are down to about 4.3%.”  Burke said that the rental prices are going up which makes rentals a cash cow for landlords and that the demand is very high.

The recession is largely responsible for keeping the rental demand very high.  People that were once homeowners had no choice but to become renters due to losing their homes to foreclosure.  What is great about rentals is that you can always find a tenant if you are priced correctly.  If your property does not rent for $1,500, it might rent for $1,400.  And if it doesn’t rent for $1,400, you can get $1,350.

Another huge benefit is that Chicago has the second largest public housing program in America!  There are over 36,000 Section 8 vouchers in Chicago that make it possible for low-income families to rent in the private market.  Landlords benefit because rent subsidies are paid directly to the landlord through direct deposit.  In some cases, Section 8 requires the tenant to pay a portion of the rent but it is very low risk because if their portion is not paid, they voucher which took several years to acquire.

The biggest benefit to having rental properties in Chicago is that the ROI is astronomical in many cases.  Single family homes in nice neighborhoods to attract choice tenants can be purchased for $40,000-$60,000 with rehab costs varying from $5,000-$15,000.

Example of a purchase price of $60,000 and a rehab of $15,000.

This example was a worst case scenario on purchase price and rehab.  It looks phenomenal on paper but in reality things can always happen.  That is why properties should always be purchased in neighborhoods where there is very low crime, low vandalism, and a good school district.  Turnover (the time between tenants moving out and new tenants moving in) and rehab between tenants can kill profits very quickly.  That is why it is smart to purchase single family homes in good school districts.  Tenants will stay much longer and you will be able to attract families who care about their children’s education.  Read the Smart Section 8 Landlord by Al Rotiroti Sr. if you are interested in learning more about purchasing and managing rental properties this way.

Some investors focus on rentals in areas in Chicago where properties can be picked up for $10,000 and rents are very comparable to the example above but the landlords typically have issues with break ins and turnover since people do not enjoy living in those areas.

In Conclusion

There has never been a better time to purchase rental property.  This opportunity will not be around much longer at these rock bottom prices.  If you are not interested in dealing with rentals on your own, you should reach out to companies like Olivia Homes that offer turnkey operations.  Additionally, if you are not interested in owning rental property or having to deal with tenants, you should become a lender for rental properties.  Lenders are able to get very favorable rates of return and the investment is secured by a mortgage and insurance.

“Don’t wait to buy real estate, buy real estate and wait” -T. Harv Eker

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