What it’s really like to invest in Chicago

This week, we head to the Windy City to hear from Andy Nathan at Creative Smart Contractors.

Average home price: $305,295 (Up 2.4% YoY)
Homes that sell over list price: 34.3%
Homes that sell under list price: 51.3%
Average rent: $2,252/month

Lay of the land: Chicago isn’t one market. It’s 77 distinct neighborhoods, each with its own personality and price points. “For example, a property going for around $750k+ in Lakeview or Logan Square goes for around $200k on the South Side,” says Nathan.

And because Chicago has some of the country’s oldest housing stock, profits often come from heavy rehabs: “We buy distressed properties, fix real problems, and focus on long-term cash flow rather than quick appreciation,” he says. One recent deal:

Purchase price: $30k
Renovation cost: $150k
Rent: $2,500/month

His advice: Since a lot can go wrong with a gut rehab, prepare to lowball and stick to your guns. Chicago investors live and die by the motto “You make your money when you buy.”

“You will make mistakes, but buying correctly will fix a lot of those mistakes,” Nathan says. “For example, we have a two-flat that was a horrible fix and flip. But because we bought correctly, we were able to rent out the property for a 20% cash on cash return.”

Got a home or housing market you want to highlight in The Playbook? Tell us more about it here, and we’ll consider featuring it in an upcoming issue.