Helpful guide
Invest Like A Pro
Investing badly and investing well look identical for about eighteen months. The difference only shows up when the furnace fails, the tenant leaves, or the tax bill is reassessed — which is to say, it shows up exactly when you have the least flexibility.
Everything below is about building that flexibility into the number before you buy.
1. Underwrite on actual numbers, not pro-forma ones
A pro-forma rent is what a seller believes the building could earn. The actual rent roll is what it does earn. The gap between them is the seller's optimism, and you should not pay for it.
The same applies to taxes. Use the current assessment and consider what a reassessment after sale might do — in Cook County, a sale can trigger a meaningful change in the assessed value, and that lands squarely in your monthly number.
2. Include the lines amateurs leave out
Almost every too-good-to-be-true return has the same three omissions: vacancy, maintenance reserve and capital expenditure. Roofs, boilers, tuckpointing and porches all have finite lives, and in Chicago's housing stock many of them are at the end of it.
A deal that only works with none of those lines is not a strong deal. It is an unfinished spreadsheet.
- Vacancy, as a realistic percentage for that building and that block
- Property management, even if you intend to self-manage — your time is a cost
- Maintenance reserve, separate from routine repairs
- Capital expenditure for roof, mechanicals, porches and tuckpointing
- Insurance quoted for its real use, not estimated from a single-family policy
3. Check zoning and occupancy before you fall in love
What a building currently does and what it is legally permitted to do are not always the same thing. Non-conforming unit counts, converted attics and basement apartments are common across Chicago, and they become your problem at closing.
Short-term rentals deserve the same scrutiny earlier rather than later. Chicago and each suburb regulate them differently, the rules change, and a strategy that is legal in one municipality may not be legal six miles west.
4. Know the exit before you sign the entry
Ask who buys this building from you, on what basis, and in what condition. A two-to-four unit sells to an owner-occupant or a small investor and is valued partly on comparable sales. A five-unit and up sells to an investor and is valued on its income. Those are different buyer pools with different timelines.
A deal that only works if you hold it forever is not an investment. It is a job you bought.
No email gate, no download, no drip sequence. If it is useful, it should just be readable.
Keep reading
Free 15-minute call
Let's talk about what you're trying to do.
No pressure and no script — just fifteen minutes with someone who knows this market, in English or Español.