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Chicago Real Estate Investing

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Chicago is the 3rd largest city in the country and an important center of culture and industry. With nearly 3 million residents (and an additional 7 million in the surrounding metropolitan area), Chicago is a commercial powerhouse with a strong tourism industry. 

Several major financial institutions are based in the city, such as the Chicago Board Options Exchange (CBOE), JPMorgan Chase and the Chicago Mercantile Exchange. Additionally, McDonald’s, Boeing, Abbott Labs and Walgreens call Chicago home.

Another appealing feature of Chicago is the expanding real estate market. With mortgage rates near historic lows, the Chicago housing market is trending up and both buyers and sellers can find reasonable deals. 

Thinking about a real estate investment in Chicago? Start with Benzinga’s guide to everything you need to know.

Why Invest in Chicago?

Chicago has some drawbacks like thick traffic, severe winter weather and Mitch Trubisky playing quarterback, but the city has a deep cultural history and a strong, up-and-coming real estate market. Here are a few reasons to consider real estate in Chicago. 

Market dynamics. Competition is beginning to get fierce in the Windy City. Chicago ranks as a 70 on the Redfin market trends calculator with multiple offers coming in on some homes and an average sale price 2% below list price.

The average home sale price on Redfin was $320,000 in June 2020 — a 1.6% increase from the previous year. 

Transportation. While the traffic may be a struggle, Chicago rates well in public transportation and walkability. Downtown areas are very accessible by foot or bike, and the city’s tourism industry benefits from the ease of getting around.

Tourism. Chicago is 1 of the premier destination cities in the United States. Over 58 million tourists visited Chicago in 2018, 2nd only to New York City. Chicago has 2 of the most famous sports stadiums in the country: the Cubs’ Wrigley Field and the Bears’ Soldier Field. Other sites include the Lincoln Park Zoo, River North Gallery District and Navy Pier. “The Loop”, Chicago’s downtown business district, is the 2nd largest of its kind in all of North America.

Timing. According to Zillow’s Home Value Index, the Chicago real estate market is currently controlled by the sellers, but the next 12 months could be difficult. Zillow predicts a 2.3% decline in home prices over the next year, which could put buyers back in command.

Buyers are also beginning to get more bang for their buck as the price per square foot of housing in Chicago has declined from $262 per square foot  in April 2019 to $243 in June 2020. Economists aren’t predicting much growth, but opportunities could await in Chicago over the next few months.

Chicago Real Estate Market Forecast

Before the coronavirus pandemic threw the economy out of whack, forecasters predicted a middling year for Chicago real estate. While uncertainty still reigns supreme over all things economic, it’s worth remembering the predictions economists made back when society was functioning normally.

Realtor.com predicted a 0.9% decline in Chicago home sales growth for 2020, along with a 0.3% decline in home prices. For comparison, Realtor.com predicted a 1.8% in overall U.S. home sales growth in 2020, but a 0.8% increase in price growth. 

Zillow was even more pessimistic about the Chicago real estate market, predicting a 2.3% decline in median home prices over the next 12 months. About 1.3% of Chicago homeowners are underwater on their mortgage, which is a tick higher than the national average of 1.1%.

Investing Passively in Chicago

Passive real estate investing has opened the door for many investors to own property. With passive investing platforms, potential investors no longer have to worry about massive down payments, facilities maintenance or tracking down troublesome tenants for rent.

DiversyFund allows investors to access a professional real estate portfolio composed of multi-family housing and student living facilities in California, Texas and North Carolina. Unlike most real estate investing platforms, DiversyFund clients don’t need to be accredited investors or even have access to 4-digit sums of capital. 

For as little as $500, investors can buy into the DiversyFund Growth REIT and supplement their investment portfolios with commercial real estate assets. An REIT is a real estate investment trust. Unlike real estate stocks, REITs invest directly in real estate and own, operate or finance income-producing properties.

Best Passive Real Estate Investing Platforms

The real estate market is more accessible than ever thanks to platforms like DiversyFund. Passive real estate investments allows you to reap the benefits of cash flow from rental payments and the long-term capital appreciation of the property. Plus, you won’t need to perform maintenance or collect rent. Here are a few of the most popular passive real estate investing platforms.

Minimum Investment
$5,000
Fees
Between 8% and 10% of the purchase price.
Get started securely through Roofstock’s website
Minimum Investment
$5,000
Fees
Between 8% and 10% of the purchase price.
1 Minute Review

Roofstock is a registered real estate broker and marketplace specializing in single-family rental properties. Unlike its competitors, Roofstock isn’t selling shares of properties through trusts or LLCs — they’re connecting buyers and sellers directly. Roofstock properties are carefully vetted by a qualified home inspector and come with a rental income guarantee. That’s right, Roofstock will pay you rent even if your property stays vacant.

Financial data on each property is available even to those who are not clients and nonaccredited investors are welcome to join free of charge. Cash and financing options are available when making a purchase, but Roofstock will tack on their own fees in addition to closing costs.

As the solitary owner of your property, you’ll be expected to fund repairs out of your own pocket. Still, Roofstock is a great way to get a foot in the door of the real estate industry and their fees are much lower than most of the competition.

Best For
  • Nonaccredited investors
  • Real estate investors with limited capital
  • Investors looking for income through rental properties
Pros
  • Free to sign up
  • No investment minimum
  • Ownership of real assets
  • Low fees 30-day money back guarantee
Cons
  • Single-family homes only
  • Need to finance repairs yourself
  • Requires down payments
Minimum Investment
$500
Fees
No management fees
Get started securely through Diversyfund’s website
Minimum Investment
$500
Fees
No management fees
1 Minute Review

DiversyFund isn’t your average crowdfunding platform. You’ll find that the company puts a twist on the traditional everyday crowdfunding platform, beyond anything you can find online with a simple Google search. You only have to look under DiversyFund’s skin one layer to surmise that DiversyFund is a conscientious developer and sponsor and helps hedge risk through improved vetting.

DiversyFund offers a multifamily real estate investment trust, the DiversyFund Growth REIT, and its main goals are to increase cash flow and resale value. It’ll automatically give you access to multi-million dollar real estate assets.

Best For
  • Those looking for an alternative investment beyond stocks and bonds
  • Individuals who aren’t sure they want to be landlords in the traditional sense
  • Investors who aren’t accredited
Pros
  • Only need to pony up $500 to get started
  • Open to investors all over the world
  • No expensive broker fees
Cons
  • You’ll only be able to access “blind pool” investments, which means that you can’t opt out of specific properties
  • There’s only one real investment option, the DiversyFund Growth REIT
Minimum Investment
$10,000
Fees
1% – 1.75%
Get started securely through CrowdStreet’s website
Minimum Investment
$10,000
Fees
1% – 1.75%
1 Minute Review

CrowdStreet is a commercial real estate investing platform where people can invest directly in commercial projects. Unlike a brokerage firm, CrowdStreet isn’t a middleman. Instead, the platform acts as a marketplace where investors can pick and choose the best deals for their time horizon and strategy.

Available investments range from family living spaces to office buildings to storage facilities and investors can sign up for a free membership. Your investment options are limited to what’s live on the Marketplace and you’ll need capital to build a diverse real estate portfolio. Only accredited investors can access deals through CrowdStreet.

Best For
  • Investors looking for diversification away from stocks
  • Real estate investors interested in new opportunities
  • Accredited investors with lots of capital at their disposal
Pros
  • Unique opportunities available
  • Makes real estate accessible and understandable
  • Investors can devote capital to both debt and equity offerings
  • Offers quality education materials and answers to FAQs
Cons
  • Real estate is highly illiquid
  • Most properties require a minimum $25,000 investment
  • You’re limited to what’s on the CrowdStreet Marketplace
Minimum Investment
$500
Fees
0.85% asset management fee per year
Get started securely through Fundrise’s website
Minimum Investment
$500
Fees
0.85% asset management fee per year
1 Minute Review

Fundrise, a real estate investment platform, allows small investors to gain exposure to a diversified portfolio of real estate projects hand-picked by the Fundrise team. Investors can choose between a starter plan and three advanced plans, all designed to meet certain investing goals. Each plan gives you an exposure to a specific portfolio which comes in a form of eREITs and eFunds, custom-made products which are not traded on security exchanges.

Best For
  • Small real estate investors
  • Passive investors
  • Long-term investors
  • Beginners
Pros
  • Allows small investors to get exposure to commercial real estate
  • Diversification in the real estate sector
  • Goal-oriented investing
  • Relatively low fees
  • 90-day guarantee
Cons
  • Liquidity issues as eREITs and eFunds are not exchange traded
Minimum Investment
$1,000
Fees
2% – 3%
Get started securely through stREITwise’s website
Minimum Investment
$1,000
Fees
2% – 3%
1 Minute Review

Looking to diversify your portfolio and get into real estate? A real estate investment trust (REIT) that owns income-producing real estate may be a great place for you to start. Streitwise is a REIT that specializes solely in commercial real estate and has a low entry investment requirement of $1,000. Based in Los Angeles, Streitwise was created in 2017 by three veteran real estate investors who were frustrated that there wasn’t a good option for unaccredited investors to get into the commercial real estate market.

Streitwise focuses on investing in low-risk rental commercial real estate aimed at providing clients with consistent high-yield returns. The team invests in markets that are steadily growing and offer low-risk potential outcomes. While they’re still young and growing, the founders have built their business based on solid experience coupled with a vision for the future of investing. If you’re looking to diversify your current investment portfolio but feared real estate was too lofty a goal, Streitwise is worth exploring.

Best For
  • Investors looking to diversify
  • Investors with less than $200k in annual income
  • Passive traders
Pros
  • Consistent quarterly dividends
  • Low, transparent fees
  • Low investment minimum
  • Convenient and easy to use
Cons
  • Young company
  • Projections are uncertain
  • Limited portfolio
  • Limited technology

Home prices remain affordable in the Chicago area, and record low mortgage rates have caused buyers to flock to open deals. Despite the current increase in demand, sellers see homes go for prices below the asking list price. Many experts project a slight decline in housing prices through the remainder of 2020.

But crisis often creates opportunity. The coronavirus pandemic has created a market where many people feel it’s time to buy real estate. In Chicago, housing that’s currently going below market value may not be below market value much longer. 

Patient investors who can buy now while prices are on the downslope may be rewarded when the pandemic fades and market forces return to equilibrium. Cities like Chicago may suffer in the short term as the work-from-home trend takes hold, but the opportunities created now could be too good to pass up.

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