House Hacking in Chicago: A Comprehensive Guide
Key takeaways
Chicago is a great place for new real estate investors looking to delve into house hacking. We'll cover some of the unique characteristics of the windy city that make it a great location to try out your first house hack!
What is House Hacking?
House hacking refers to the strategy of offsetting your housing costs by renting out part of your property. This could mean house hacking a duplex and living in one unit while renting out the other, or even renting out spare rooms in your single-family home.
Why Chicago?
Recent data from the Chicago housing market indicates a decline in home sales and a decrease in median home prices. However, this shouldn't sway you one way or another, but just help you understand the market. In fact,it presents some unique opportunities. The Illinois housing market saw a decline in statewide home sales in July 2023 compared to the previous year. Yet, the median price of homes in the Chicago Metro Area in July 2023 was $340,000, up 5.3% from July 2022. This suggests that while sales volume might be decreasing, property values remain robust. Also, Chicago renters make up a large portion of the population, meaning your pool of potential tenants is quite large!
Benefits of House Hacking in Chicago
- Offsetting Mortgage Costs: Obviously, offsetting your mortgage is important. With the median price of a home in Chicago being $342,500 as of July 2023, house hacking can significantly help in offsetting mortgage payments and reduce the barrier to entering the market.
- Diverse Tenant Pool: Chicago's diverse population ensures a steady stream of potential tenants, from students to working professionals.
- Strong Rental Market: Over 50% of Chicago's population rents, making it a strong renter's market. The average rent for a 1-bedroom apartment in Chicago as of September 2023 is around $2,097.
Steps to Start House Hacking in Chicago
- Research: Understand the local real estate trends. Check out our list of favorite neighborhoods below
- Financing: Look for properties that fit your budget. And define your goal. where thats to offset your living costs or to try and make a profit.
- Landlord/Tenant Law: Ensure you're aware of Chicago's rental laws and regulations.
- Find Tenants: Finding tenants is a relative breeze nowadays with apps like Zillow that will post your listing to many other sites in one go.
Our Favorite Neighborhoods
Lincoln Park Located on Chicago's North Side, it's bordered by Diversey Parkway, North Avenue, Lake Michigan, and the Chicago River. It's known for its park, zoo, conservatory, and many theaters and museums.
Lakeview Situated on the city's North Side, it's bordered by Diversey Parkway, Irving Park Road, Ravenswood Avenue, and Lake Michigan. It includes areas like Wrigleyville and is known for its theaters, live performance venues, and the Belmont Theater District.
West Town Located northwest of the Loop, it's bordered by the Chicago River, Union Pacific railroad tracks, Bloomingdale Avenue, and Humboldt Park. It encompasses several neighborhoods and was historically part of Polish Downtown.
Take a look at these metro areas to understand the wide range in median rent prices and where Chicago stands among them.
Enhancing Your House Hacking Strategy
- Stay Updated: The Chicago housing market is dynamic. For instance, the Zumper Chicago Metro Area Report highlighted that Aurora had the fastest-growing rent, up 29.2% from the previous year.
- Leverage Data: Utilize platforms like Zillow to understand market metrics. As of August 31, 2023, 50.4% of home sales in Chicago exceeded their list prices, indicating a competitive market.
- Diversify: Consider different types of properties. Chicago has a mix of condos, apartment buildings, and single-family homes.
- Value Add: If your house hacking analysis isn't giving you the right numbers, consider optimizing your rental with these cash flow methods.
Conclusion
House hacking in Chicago offers a unique opportunity to live in one of America's most vibrant cities while reducing your cost of living. Hopefully we've given you enough insight into house-hacking in Chicago that you can make the plunge!
