best neighborhoods for rehabbing houses (Chicago, Cicero: bank owned, sales, apartments)

[BigV]

What is the best neighborhood for rehabbing houses in the Chicago area? Ideally, I'd like to find an area that has a good mixture of renters vs. homeowners and within 20 miles of Berwyn, IL.

Also, I don't want to start in the worst crime areas, just a decent, working class, blue collar type neighborhood.

Which after repair price ranges would I be looking at for a 3BR, 1 BA homes? 180-200K?

[irish setter girl]

About 10 years ago we did condo conversions and rehabs in the city and in Cicero. I would NEVER do another project in Cicero and if you go into the city make sure you have a security fence and guard. We were in a decent neighborhood (condos in the 300-450k range) and still had issues. I can't tell you how many new appliances were stolen& vintage mantels pulled from the plaster in the middle of the night. Our security guards never slept on the job, they were actually kept pretty busy

[irish setter girl]

I forgot to mention, in your price range you might try West Chicago. Rentals there do pretty well and may turn into a lease with the option to buy if you want. Hanover Park, Carol Stream, and Roselle are also good places for rentals. We had rentals in West Chicago years ago and always had good tennants who paid on time (cash) and stayed for the full lease. Good luck to you.

[gardener34]

irish: I guess this is big everywhere. Even the new homes - where the developments have stalled because of the new home market situation - have been getting decimated if they are unoccupied yet. Copper piping, etc. Appliances. It is very commonplace to have your construction raided.
Many big jobs around here (fox valley) have alarms, security lights, and security systems installed, fences, etc.

[irish setter girl]

Gardener, yes copper piping is very popular amoung theives. They are getting about $4-5.00 a pound so they go into new construction and foreclosures and rip it all out. Unfortunately I deal with bank owned property all the time and have seen the results of unhappy former owners and/or theives. Homeless people have taken refuge in empty homes since most of the time the utilites are still turned on and they have learned how to play the game between the shelters and being a squatter. Pretty creative on their part! We never had piping taken from our projects, just appliances and anything they could sell quickly. Antique pocket doors, mantles, thick baseboards (all the stuff you see at places like Salvage One in Chicago) were stolen from our properties. We stopped doing rehabs years ago because the money was not worth the time and the added expenses of security, replacing the stolen items, etc... Although this is a great time to purchase homes. If you have the cash, buy homes now, rent them out for a few years, then rehab them and sell them when the market picks back up. Hopefully by then all the bank owned properties will be flushed out and things will become a bit more stable.

[BigV]

thanks all for responses. But how do you suggest I go about evaluating an area that moves quickly in this market? Perhaps I'm mistaken in assuming that lower priced homes will have a higher demand that higher priced homes due to affordability. But where are bread and butter type properties?

[irish setter girl]

To find out what moves quickly have an agent run number of lisitngs and sales for you. Find out at what percentage homes are selling- list price vs sale price and the percentage of the homes on the market that are actually selling (not being cancelled, expired, etc..). Find out about the current rental market. When rents are high people tend to want to purchase. When rents are low they will continue to rent. Compare rental homes to rental apartments. Are the complexes/duplexes occupied? Are they running specials to get people to move in? For rentals it is important to know your target rental pool. Do most renters work in that same area and can therefore walk to work or do they commute. If they commute are you close to public transportation? Have an agent find out what current rents are and compare them to the starter home prices in that same area. I think you need to decide what kind of rental property do you want to have? Then, ask an agent (who will work for free if you use them to purchase) where you can find that type of rental. I have owned homes and condo buildings as rentals. They are very different and requrie a different type of renter. Would you consider something that was a rent to own situation in the event you didn't want to be a landlord any more?
Now if you are simply looking to buy, rehab and flip then you need to check out the resale market very well. You need to know how many other homes in the same price range are on the market and how long they are taking to sell. You need to find an area that supports homes over rentals and what options are necessary for that buyer pool. Right now is not the season to throw anything into a home and flip it in 90 days like you could 3-4 years ago. The market is saturated with homes at all price points and you need to find a way to sell YOUR home over the others. People are skeptical of flippers so you may want to consider a rent to own and then sell it when the market picks up. I think buying homes, holding on to them as rentals is the safest way to go right now. This is just my personal opinion

[chet everett]

When it comes to buying a home the key is always : location location location. I think that a big part of what makes one location better than an another, especially in the Chicago region where geography is pretty uniform (no mountain views and only a tiny sliver of "waterfront") is EMPLOYMENT BASE.

If you look at the areas that are doing well (or at least not suffering too badly) they are areas where employment is strong. The downtown white collar employers are in better shape than a lot of the transportation and manufacturing firms. The "blue collar core" is in bad bad shape. Thus the "yuppie" areas are still in good shape AND the towns with good commuter rail access seem to be mostly OK.

The tough thing is that at the price point you are interested in MOST if not ALL the rehab opportunities are long GONE. It is not just that lower homes sell more quickly because of affordability, it that low priced properties IN GOOD LOCATIONS are rare.

My advice is multi-pronged:

First: Can I afford to BUY a home, then FIX IT UP APPROPRIATELY to make a profit. Even though some prices have come down in some places there are still way too many overpriced home that still need A LOT of work.

Second: How wide is the appeal of the home going to be? If I do a "starter" home will it be hip enough for a 'starter family'? If I do a "move up" home is it in town where people will want to "move up not move out"? If I do a 'dream home' whose dream is -- it better be the REAL BUYER and not the guy/gal doing the rehab!

Third: Is there such a thing as a "meat & potatoes" kind of homeowner? Way back when a good job meant working at Western Electric right out of high school it was easy to say any place that would hold your wife and kids was a swell home. Now you have two income families that married later and have a lot higher expectations. Even if Mom decides that since she paid off her nursing degree and would rather stay home with the little ones that doesn't mean she is ready to accept a "simple" house. If you are targeting first time home owners they might very well be immigrants. Where are their jobs? What is their stability?

BigV, sorry buddy, I think the quick buck rehab/flips are gone for a while. If you have skills it might be the time to build a true remodeling/renovation business. If you like smallish projects you can make good money helping people convert their attics to dormers and that sort of thing. If you like bigger project go upscale -- the big money /flashy lifestyle people like to redo their decor to the latest trends, though they call 'em rich b**ches for a reason. If you are more of money man it might be time to be a more passive investor in rental projects, as long as you understand the hassle of managing those. All these foreclosed folks are going to need SOMEPLACE to live...

[BigV]

thanks again. I hear you guys. And I would not mind starting with a cashflow single family property, however, there is a new state law that is being proposed, that will make it illegal to evict a tenant based on unpaid past rent. The tenant could pay current month rent and stay in the place. The landlord would have to pursue judgment for past rent, but not evict.

Illinois General Assembly - Bill Status for SB2124

[irish setter girl]

BigV - Illinois has always been a state that favored tenants over landords. It was very difficult for us to evict people. We have a lady who owes us more than 10k, we took her to court and actually won a judgement against her and they garnished her paycheck. Well this was supposed to continue until she paid the full amount. After getting about 4 checks from her employer (the state of IL!!) she filed for BK and we were left holding the bag. I agree with the previous poster that the easy flips are primarily gone and that location is the key to any purchase. Interesting comment about all these foreclosed people looking for homes...this is so true but there obviously is some risk involved there. Pehaps getting a large security deposit to cover a few months rent might help you out. There are companies out there that do just this. They buy up foreclosed properties, fix them up a bit (not a rehab, just cosmetic stuff) and they keep an inventory of about 15 homes all the time. When they have a client who is in foreclosure they buy their home (quarters on the dollar) and then move them into one of their inventory homes that they can actually afford. Once they have shown good payment history and can afford to move up they will assist them in buying one of their larger/more expensive inventory homes. They just keep circulating people in and out of their homes and they actually make some good money doing it. You might consider doing something like this (on a much smaller scale) where you own homes and allow people to use them as a spring board after foreclosure.