Chicago real estate offers investors an array of single-family rental (SFR) and multifamily opportunities ranging in location from urban to further-flung suburban areas. In the suburbs, properties with immediate cash flow can be purchased with low leverage. Meanwhile, investors with a longer time horizon can target core inner-city properties if they’re searching for appreciation, at higher entry points.
The local Chicago economy continues to improve from its sharp downturn during the Great Recession, which is great news for investors. Chicago is the third-largest metro in the U.S., with a diverse economy featuring distribution, finance and tourism anchors. Speaking of tourism, the metro attracts the third-highest number of visitors annually, surpassed only by Orlando and New York City. Chicago also boasts the largest intermodal port in the nation, making the area a distribution hub for much of the Midwest.
Here are some key takeaways on the local economy to keep in mind when deciding to invest in Chicago real estate:
- 36 Fortune 500 companies have their headquarters in Chicago
- The gross metro product in Chicagoland is larger than all but 20 countries
- The Windy City attracts more than 50 million visitors annually, the third-highest number in the U.S.
- Chicago is one of four cities with five or more major professional sports teams
There are many more reasons to invest in Chicago real estate from a real estate fundamentals perspective. Entry prices for SFRs remain among the lowest in the country, and demand for rental housing is healthy. In addition, average cap rates are relatively high, compared to other metros nationwide. At the end of 2017, the median SFR price in Chicago was a relatively low $230,000, up modestly from about $218,000 on a year-over-year basis.
Average rents are expected to increase approximately 1 percent to $1,673 per month for Chicago real estate – slow and steady growth. Average cap rates dropped only 20 basis points to 5.1 percent at the end of 2017, making Chicago one of the top 20 best places to invest in SFRs based on first-year returns in 2018, according to HomeUnion Research Services.
Central Location, Distribution Hub and Infrastructure Draw Renters
Chicago is one of the most well connected metros in the U.S. The Windy City’s location makes it an important distribution center for global trade, with the largest inter-modal port in the U.S., and the third-largest port of that designation in the world. In addition to freight distribution, Chicago has the distinction of being the busiest hub in the U.S. for passenger rail travel, with direct connections to nearly all major metros in the U.S. on both coasts, with the exception of New York.
The metro has an extensive public transportation network, which includes the “L” or elevated subway system operated by the Chicago Transit Authority (CTA). Two of the city’s lines offer 24-hour service.
Chicago also has an extensive highway system that includes multiple interstate freeways, known in Chicago as “Expressways.” These include Interstates 90/94, 190 and 57, as well as remnants of historic routes like U.S. Route 66.
Chicago’s O’Hare International Airport is one of the busiest airports in both the world and the United States by airline operations and passenger travel, partially due to its status as the hub of United Airlines.
Entertainment, Good Quality of Life Attract Renters
An incredibly green city, nearly 8.5 percent of the metro’s land area is dedicated to parks and green spaces. With more than 580 parks, access to numerous beaches and an 18.5-mile bike park, the city has enough recreational activities to make any outdoor enthusiast feel at home.
The region also offers sports fans an array of professional teams to support. The metro is home to the Chicago Bears (NFL), the Chicago Cubs (MLB), the Chicago White Sox (MLB), the Chicago Bulls (NBA), the Chicago Blackhawks (NHL), and the Chicago Fire (MLS).
The Art Institute of Chicago, DuSable Museum of African American History, the Adler Planetarium, and Gerber/Hart Library and Archives are just a few of the numerous museums in the metro. Chicago also offers residents a wide variety of theater and live performance venues, from the famed Second City Improv and sketch comedy club to Broadway in Chicago, there is entertainment available to suit every taste.
So, whether you’re looking for an investment property in a bustling urban core near employment centers, public transit and plenty of renters, or a suburban asset with lots of upside potential, consider the investment opportunities in Chicago. Consult with one of our Solutions team members at email@example.com to help you make a decision that best suits your investment needs.