Chicago Real Estate Stats: Single Family Homes vs Two Flats
The Secret Route to a Cheap 5-Bedroom Home in Chicago
Let's talk about two-flats. Despite their prominence in some sections of Chicago, They're often overlooked by homebuyers, existing somewhere in the borderlands between a house and an apartment building. They absolutely should not be ignored. If you're looking for a large living space with a yard and garage, and are willing to do some work as a landlord in exchange for a lower purchase price, you're going to find some excellent deals.
Today I've taken a quick survey of the last six months of sale prices across an assortment of neighborhoods, comparing the results of two specific types of property. On the one hand we have single family homes with 3 to 4 bedrooms. On the other, we have two-unit buildings where at least one of the units has 3 bedrooms and the other has at least 2 bedrooms.
The smart reader will realize that this type of two-flat could actually could serve as a five bedroom home if the owner chose to use both units for themselves. Alternately, if rented out, the extra unit could provide some backup income to help with expenses.
A lot of folks think that multi-unit buildings would be more expensive than single family homes. Today's research will show that this is not really the case. In fact, in most of the neighborhoods I studied, the median price of a two flat was comparable or lower than the median price of a single family, and the maximums were all 35-50% lower on the two flats than the single family homes.
A Few Caveats
Also, as much as I love working with first time buyers, these deals are not necessarily right for them. It takes a certain personality type to be willing to take on the responsibility of being a landlord within your own home. A first time homeowner has a learning curve to cover on their own without taking on custodianship of anyone else's living space.
Additionally, one must acknowledge that the current Chicago stock of two-flats is approaching a century old, so unless you love vintage style or are willing to do a lot of upgrades you are not going to be moving right into a home of the same quality that you might find in a new house. (On the other hand, the average bungalow in some of these areas is of comparable age and style.)
As a sidenote, part of me wonders if Chicago wouldn't benefit from a spate of two-flat apartment development. We desperately need more low-to-mid range apartment housing that isn't extremely dated, and I think a lot of the reformed homeowners would fit very nicely as renters in newer two-flats. Most of the multi-unit Chicago has seen over the past decade has been in either in the condo sector or in large-scale high rise luxury rental developments. The primary age group of two-flat owners that I've met are over the age of 50 despite the approachable pricing. I think some newer two-flat stock might entice some younger landlords to take up the trade without going all the way over to corporate REIT-style landlording or massive investment portfolios.
If you're a developer interested in following up on this idea, please contact me. I'd love to chat with you.
Skylarking aside, here's the stats.