Buying or Selling Chicago 2 Flats

The “Two Flat” is a major part of Chicago history. One of the most common real estate options on the market, a 2 Flat is a two-story building with a legal apartment on each floor.

Many of them were built as far back as the 1910s and continue to be a mainstay of neighborhoods like Avondale, Bridgeport, Brighton Park, and Humboldt Park. While some have been converted to single-family homes or knocked down in favor of high rises, buying a 2 Flat in Chicago continues to be an excellent investment choice.

#1 Rule of Real Estate: Location, Location, Location

2 Flats currently make up about 30% of the city’s real estate market. In fact, the term itself is pretty much exclusively used in Chicago. With so many options to choose from, how do you know which 2 Flat is right for you?

Chicago real estate rule number 1

It’s important to remember that the most important factor in your real estate purchase is location. It may be best to start with areas that you’re familiar with. Pick 2-3 neighborhoods you want to target and narrow down your search from there.

For the highest rents in the area, you’ll want to search for properties within about five blocks of a train station. Areas around CTA and Metra stops tend to develop faster and have higher values, especially in up-and-coming areas. 

It’s also essential to know the surrounding buildings. What does the neighborhood have to offer? Take note of the schools in the area if you’re planning to rent to families. Proximity to bars, restaurants, and shopping centers will make your property more attractive as well. 

If the 2 Flat is located on a block with more single-family homes, many renters will enjoy living in a neighborhood with long-term homeowners. If the property is located among larger apartment complexes, parking may be difficult around the area and discourage some potential renters.

Property Condition and Building Material

First, decide what kind of 2 Flat you’re in the market for. Are you looking for something that’s already in move-in condition, or are you prepared to work on the property if it needs improvement?

When touring and inspecting different properties, it’s a good idea to take detailed notes on your phone. Take photos and videos as well, as it can get overwhelming if you’re touring multiple buildings. 

Some parts to focus on are the roof, basement, heating & air conditioning, and the building structure. Are the floors uneven? Is there water damage in the basement? Are there any illegal apartments? These are important things to look at when comparing properties. Also, note that kitchens and bathrooms are often the most expensive rooms to remodel. Most of these issues can be fixed with enough labor, but they may require significant time and capital.

Lastly, are you looking for a wooden frame home or one made of brick? Brick homes are worth slightly more and offer a more attractive appearance. While frame homes often have the same functionality as brick, they can require extra investment for common issues like painting, siding, and other repairs down the road.

2 flats brick vs frame

Owner Occupant or Investor?

Buying a 2 Flat in Chicago (or any multi-family real estate property) presents some unique living options. While some buyers may live elsewhere and maintain the 2 Flat as an investment, others will go the Owner-Occupant route and live in the building while renting out the other unit.

If you’re in the market as an investor, buying a 2 Flat will result in two different units to earn rental income from. It’s a solid investment choice, especially since Millenials and other age groups prefer renting instead of owning.

Two Flats began as a way for working-class families to both have a place to live and a source of extra income. Being an owner-occupant in your 2 Flat is arguably what the property was made for, and it’s a phenomenal way to make some money to offset your mortgage.

However, keep in mind that you’ll always be on landlord duties if you’re residing in the building. As an owner-occupant, you’ll need to be available for any questions or concerns from your tenant. Being an owner-occupant also brings a hefty list of complex tax laws.


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Get Pre-approved for a Mortgage

The first step in buying a home is getting pre-approved for a mortgage with a reputable lender and hiring a real estate agent. Pre-approval consists of a lender determining how much you can borrow, the loan programs available to you, and the interest rate you qualify for. Pre-approval demonstrates your financial strength, how much can you afford and is based on things like credit score, employment history, and income.

To get pre-approved to purchase a Two Flat, you’ll need a few pieces of documentation. Most commonly, you’ll need proof of income, proof of assets, and employment verification. It’s extremely important to have a good credit score for a successful pre-approval process. 

After pre-approval, the next step is making an offer on the property and getting accepted. Next, after the contract is reviewed by an attorney, you can close on the property and officially own the home. For a closer looking at buying a home in Chicago, Chicago Real Estate Source has laid out a step-by-step guide on buying your next property.

Weigh The Risks and Benefits

Before purchasing, it’s important to take a close look at the finances of the deal. While the rental income is great, a lot of that money will go towards property maintenance, marketing, and monthly mortgage payments. Focus on the cash flow numbers behind your investment and calculate whether the income meets your expectations.

investment property risks for Landlords

Remember the time investment required to successfully manage a Two Flat. You might have to deal with non-paying or difficult clients, both of which will require significant capital and management skills. 

If you purchase a Two Flat in a prime area, you’ll not only have a place to live but also a consistent source of income. When done correctly, purchasing a Two Flat in Chicago is an excellent investment. There are several great deals to be found in up-and-coming neighborhoods, and you can also convert the Two Flat to a single-family home in the future and make a profit on the sale.

Purchasing a Two Flat In Chicago: Is It For You?

If you’re looking to invest in real estate in Chicago, some of the best properties you’ll find will be Two Flats in neighborhoods across the city. They offer a great investment opportunity and considerable flexibility when deciding what to do with the property.

Landlord says pay rent

When deciding whether or not to purchase a 2 Flat, remember to focus on the location, building condition, and all other financial risks and benefits. Decide if you want to be an owner-occupant or investor, and be prepared for the mortgage pre-approval process.

Once you’re ready to get started on finding the house that’s right for you, take a look at Chicago Real Estate Source’s extensive list of multi-family buildings for sale. Whether you’re looking as an investor or an owner-occupant, Jose Hernandez is ready to help you find the ideal income property.


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