If you’re interested in buying a multi-family home in Chicago, a fixer-upper is an ideal investment. A fixer-upper is a home that needs repairs and will require renovation work.
There are many reasons to buy a fixer-upper in Chicago. If you’re picky about interior design or want a property in a specific neighborhood, buying a home and renovating it allows for flexibility. It is also an excellent way to build equity. Many buyers will only buy a property that is finished, so it’s possible to find hidden gems if you’re willing to put in the work.
Some homes may only need minor repairs, while others will be a full rehabilitation project. It’s important to have the right real estate agent, contractors, and inspectors on your team to help analyze and complete the project effectively. The key to buying a fixer-upper is choosing the right property, working with the right people, and understanding the necessary repairs.
Buying a fixer-upper in Chicago is a smart business decision and a great way to find a long-term home for your family. If you’re looking to purchase a multi-family home and are comfortable with the renovation process, take a look at our home repair costs chart to get an idea of the costs involved.
How To Find the Right Fixer-Upper
Finding the right property can be an overwhelming first step. First, narrow down your search to the specific neighborhoods you want to target. The #1 rule of real estate is always location!
What kind of property are you looking for? If you’re looking for a single family home, a three-bedroom is often the most valuable and appeals to many buyers. In a multi-unit apartment like a 2 Flat, you can move into one floor while continuing to renovate the other. Buying a 2 Flat doubles as both a place to live and an income source.
While the majority of fixer-uppers are available on the open market, pocket listings are only available through an experienced real estate broker. This is why it’s essential to work with a respected organization like Chicago Real Estate Source.
Inspections, Appraisals, and Permits
Next, think about the level of repairs and restorations that you’re comfortable with. Renovations aren’t always as easy as they appear on TV; projects can become complicated and costs will often end up higher than anticipated. It is a good idea to walk through the property with a contractor and discuss repair costs prior to purchase.
Securing the right team of professionals is absolutely essential. In addition to your real estate broker, you’ll need to find the best contractors and inspectors. Word of mouth and professional references are great ways to find workers, but you can locate contractors by researching online as well.
There are a few checkups that should be completed for every fixer-upper. Specifically, consider a roof certification, pest inspection, sewer line inspection, and environmental and engineering reports.
However, before completing any work, ask local officials if the work you’re going to do requires a permit. Permit requirements vary by location, but projects like upgrading electrical systems or major structural repairs often come with a strict approval process.
DIY Home Improvements vs. Professional Work
Be realistic about the budget you have for this project. Simple repairs like laying down tile can be done independently, but more serious structural repairs are expensive and difficult.
Tasks like painting and patching walls, pulling up carpet, fixing windows, and replacing kitchen cabinets are straightforward. These projects can be completed on your own or by a handyman that specializes in this line of work. Handymen are great for jobs like replacing light fixtures or water faucets.
However, a fixer-upper can also come with complex and expensive repairs such as replacing an HVAC system, repairing a sidewalk, replacing sewer lines, and remodeling a bathroom. For these jobs, reach out to three companies and get quotes from each. This will give you exposure to several different organizations and ensure you’re getting the best value.
Financing Your Project
When it comes to the finances of your project, analyze how much you will need for the downpayment and closing costs. We recommend putting down the minimum amount possible for your downpayment, as this will result in more cash available for any necessary repairs.
Now, it’s time to determine how you’ll pay for your fixer-upper. If your property is in good condition and only requires minor repairs, you will likely qualify for conventional financing. This will require 5% down and allow up to 6% in seller concessions. The HomeStyle Renovation Mortgage by Fannie Mae is a popular example.
If your property has significant structural issues or major repairs, you’ll need to look into a rehabilitation loan. An FHA 203(k) allows financing for acquisition and improvement costs in one loan, and lower credit scores and lower down payments are permitted. However, it usually takes about 60 days to close. Another option is the VA renovation loan, which is designed exclusively for veterans.
Conventional financing is preferred, while rehabilitation loans should be seen as a secondary option. Rehabilitation loans often require months from contract to closing, making conventional financing a much better choice.
How To Find a Fixer-Upper in Chicago
If you’re looking to invest in the real estate market, buying a fixer-upper is a great opportunity. First, decide what neighborhoods you’ll be targeting and work with an established broker like Jose Hernandez to find the best homes.
Next, decide what level of work you want to put into the property and understand the necessary repairs you’ll be taking on. Reach out to contractors to get quotes on future work and determine what permits and inspections will be needed. While some renovations can be done on a budget with widely available contractors, others will require considerable time and investment. It’s important to understand everything about your fixer-upper before buying.
After you’ve found the perfect home for you, look into your financing options. A conventional loan is preferred, but rehabilitation loans available as well. Research the different types of loans you qualify for and identify the best option.
Chicago Real Estate Source has plenty of multi-family homes available now. If you’re ready for the excitement of renovating a house and creating a beautiful home, then buying a fixer-upper in Chicago is for you.