House hacking in Chicago

Kinds of buildings

• 2-flat: two homes. The easiest way in. You live in one and rent the other.
• 3-flat: more rent coming in, and more to manage.
• 4-unit building: still can use a loan for people who live there, if you live in one unit.
• Coach house: a main house with a separate rear cottage. It gives you more space between you and a renter.
• Condo: check the association rules first. Many do not allow renting out a room or a unit.

Ways to pay for it

Step by step

1. Set your budgetKnow your income, your credit score and how much cash you have. Get pre-approved before you look at homes.
2. Pick a few areasChoose two or three parts of the city you can get to know well. Look at how close the train and your work are.
3. Run the numbersFor any building you like, work out the real monthly cost. The list below shows how.
4. Inspect it wellA building with several apartments has more heating, plumbing and wiring to check. Use an inspector who knows old Chicago buildings.
5. Close and set up your rentalsIf renters already live there, read their leases. If not, set the rent and find renters before you move in.
6. Live thereA loan for people who live in the home needs you to live there. Do it.

How to run the numbers (add these up)

• The loan payment.
• Property taxes. In Cook County they are big, so ask for the real tax bill, not a guess.
• Home insurance.
• Mortgage insurance, if your loan has it.
• Repairs and upkeep. Plan for them every year.
• Empty months. Do not count on every unit being rented all year.
• Then take away only the rent you can back up with real rents for similar apartments nearby.

Mistakes to avoid

• Counting too little cost: taxes, insurance, repairs and empty months add up.
• Guessing the rent. Look up what similar apartments really rent for.
• Skipping the inspection.
• Buying where you do not know why people want to live there. Know the train, the streets and the trends.
• Waiting for the perfect deal. Run the numbers, and move when a good one fits.

Being a landlord in Chicago

• A renter’s security deposit must sit in an insured, interest-bearing account in Illinois, apart from your own money.
• You must tell the renter in writing, within 14 days, which bank holds the deposit.
• The deposit must be returned within 45 days after the renter moves out, with a written list of any damage within 30 days.
• A rent increase or a decision not to renew needs notice: 30, 60 or 120 days, depending on how long the renter has lived there.
• Treat every applicant the same way and write your rules down before you advertise. Illinois protects renters by where their money comes from too, such as housing vouchers.
• Some city rules can be different for owner-occupied small buildings, so ask your attorney which ones apply to you.