We have been investing in Chicago now for the last decade. All the time we see unsuspecting out of state/country investors purchasing turn key properties in some of the most violent neighborhoods in Chicago. Out of state/country investors need to do their due diligence so they don’t get stuck in that situation. Here is a list to help you start your due diligence and keep you out of a war zone.
1. Turnkey Company
First and foremost you need to do your due diligence on the turn key company that is actually providing the property. More times than not, people are convinced that the marketing company is the one selling the turn key properties and they only come to realize this after there is a problem. Make sure you are dealing directly with the turnkey provider. If the marketing company will not let you, then this is a red flag.
Always, always, always, ask for references. Even more important, CALL the references. Make sure that you ask them what areas they are investing in and why? Also ask about any problems that they have had with their turn key properties and how the provider handled them.
Ask questions to the provider about turn key investing in Chicago & then check on those answers
Ask the turn key company why they are buying turn key properties in those neighborhoods? What is the story of the neighborhood? How has the neighborhood changed in the last 5 years? Is the neighborhood getting better or worse? Are businesses moving into the neighborhood or out? How is the crime in the neighborhood and what type of crime is it? Then try and look up these answers online or call another property manager in the area and see what their answers are.
2. Site Visit
Get on a plane
I can’t stress this enough. If you are willing to put hundreds of thousands of dollars into turn key properties, then you can afford to buy a plane ticket and visit those neighborhoods. First, drive around with a couple different providers and ask them do drive up and down the blocks. See firsthand what the block looks like. Just last week a property was listed on MLS by a turnkey company on a block, which we have visited a month ago. The block was so bad that we didn’t even get out of the car because there were 18 boarded up houses on that block. If you just look at their photos to make up your mind, it won’t tell you the whole story.
Trulia has a nice little tool that has a heat map for crime. Plug in some of the addresses in Trulia and scroll down the map. The map will show how much crime there is: Red being the most and green being the least. It will also show the types of crimes that were committed. Keep in mind that map is just a snapshot in time, the colors can change from week to week, but you can always look at the list of crimes in the area to get a good feel.
I was hesitant to put this on here, but I think you should be aware. Chicago is a neighborhood by neighborhood even at times block by block city. It is very unique in that respect. Strong block clubs and local influences can have huge impacts on neighborhoods and property values. With that being said, when pulling comparable property sales in Chicago, it needs to be done with precision. Otherwise you will get bad data and end up making a bad purchase. There are properties that we have bought where the difference of a quarter mile can have a 30% difference in the market value of a property. The best way to figure this out is to check and see if there are any other sales in the area at the same price point. Make sure they are sales, not listings. If no other properties have sold near that price, you may be paying too much.
Due Dilligence on Turn Key Properties in Chicago
Turnkey Investing in Chicago will be far more profitable and headache free if you stay out of the war zones explained above. Due diligence is important no matter what you purchase, but it is even more important when you are buying real estate out of state. Buying an overpriced property in a bad neighborhood can cost you tens of thousands of dollars and the “cash flow” will not be able to make up for that mistake. Get comfortable with the provider and the neighborhood before purchasing a turnkey property in Chicago.