There are a ton of different factors to consider when purchasing an investment property. Some think that nearly anywhere in the country is a safe bet, but some areas are much better investments than others. Hot rental markets can change over time, but right now Chicago is a hot rental market. Investing in a hot market, like Chicago, can ensure that your investment becomes a profitable one. Here are 6 key variables to consider when considering where to buy rental properties and Chicago’s record on each.
Appreciation: Appreciation is determined by comparing the average value of a rental property year-over-year and can give you a great feel for the property’s potential growth. A high property appreciation value is good, as it indicates that properties are rising in value. A recent study found property appreciation values in Chicago to be nearly 5% which is above average across the country.
Vacancy Rates: One of the most painful aspects of an investment property is the time that the unit sits vacant waiting for a renter. While Chicago has a slightly higher vacancy rate of nearly 11%, there are other key areas that make the Chicago rental market really shine.
Rental Rate Variance: Smart investors will not invest in markets where rental rates are falling. The rental rate variance compares rental rates year-over-year to determine which city’s rates increased the most. Chicago’s rental rate variance at 1% is a health number that is about average. The key here though is that the year-over-year rental values are increases and growing.
Capitalization Rate: The capitalization rate compares the average property value to average rental rates year-over-year to determine the potential for return. The higher the capitalization rate, the higher the return. Chicago’s capitalization rate is nearly 8% which is above average across the country.
Job Growth: An indicator of a strong economy, job growth in a particular city is a great way to judge the overall feeling of the housing market. Chicago’s job growth has been growing steadily at 1.4% which is great across the country and near the top for the Midwest.
Days On Market: The average number of days on market looks at the number of days a property sits on the market prior to being sold. This number helps determine how active the real estate market is. At 103 days, Chicago is strictly average, but making the most of an investment property is about more than the average number of days on the market.
Chicago may have not come out perfectly in these tests, but there are other aspects that make the Chicago rental property market great. There is a constant demand for rental properties of all types. Wages for Chicago residents wary widely and both affordable and luxury rental properties can succeed in the area. Additionally, there are areas where purchasing properties is highly affordable and a smart investor can make quite a bit of money if they know where to look. For more information on the Chicago rental market and for property management services in Chicago, contact us today.
