Chicago Real Estate Market Report 2019

Chicago Overview

Chicago is a major city in the US and an international industrial, financial, commercial, technological, telecommunications, transportation, and cultural hub.

The population of over 2.7 million people makes the Chicago real estate market the largest in the State of Illinois as well as the most populous one in the Midwest and the third largest in the entire US (after New York City and Los Angeles). The City of Chicago is the county seat of Cook County, the second most populous county nationwide, and the principal city of the Chicago metropolitan area. With a population of nearly 10 million people, the Chicago–Naperville–Elgin metro area is the third most populous in the US (after New York-Newark–Jersey City and Los Angeles–Long Beach–Anaheim).

The economic importance of Chicago spreads well beyond the borders of the US. the city features a truly global economy, which is actually one of the most diversified and balanced economies worldwide. There is no dominant industry in Chicago as technology, manufacturing, telecommunications, sciences, education, accommodation, real estate, transportation, administration, trade, and commerce are all well developed and created above-average employment opportunities. Furthermore, Chicago hosts a number of Fortune 500 companies. This economic diversification is an excellent indicator for both commercial and residential real estate investments as it means that even if one sector of the economy takes a hit, others will remain stable and absorb some of the labor force.

As a matter of fact, Chicago has one of the GDP levels globally. O’Hare International Airport is one of the busiest worldwide, and the Chicago region also boasts the highest number of highways and the largest amount of railroad freight across the nation.

As a result of the economic activities, in 2018 Chicago was ranked an Alpha++ city by the Globalization and World Cities (GaWC) Research Network. The fact that Chicago is a top-performing city with great potential is further testified by the fact that it ranks #8 in the 2019 Global Cities Index, only after New York City (#1) and Los Angeles (#7) in the US.

In addition, Chicago is a top tourist destination both nationally and globally. With over 57.6 million visitors per year, Chicago is the second most visited city in the US, after New York. The unique skyline and architecture, the lakefront location, and the entertainment and shopping opportunities attract millions of tourists. Moreover, Chicago is a major convention destination. McCormick Place is the largest convention center in the US and the third largest in the entire world. The strong economy and the endless business opportunities attract numerous business travelers. All this makes Airbnb Chicago one of the hottest in the US.

The average per capita income in Chicago reaches $32,650, which is just above the national average of $31,177. The median household income amounts to $52,497, below the US level of $57,652. The City of Chicago has an unemployment rate of 4.4%, slightly exceeding the national average. Importantly for real estate investors in long term Chicago rental properties, more than half of the city population (56%) is comprised of renters rather than homeowners. This fact is one of the drivers in the Chicago real estate market.

Chicago Real Estate Market Overview

Median Property Price: 441,700
Price per Square Foot: $261
Real Estate Appreciation: 55% since 2000 (significantly above the Illinois real estate appreciation rate and around the US average)
Days on Market: 64
Listings for Sale: 5,134
Price to Rent Ratio: 18 (moderate)
Buyer’s Market or Seller’s Market: Shifting towards a buyer’s market
Renters’ Percent of Population: 56%

The Chicago real estate market has been one of the top choices of investors looking for top-performing rental properties in the last decades. The drivers behind the success of the Wind City housing markets include the strong and diverse economy, the multiple employment opportunities, the positive net migration, and the tourist attractions. According to the PwC Emerging Trends in Real Estate: United States and Canada 2019 report, Chicago wins investors over as an attractive gateway market.

After years of being a seller’s market, the Chicago housing market is balancing in 2019 and expected to become a buyer’s market by the end of 2019 or in early 2020. The major reason for this shift in the Chicago real estate market is the increase in construction activities, which led to a growth in inventory. Currently there are about 5.9 months of supply of Chicago homes for sale, and the average days on the market for residential Chicago real estate listings have gone up to 64. At the moment there are 5,134 houses for sale in Chicago. This means that property buyers are starting to gain the upper hand in the Wind City.

Chicago real estate prices are relatively affordable, especially when compared to other hot real estate markets in 2019. The median listing price of homes for sale in Chicago exceeds the national level of $229,000 by 93%. Appreciation in the Chicago housing market hovers around the national average but is expected to remain strong and stable. This makes buying Chicago investment properties a good long term real estate investment strategy.

All in all, both traditional, long term rentals and Airbnb, short term rentals can constitute a profitable real estate investing strategy in the Wind City as the rest of this Chicago real estate market report 2019 shows.

Best Property Types for Investing in the Chicago Residential Real Estate Market

Single Family Homes for Sale in Chicago, IL: 1,453
- Median Property Price: $325,600
- Price per Square Foot: $170
- Average Monthly Traditional Rental Income: $,1680
- Average Traditional Cap Rate: 2.4%
- Average Monthly Airbnb Rental Income: $2,110
- Average Airbnb Cap Rate: 2.8%
Condos for Sale in Chicago, IL: 2,645
- Median Property Price: $488,000
- Price per Square Foot: $322
- Average Monthly Traditional Rental Income: $2,150
- Average Traditional Cap Rate: 0.0%
- Average Monthly Airbnb Rental Income: $2,970
- Average Airbnb Cap Rate: 1.4%
Townhouses for Sale in Chicago, IL: 187
- Median Property Price: $577,600
- Price per Square Foot: $254
- Average Monthly Traditional Rental Income: $2,5540
- Average Traditional Cap Rate: 0.9%
- Average Monthly Airbnb Rental Income: $2,600
- Average Airbnb Cap Rate: 0.7%
Multi Family Homes for Sale in Chicago, IL: 824
- Median Property Price: $396,700
- Price per Square Foot: $179
- Average Monthly Traditional Rental Income: $1,880
- Average Traditional Cap Rate: 2.7%
- Average Monthly Airbnb Rental Income: N/A
- Average Airbnb Cap Rate: N/A
Foreclosed Homes for Sale in Chicago, IL: 83
- Median Property Price: $167,400
- Price per Square Foot: $112
- Average Monthly Traditional Rental Income: $1,150
- Average Traditional Cap Rate: 2.7%
- Average Monthly Airbnb Rental Income: $1,670
- Average Airbnb Cap Rate: 3.2%

Unlike other top locations for real estate investments, the Chicago housing market is not dominated by single family homes. While Chicago single family homes for sale constitute 28% of the whole inventory, condos for sale in Chicago, IL account for 52% of all listings. Multi family homes constitute 16% of all Chicago real estate listings, and townhouses make up 4%.

Why Investing in Single Family Homes in Chicago

According to the real estate analysis figures in this real estate market report, single family homes for sale in Chicago comprise the most profitable rental property type in 2019, for both traditional Chicago rentals and Airbnb Chicago properties. The price of these properties is equivalent to only 67% of the median price level in the local housing market, which makes them an affordable option for beginner real estate investors and others with limited financing capacities. One of the best features of investing in single family homes in the Chicago real estate market or any other location is that they attract young professionals and small families, who make for good tenants. Moreover, under the provision of the Airbnb Chicago laws, they can be rented out on short term basis as owner-occupied properties. Chicago real estate investors have 1,453 listings to choose from..

Why Investing in Condos in Chicago

Condos for sale in Chicago, Illinois are the most numerous property type in the local market. Their price is equivalent to the city median level, which means that they don’t require additional financing. City-level real estate data shows that condos tend to break even when rented out traditionally, but investors can find high-performing condos as long as they conduct thorough property search and investment property analysis. While on average condos make profitable Chicago vacation rentals, investors have to study the rules and regulations of the HOA before buying an investment property to make sure that short term rentals are allowed. The 2,645 condos listed for sale in the Chicago real estate market allow investors to find a property which matches all their criteria and expectations.

Why Investing in Townhouses in Chicago

Townhouses for sale in Chicago, Illinois are another option for real estate investors. They sell for 18% more than other property types, but their price per square foot is comparable to the city level. Townhouse investments are feasible for both rental strategies. With 187 townhouses for sale to choose from, investors are bound to find a property which meets their requirements.

Why Investing in Multi Family Homes in Chicago

Multi family homes provide investors with an easy opportunity to scale up their real estate investment portfolio by purchasing a few residential units at the same time. In the Chicago real estate market multi family properties sell for less than other houses when considering the price per square foot. Out of all property types, multi family homes for sale promise the highest return on investment as traditional, long term rentals. While there isn’t enough data to show their the average cap rate for Airbnb, they have real potential in this regard. Investors interested in this property type can choose from 824 listings.

Why Investing in Foreclosures in Chicago

Foreclosed homes are a profitable real estate investment strategy in any housing market, including the Chicago real estate market where affordability is not a problem. Nevertheless, Chicago foreclosures sell for a third of the price of other Chicago homes for sale. This means that investors get an immediate boost in their return on investment, especially in terms of cash on cash return. Investing in cheap real estate is one of the best ways to make money with rental properties. While foreclosed homes for sale require more repairs than other houses, the total cost is still lower. Currently investors can choose from 83 foreclosures for sale in the Chicago housing market.

Important Stats for Chicago Real Estate Investors

Safety in the Chicago Real Estate Market

Crime Rate Index: 8 (100 is highest)

Orlando is safer than 8% of US cities, with a high overall crime rate of 44 crimes per 1,000 residents.

Access in the Chicago Real Estate Market

Walk Score: 78
Transit Score: 65
Bike Score: 72

Austin is the 6th most walkable large city across the nation. It has good public transportation and is very bikeable. Generally, Chicago is a very walkable city where most errands can be accomplished on foot.

Affordability in the Chicago Real Estate Market

Cost of Living Index (Excluding Rent): 78
Rent Index: 52
Cost of Living Plus Rent Index: 65

The cost of living in Chicago index excluding rent is 22% cheaper than in New York City. Rent is 48% less expensive than in NYC. Meanwhile, the average cost of living plus rent index in Chicago, IL is 35% below the level in New York City.

Chicago Real Estate Tax Rates

Illinois Average Effective Property Tax Rate: 2.32%
Cook County Average Effective Property Tax Rate 2.14%

Illinois property taxes are the second highest among all states, right after New Jersey. While the assessed value of residential properties equals 33.33% of the market value in most of the Illinois real estate market, the assessment ratio is only 10% in Cook County. The average rate of Cook County property taxes is below the average rate of Illinois real estate taxes. Chicago property owners pay an average of $3,538 in taxes, which is less than what many other cities pay in both Cook County and the State of Illinois. Of this, 8% goes to the county and 18% goes to the city. All in all, Chicago real estate taxes are relatively high compared to the levels in other top locations for real estate investing. Nevertheless, the rental income in the Chicago housing market makes up for this, resulting in highly profitable Chicago real estate investing opportunities.

If you’d like to buy an investment property with a high return in states with no property tax, check out Texas, Hawaii, Alabama, Louisiana, West Virginia, and Wyoming.

Chicago Real Estate Market: Traditional Rentals

Average Monthly Rental Income: $2,010
Average Cap Rate: 0.9%
Price to Rent Ratio: 18
Renters’ Percent of Population: 56%
Optimal Property Type: Multi family home or single family home
Optimal Number of Bedrooms: 4 and 3
Traditional Rental Listings: 5,091
3 Best Neighborhoods in Chicago for Investing in Traditional Rental Properties: North Austin, East Chatham, and South Austin
3 Worst Neighborhoods in Chicago for Traditional Rental Properties: East Hyde Park, Gold Coast, and Kenwood

The Chicago housing market is one of the top locations to invest in real estate not only in the State of Illinois but in all of the US. Affordability does not constitute an obstacle here as the median price of Chicago houses for sale is below the median in many other best real estate markets. At the same time, traditional Chicago rental properties enjoy a strong demand since there are over 1.7 million renters in the Wind City. This comes as no surprise considering the fact that Chicago is one of the best cities in Illinois in terms of employment opportunities and living conditions. Moreover, the moderate price to rent ratio also supports Chicago real estate investors considering long term rentals. The existing price to rent ratio of 18 means that while there is high rental demand, Chicago real estate prices are not too high compared to the predominant rental rates to avert high return on investment.

Experienced real estate investors will be concerned about the city-level average capitalization rate of 0.9% as this is much below the conventionally agreed upon good cap rate of 8% and above. However, anyone interested in buying an investment property in the Chicago real estate market to rent out on long term basis should remember that this is just the city average, while some Chicago neighborhoods offer a much higher cap rate. Many Chicago homes for sale have double-digit return on investment.

In the Chicago real estate market multi family homes provide the highest return on investment when rented out on long term basis. The next most profitable property type is single family homes. The optimal number of bedrooms for long term rental property investments is 4 and 3 bedrooms. Resourceful real estate investors consider Chicago foreclosures for sale as they constitute the cheapest and most profitable investment properties.

Landlord-Tenant Law and Regulations in the Chicago Rental Market

Unlike other major cities in the US, the Chicago City Council passed its own Residential Landlord and Tenant Ordinance (RLTO) in 1986. This law establishes and governs the rights and obligations of both landlords and tenants in Chicago rentals. Generally speaking, the Chicago legislation makes it a tenant-friendly city. For example, security deposits should be held in federally insured interest-bearing accounts in a financial institution in the State of Illinois. Chicago landlords are obliged to pay interest to their tenants on prepaid rent and security deposits held for more than 6 months, and the interest rate is determined by the City Comptroller each year. The security deposit has to be returned to the renter within 45 days after the end of the lease.

Furthermore, a landlord in the Chicago real estate market can’t require a tenant to renew the lease more than 90 days before the end of the current rental agreement. The landlord also has to give renters a 30-day written notice in case the lease will not be renewed.

At the same time, landlords and property managers can access their Chicago investment properties after a two-day notice.

If things go really bad with your renter, it is good to know that eviction is possible in the Chicago rental market. However, evicting a renter usually takes a lot of time and money and requires hiring a lawyer. Nevertheless, you can sue the tenant for all legal fees incurred during the eviction process.

In sum, the RLTO tends to give tenants the upper hand in the Chicago rental business. However, the landlord-tenant legislation governing Chicago rental properties is not prohibitive for real estate investors by no means. They just have to study the Ordinance carefully before buying an investment property and renting it out to make sure they are fulfilling their duties and responsibilities and assuring the rights of renters, while benefiting from any advantages for landlords.

If, alternatively, you’d like to explore real estate investment opportunities in the landlord friendly states, check out traditional rental properties in Arizona, Texas, Indiana, Colorado, Georgia, Kentucky, and Alabama.

Best Chicago Neighborhoods for Investing in Traditional Rentals

Chicago Real Estate Market Report 2019 Best Chicago Neighborhoods for Traditional Long Term Rentals

1. North Austin

Median Property Price: $208,400
Price per Square Foot: $139
Average Monthly Rental Income: $1,860
Average Cap Rate: 5.9%
Walk Score: 83

Based on the analysis of the present Chicago real estate market report 2019, the North Austin neighborhood is the best place for investing in a Chicago long term rental property. Chicago, Illinois real estate data shows that this neighborhood yields the highest return on investment for this rental strategy in terms of both capitalization rate and cash on cash return. One of the main reasons for the high profitability is the abundance of cheap houses for sale in Chicago in this particular area. However, investors less familiar with the Chicago real estate market should keep in mind that this is one of the most dangerous neighborhoods in Chicago, leading to such affordable property prices. This means that investors should calculate extra costs for securing the safety of their investment property and tenants. Nevertheless, with property due diligence and preparation, buying a rental property in North Austin can be a very profitable real estate investment strategy even for beginners.

2. East Chatham

Median Property Price: $114,900
Price per Square Foot: $93
Average Monthly Rental Income: $1,190
Average Cap Rate: 5.1%
Walk Score: 84

The East Chatham neighborhood is #2 among the top neighborhoods of Chicago for buying a long term rental property. Compared to other areas, it is among the safest neighborhoods in Chicago and also one of the most walkable ones. East Chatham is also one of the most affordable neighborhoods in Chicago for new real estate investors and other property investors on a tight budget. While the traditional rental income is not as high as in other top markets for real estate investing, it is enough to bring high return on investment, mostly due to the low prices of Chicago homes for sale here. Overall, investing in a long term rental property in East Chatham is a top strategy for making money in 2019 and 2020.

3. South Austin

Median Property Price: $141,100
Price per Square Foot: $81
Average Monthly Rental Income: $1,370
Average Cap Rate: 4.7%
Walk Score: 80

The South Austin neighborhood is the 3rd among the best Chicago neighborhoods for investment properties to be rented out traditionally. The median price of homes for sale in Chicago here are much below the national average, which makes this area ideal for affordable real estate investments. This is an urban community where 63% of the residents rent rather than own a home, which results in a high rental demand and highly profitable real estate investments. Buying an investment property in South Austin brings significantly higher cap rate and cash on cash return than other top locations for property real estate investing in the US housing market.

4. Pullman

Median Property Price: $131,100
Price per Square Foot: $105
Average Monthly Rental Income: $1,940
Average Cap Rate: 4.6%
Walk Score: 57

Pullman comes as #4 among the most profitable neighborhoods of Chicago for buying investment properties to rent out on monthly basis. With good amenities, parks, nightlife options, and diversity, this area is one of the best Chicago neighborhoods for young professionals to live in. most of the residents of the Pullman neighborhood rent, which drives the strong rental demand – one of the main reasons for the high return on investment, in addition to the low real estate prices. Buying an investment property in Pullman is a top investing strategy 2019 not only in the Chicago real estate market but also nationally.

5. Winneconna Parkway

Median Property Price: $123,600
Price per Square Foot: $79
Average Monthly Rental Income: $1,130
Average Cap Rate: 4.3%
Walk Score: 74

Winneconna Parkway is yet another of the good neighborhoods in Chicago for investors looking for long term rentals. You can find numerous cheap Chicago homes for sale in this area, which is one of the prerequisites for a profitable real estate investment. Moreover, the low prices of Chicago real estate listings here make the Winneconna Parkway neighborhood a perfect choice for beginner real estate investors taking their first steps in 2019. Traditional rental properties in Winneconna Parkway are a money-making real estate investment strategy.

6. LeClaire Courts

Median Property Price: $167,900
Price per Square Foot: $163
Average Monthly Rental Income: $1,540
Average Cap Rate: 4.1%
Walk Score: 38

LeClaire Courts is the last on this list of Chicago neighborhoods for long term rental property investments. The LaClaire Courts neighborhood is a unique residential real estate project within the Chicago real estate market as it was the first to be built on the outer edge of the city. In 2019 rental properties here are in high demand and bring high return on investment in terms of cap rate and cash on cash return to investors. Investing in a traditional rental property in LeClaire Courts constitutes an excellent opportunity to make money in real estate in 2019, 2020, and beyond.

Chicago Real Estate Market: Airbnb Rentals

Average Monthly Rental Income: $2,870
Average Cap Rate: 1.8%
Average Occupancy Rate: 57.5%
Optimal Property Type: Single family home or condo
Optimal Number of Bedrooms: 4 and 1
Airbnb Rental Listings: 19,553
3 Best Neighborhoods in Chicago for for Airbnb Rental Properties: Washington Park, West Garfield Park, and Gage Park
3 Worst Neighborhoods in Chicago for Airbnb Rental Properties: Hyde Park, McKinley Park, and Belmont Central
Chicago Airbnb Legal Status: Airbnb rentals in the Chicago real estate market are only legal for owner-occupied residential real estate properties. Single family homes, duplexes, and other multi family homes face different restrictions on the number of dwelling units which can be rented out on short term basis. Registration is required for shared housing units, while vacation rentals need a license. A total of 10.5% city tax has to be paid.
Annual Events in Chicago with the Highest Airbnb Occupancy Rate:
- Taste of Chicago: July

This is by far one of the biggest Chicago events, celebrating the city’s eclectic food culture. In addition to cooking demonstrations and food tasting, this event also features live music, attracting over 1.5 million visitors each year.

- Chicago Air & Water Show: mid-August

This two-day event is the largest of its kind in all of the US as well as the longest ongoing in North America. The show can be viewed all along the lakefront.

- Chicago Marathon: mid-October

This is one of five World Marathon Majors which attracts more than 50,000 national and international runners in addition to 1.5 million spectators.

- Lollapalooza: early August

This festival hosts more than 130 rock, indie, electronic, and hip hop bands on 8 stages. The farmers market, food stands, and handmade arts and crafts market complete the event.

- Chicago Jazz Festival: late August-early September

This Labor Day weekend event has been featuring local, national, and international jazz musicians for 30 years. Every year it brings together over 150,000 jazz fans.

- Chicago International Film Festival: mid-October

Hundreds of feature films, feature-length documentaries, films by first-time filmmakers, and short subject films from more than 55 countries get presented during this major film event in Chicago.

- Chicago SummerDance: summer

This summer festival provides guests with free one-hour dance classes by professional instructors in addition to two hours of free music and dancing for the duration of 11 weeks.

- Chicago St. Patrick’s Day Parade: St. Patrick’s Day

This is by far one of the major celebrations of St. Patrick’s Day in all of the US when the Chicago River turns green. This over 170-year-old tradition features Irish-inspired floats and dancers.

The Airbnb Chicago, IL rental business has a huge potential. In 2015 Chicago Airbnb hosts generated profits of $24,175, which ranked the city as the 3rd most profitable short term rental market in the US, after Airbn San Diego and Airbnb Miami. In 2016 the Chicago real estate market kept its position as the 3rd best for vacation rentals after generating $73 million in supplemental income. Only Airbnb New York and Airbnb Los Angeles performed better nationwide. This high ranking was the result of the city’s status as a major global business, commerce, industry, education, culture, and tourism center. The year-round festivals, conventions, and celebrations guarantee high Airbnb occupancy rates in the Wind City.

Following the success of the Airbnb Chicago rental industry, the City Council decided to introduce a new restrictive Ordinance in the summer of 2016. While one of the states objectives of the Ordinance was to enhance the newly emerging short term rental business, it has actually imposed major limits on the opportunities facing Chicago Airbnb hosts. Most importantly, non-owner occupied Chicago short term rentals are no longer legal.

Nonetheless, real estate investors manage to find profitable options for Chicago vacation rentals. Real estate data on the Chicago housing market reveals that an Airbnb Chicago rental can generate high return on investment in terms of cap rate and cash on cash return. The most profitable property type for this rental strategy in the Chicago real estate market is single family homes and condos. The best number of bedrooms of high return on investment on Chicago homes for sale to be rented out on short term basis is 4 and 1.

Chicago Airbnb Laws and Regulations

Being the second most visited city in the US by both domestic and foreign tourists, it is expected that the Airbnb Chicago market is one of the hottest not only in the US but also globally. Similar to other hot Airbnb destinations such as New York City real estate market, the San Francisco real estate market, the Las Vegas real estate market, or the Santa Monica real estate market, the Chicago housing market also faces strict Airbnb rules and regulations. On 22 June 2016 the Chicago City Council passed a new Chicago Airbnb ordinance pioneered by Mayor Rahm Emannuel. The stated goal of the Airbnb Chicago laws was to support the emerging homesharing industry while protecting Chicago’s residents and their quality of life in addition to raising funds for addressing the growing homelessness issue in the city.

Regarding Chicago Airbnb hosts, the following restrictions were introduced:

Within single family homes in Chicago, only primary residences can be rented out on short term basis.
In multi family homes with 2 to 4 housing units, only primary residences can operate as Airbnb rentals, and only one housing unit per building can be rented.
In multi family homes with 5 or more housing units, the number of short term rental units is limited to one quarter of the total number of units or 6 dwelling units, whichever is lower.

With regards to short term rental platforms, the Chicago Airbnb ordinance defines two types:

Companies to be licensed as short term residential rental intermediaries (for example, Airbnb.com). These are expected to pay a flat annual license fee of $10,000 in addition to a $60 fee per unit.
Companies to be licensed as advertising platforms (for instance, HomeAway)

Airbnb Chicago hosts also need to keep in mind that:

Airbnb Chicago rental units need to be registered as a shared housing unit if they get booked through an intermediary.
Alternatively, if they are booked through an advertising platform or offline, Chicago short term rentals have to be licensed as a vacation rental.

Furthermore, as of 1 December 2018 both Chicago shared housing units and Chicago vacation rentals must pay a city tax rate of 10.5% of the gross rental or leasing charge, including a 6% subcharge and a 4.5% base rate.

The strict Chicago Airbnb laws eventually mean that only owner-occupied short term rentals are possible in the Chicago real estate market. This leaves out of state real estate investors out of the equation as they have to turn to long term Chicago rental properties. However, there are plenty of profitable real estate investment opportunities for those who are willing to buy a duplex, triplex, or multi family home to live in one housing unit and rent out the rest. Because of the high demand for Chicago short term rentals, even renting out a single room in a single family home can yield high return on investment.

Best Chicago Neighborhoods for Investing in Airbnb Rentals

Chicago Real Estate Market Report 2019 Best Chicago Neighborhoods for Short Term Airbnb Rentals

1. Washington Park

Median Property Price: $118,100
Price per Square Foot: $85
Average Monthly Rental Income: $2,680
Average Cap Rate: 12.5%
Average Occupancy Rate: 65.8%
Walk Score: 70

The Washington Park neighborhood heads the list of the best Airbnb Chicago neighborhoods according to the data analysis conducted for this Chicago real estate market report 2019. This area provides investors with the opportunity to buy cheap South Chicago homes for sale to rent our on short term basis. Mostly owing to the low property prices, this location is particularly profitable for Chicago vacation rentals. Nationwide neighborhood analysis demonstrates that a double-digit return on investment is rare at the neighborhood level. Thus, local first-time real estate investors with limited financing options should definitely consider buying an investment property in Washington Park.

2. West Garfield Park

Median Property Price: $123,000
Price per Square Foot: $85
Average Monthly Rental Income: $1,910
Average Cap Rate: 8.6%
Average Occupancy Rate: 48.4%
Walk Score: 84

The West Garfield Park neighborhood is the 2nd best Airbnb Chicago location for profitable real estate investments. Located in the West Chicago real estate market, this area is one of the most affordable Chicago neighborhoods. While the Airbnb rental income is not particularly high, it is high compared to property prices, leading to money-making short term rental options here. Buying a vacation rental in West Garfield Park yields high cap rate and cash on cash return and is ideal for beginner real estate investors in the Chicago housing market.

3. Gage Park

Median Property Price: $170,900
Price per Square Foot: $146
Average Monthly Rental Income: $2,400
Average Cap Rate: 8.3%
Average Occupancy Rate: 53.0%
Walk Score: 75

The Gage Park neighborhood is another top location for investing in an Airbnb Chicago rental property. This area offers an urban feel combined with numerous parks and nightlife options. The Airbnb rental income here is excellent, which – together with the good Airbnb occupancy rate – pushes the return on investment up. Investing in a short term rental in Gage Park is one of the most profitable real estate investment strategies in 2019, 2020, and beyond.

4. Fuller Park

Median Property Price: $152,300
Price per Square Foot: $112
Average Monthly Rental Income: $1,940
Average Cap Rate: 7.3%
Average Occupancy Rate: 50.8%
Walk Score: 68

Chicago real estate market analysis ranks Fuller Park as the 4th best neighborhood for Airbnb Chicago. South Chicago homes for sale in the Fuller Park neighborhood as listed for prices much below the city-level median value, which makes for affordable Chicago real estate investment opportunities. This is a diverse community which offers a lot to Airbnb guests including many parks. Buying an Airbnb rental in Fuller Park is a money-making strategy ideal for new real estate investors.

5. Parkway Gardens

Median Property Price: $141,300,
Price per Square Foot: $108
Average Monthly Rental Income: $2,230
Average Cap Rate: 7.2%
Average Occupancy Rate: 53.0%
Walk Score: 56

Parkway Gardens is #5 among the top Chicago neighborhoods for vacation rentals investing. Parkway Garden Homes was built as a low-income apartment complex between 1950 and 1955 on land purchased by the Chicago Housing Authority to construct a public housing complex. South Chicago homes for sale in the Parkway Gardens neighborhood are cheap, while they are expected to be profitable Airbnb Chicago rental properties. Buying an investment property in Parkway Gardens to partially rent out on short term basis is a viable and profitable choice in 2019 and 2020.

6. Kelvyn Park

Median Property Price: $213,000
Price per Square Foot: $194
Average Monthly Rental Income: $2,340
Average Cap Rate: 6.7%
Average Occupancy Rate: 73.8%
Walk Score: 84

Real estate data analysis highlights Kelvyn Park as the last on this list of Chicago neighborhoods with the highest return on investment. While houses for sale in Chicago in this area are offered for slightly higher prices than in other Chicago neighborhoods, the Airbnb rental income is high enough to lead to excellent cap rate and cash on cash return. On the map of Chicago neighborhoods, the Kelvyn Park neighborhood exhibits the highest Airbnb occupancy rate, which is one of the determinants of profitability. Buying a vacation rental in Kelvyn Park promises to allow investors to make money from real estate with an affordable down payment.

Investing in Chicago Real Estate Properties: Optimal Rental Strategy

According to real estate data analysis, investing in the Chicago housing market 2019 is a smart financial decision. Chicago real estate investments offer a cap rate and cash on cash return significantly above what other top real estate investing locations do, regardless of which rental strategy one looks at. This is the combined effect of the relatively affordable Chicago real estate prices and the high rental demand for both traditional Chicago rental properties and Airbnb Chicago rentals.

Focusing on return on investment, Airbnb Chicago is the more profitable rental strategy as it yields a higher city-level cap rate which reaches a two-digit figure in some Chicago neighborhoods. This high profitability comes as no surprise considering the fact that Chicago is the second most popular tourist destination in all of the US after New York City.

Prior to buying an investment property for the sole purpose of renting it out on Airbnb or a similar short term rental platform, though, investors in the Chicago real estate market should study the Chicago Airbnb Ordinance, which the City Council passed in June 2016. In line with these Chicago Airbnb laws, renting out a non-owner occupied rental property is illegal in all Chicago neighborhoods. Operating Chicago short term rentals or Chicago vacation rentals out of single family homes, duplexes, triplexes, and other multi family properties is possible as long as they serve as primary residences and only a certain number of housing units is rented out. This means that Airbnb Chicago is not a viable option for out of state and full-time real estate investors. Nevertheless, it can help those in need of a home in Chicago make money in real estate. Both the Airbnb rental income and the Airbnb occupancy rate are expected to be high.

In case you are interested in out of state real estate investments or want to add a new property to your real estate investment portfolio, you should turn to the traditional rental strategy. Long term rentals are still a money-making option in the Chicago housing market. The rental demand is high as more than half of the growing population rents rather than owns a home. After conducting careful real estate market analysis and detailed investment property analysis, you are guaranteed to find a positive cash flow property.

Why You Should Invest in Real Estate in Chicago in 2019: The Pros

As highlighted in this Chicago real estate market report 2019, one of the main reasons why real estate investors should consider buying a rental property in Chicago in 2019 and 2020 is the low prices. Although the listing price of Chicago homes for sale exceeds the national median home value, the Wind City offers reasonably priced real estate, compared to other best locations.

The second factor attracting property investors to the Chicago real estate market is the high demand for both long term and short term rentals. There are over 1.7 million people renting an apartment or house in Chicago, and more than 57 million visitors per year. These figures assure low vacancy rates for both rental strategies.

Most importantly, the combined impact of the above-two factors is high profitability for Chicago investment properties, regardless of the method in which they are rented. Long term Chicago rental properties and Chicago vacation rentals can bring very high return on investment as long as investors rely on big data and predictive analytics and make use of the best real estate investment tools.

One final factor to tip the scales in the direction of a Chicago real estate investment property is the Chicago real estate market forecast 2020. The Chicago housing market is expected to complete the transition to a buyer’s market by the end of 2019 or in 2020 at the latest. As inventory is increasing, property buyers will have even more Chicago homes for sale to choose from and will not need to engage in bidding wars.

All in all, Chicago real estate trends point out to profitable investment opportunities in the coming years. To push your profitability up, look for Chicago foreclosures for sale (which sell below market value) to lower your purchase price and hire a top Chicago real estate agent to close the best deal possible in the fastest time.

Why You May Not Want to Invest in Real Estate in Chicago in 2019: The Cons

Like any other housing market, investing in Chicago real estate does not come without absolutely any problems. Something which first-time investors in the Chicago real estate market should take into consideration is the high crime rate in the city. This means that they will need to save some extra money for additional startup costs to provide the necessary security systems in their rental property.

Those interested in short term rental investments need to keep in mind that Airbnb Chicago is only permitted in owner-occupied properties. This means that buying an investment property for the sole purpose of renting it out on short term basis is not an option.

Last but not least, if you are looking for buy and hold real estate, you should know that the appreciation rate in the Chicago housing market has been below the level in other hot markets. Nevertheless, it is enough to secure good long term return on investment.

Chicago Housing Market Forecast

According to experts, the Chicago real estate market trends are all looking positive and promising for 2019 and 2020. The Chicago homes for sale inventory is expected to continue going up, partially as a result of increased construction activity. Based on the Chicago real estate market forecast 2020, property prices will keep rising but at a reasonable rate, without turning affordability into an issue. The reasonable real estate prices are what distinguishes the Chicago housing market from others nationwide. All this means that the Wind City is turning into a buyer’s market. Consequently, the rest of 2019 and 2020 will be a good time to buy a Chicago investment property rent out.

Additional Resources for Investors in the Chicago Rental Market

Best Chicago Investment Properties

As shown throughout this Chicago real estate market report 2019, investing in rental properties in Chicago can be a money-making strategy. Using an investment property calculator, you can search through the 5,134 Chicago homes for sale and filter the ones that meet your criteria including budget, neighborhood, property type, optimal rental strategy, cap rate, and cash on cash return in a matter of minutes. A heatmap tool will provide you with a Chicago neighborhoods map to find out the best neighborhoods in Austin buy a rental property to invest in rental properties as well as the Austin neighborhoods to avoid for real estate investing. A Property Finder will help you land a top-performing investment property depending on your preferred rental strategy and other preferences.

Chicago Real Estate Agents

Beginner real estate investors as well as those out of state and those looking for passive real estate investments can hire one of the top Chicago real estate agents. An expert Chicago real estate agent specializing in working with investors will not only help you find a good property but also negotiate the best price with property sellers and close the deal quickly and efficiently. Here are some of the best real estate agents in Chicago:

Chicago Real Estate Auctions

Real estate investors interested in investing in foreclosed houses for sale in Chicago can check out this calendar for auctions as well as other foreclosure related events in the Illinois real estate market.

Property Management of Long Term Chicago Rental Properties

Investing in traditional rentals in the Chicago, Illinois real estate market does not have to mean becoming a landlord and tackling all the day-to-day tasks associated with this job. Real estate investors hire a professional property manager to take care of all the duties and responsibilities of a landlord, while they enjoy their passive rental income.

Property Management of Short Term Chicago Rental Properties

If you want your Chicago vacation rentals to be passive real estate investments, you can choose one of the top property managers in the local market to handle all responsibilities related to owning and renting out an Airbnb Chicago property.