By Matt Halper
If you’re considering getting into real estate investment or looking to diversify your apartment portfolio, the Chicago Suburbs are a great market. Here are a few reasons why you should consider investing in the suburbs:
1. Steady Stream of Cash Flow as part of a diverse investment portfolio– You may want to diversify your investment portfolio so you are not overweight in Stocks & Bonds. REITS are historically correlated with the S&P 500. A commercial sized multifamily asset that is run by YOU where you can control your costs with tax benefits can help you to have a well balanced portfolio to hedge the ups and downs of capital markets.
2. Proximity to Your Investment – If you are going to buy a real estate asset, you want to be close to the property so that you can check on your investment. It becomes a nuisance if you live in Downers Grove and have to go in to Lakeview to meet with your management company or see your property.
3. School Districts Drive Great Tenants – Municipalities with very good school districts and high home ownership rates creates a high tenant demand on two-bedroom plus units. Tenants who cannot afford or don’t want to buy a home will pay a premium for rent if their kids can go to a great school. They also will tend to stay longer in their apartment, reducing turnover costs for the landlord.
4. Transportation for Tenants – Suburban commuter transportation isn’t just for homeowners. Tenants work downtown and look for dwellings near Metra stops as well. This amenity always helps keep vacancy rates low and again reduces turnover in tenants.
The Paradox of Choices
So where to buy? It all depends on what your investment goals are and your risk appetite. Cap rates over the last five years in Oak Park and Downers Grove have been 7.1% and 7.2%. This compares with places like Melrose Park and Aurora that have average cap rates of 8.8% & 8.3% over the same period, respectively.
The devil is in the details and an experienced broker with market knowledge of the suburbs can help narrow the choices for your own personal investment goals. If you’re interested in knowing what apartments Kiser Group has listed in the Chicago Suburbs, please give me a call.