Irving Park: 1 Neighborhood, 5 Reasons For Investors To Buy In 2012

Irving Park has long been a stable and sought after north center neighborhood for Chicago residents.  It has a solid mix of commerce, residential housing and decent access to public transportation and the highway.  This neighborhood was particularly hard hit by the recent housing bust from 2006-12 and now represents a good buying opportunity for investors.  Here are 5 reasons to buy in Irving Park.  

1:  Excellent building stock
The building stock in this neighborhood is great and generally dates back to the early 1900's.  You'll find a good mix of single family homes and bungalows, small residential multifamily buildings and larger residential multifamily buildings.  These properties are generally easy to restore or to fully rehab and continue to be in high demand.  Throughout the sub-pockets in this neighborhood you’ll find a fairly high percentage of buildings with 2-3+ units and larger residential multifamily buildings.  Per, the 2009 housing mix was, detached single family – 22.3%, townhouses or other attached units – 1.9%, 2-unit structures – 27.7%, 3-4 unit structures – 15.7% and 5+ unit structures – 32.3%.

2:  Solid renter base
This neighborhood has a good mix of owner occupied housing and renter occupied housing.  Some sub-pockets have a relatively high percentage of renters.  In these areas you'll find a heavier concentration of larger multifamily buildings.  In 2009, the median rent was around $800.  If you’re looking at 2-3 unit buildings in this neighborhood, you’ll find rents ranging from $500 - $1200/month for 2-3bed/1ba units.  Many smaller multifamily buildings are owner-occupied or owned by long time owners who keep rents manageable for good tenants and extended family living in the building.  It’s not uncommon for tenants to live in the same apartment for 5-10+ years.  Renters, both singles and families, continue to stay in the area due to the overall affordability. 

3: Cash flow 
In 2006, it would be unlikely that you could buy a 2-3 unit building in this neighborhood on a cash flow positive basis.  That assumes 25% down and all reasonable expenses related to ownership.  Smaller residential multifamily buildings were selling in the $300k- $500k+ range and rents were at current levels or lower.  Over the past year in 2012, 50 properties have sold for $230,000 or less.  Many of these sales were distressed and the buildings needed some work.  With today’s low interest rates and the strong rental market, a savvy investor can buy a solid 2 unit brick building, make some improvements to bump the rents to $1000-$1200/mo and have a cash flow positive property with 25% down.  You’re not going to retire on this level of cash flow but it’s only a 2 unit building.  View example pro forma that assumes a purchase price of $225,000 and an additional $30K of improvements.

4:    Excellent fix/flip opportunities
Certain pockets of the Irving Park neighborhood have a higher percentage of detached single family homes and owner occupied 2-3 unit buildings.  Property values tend to remain higher in these areas as home ownership is reflected in the way the buildings are maintained, yards are kept and the neighborhood appeal remains strong. 

These neighborhoods continue to be in high demand but they have been affected by the recent downturn in real estate values.  The Irving Park neighborhood in general, was hit hard by a high number of distressed properties that were lost in foreclosure or a short sale (sold for less than the mortgage).  From late 2009 to mid 2011, many of these properties sold to individual investors and small investment groups who rehab and resell quickly.  Few others were buying at this point and these properties were picked up at eye-popping low prices.  Of course the resale was lower at that point as well.   In late 2012, as more investors and buyers enter the market, competition has limited the number of truly good fix/flip opportunities but they are still out there and could be for a while as banks continue to sell through REO inventory.

5: Property values are improving
An influx of buyers, both investors and owner occupy alike, and a decrease in the supply of properties for sale, has pushed pricing up in the Irving Park neighborhood.  Gone are the days when 2 unit brick buildings with potential languished on the market in the sub $200k range.  You can still find building stock below $200k but it’s generally frame, small, distressed and in less desirable pockets of the neighborhood. 

Today, new listings coming to market are overwhelmed with buyer interest and if priced correctly, receive multiple bids.  This is a good sign for the neighborhood.  It demonstrates that a bottom is in place.  If the market conditions remain solid it should be a bottom that holds.  Buyers and investors can now go in with confidence.  For the pioneer investors, it’s too early to forget about Irving Park in search of better deals.  I think there are still good buying opportunities coming down the pipeline.