Chicago Real Estate Market 2020: Why and Where to Invest

Are you interested in investing in real estate in a major city in the US housing market in 2020? You should be and there are many reasons why. Due to their massive renter populations, they can be very lucrative for rental property investments. However, most major real estate markets have a problem: They tend to be unaffordable for the average real estate investor. Well, there is at least one major US market where you can still find affordable real estate for sale: the Chicago real estate market.

Have we caught your attention? Are you thinking of investing in Chicago real estate? We’ll answer two important questions regarding the Chicago housing market 2020 to help you make a smart investment decision:

• Why should you invest in Chicago real estate in 2020?
• Where should you buy Chicago houses for sale?

Related: 10 Best Places to Invest in Real Estate in 2020

Why You Should Invest in the Chicago Real Estate Market in 2020

We’ll start this blog by answering the first question. Why should you invest in Chicago real estate 2020? The answer lies in four Chicago real estate market trends.

• Traditional and Airbnb Chicago Rental Properties Will Be Profitable

Most importantly, the Chicago real estate market will be profitable in 2020. This is true for both Airbnb and traditional rental properties. According to Mashvisor’s rental property calculator, the average traditional rental income in Chicago is $2,068. An Airbnb Chicago investment property has an average income of $2,598. Chicago’s income averages are also higher than those of the Illinois real estate market. According to Mashvisor, the average traditional and Airbnb rental income of the state are $1,778 and $2,562, respectively.

It’s important for Chicago real estate investors to know that these figures are only averages. With Mashvisor’s Property Finder, investors can find more profitable Chicago rental properties in 2020.

• Chicago House Prices Will Be Relatively Affordable Compared to Large Markets

As mentioned, a major concern of big-city markets is their unaffordability. Locations like the Boston real estate market, San Francisco real estate market, and New York real estate market are notorious for their expensive homes. Chicago, however, is one of the few large cities where this trend is not so apparent. In other words, the Chicago housing market will be an affordable big city alternative in 2020.

According to Mashvisor, the median property price in the Chicago real estate market is $412,482. This is much better than the prices of the previous cities mentioned, which range from $800,000 to $1.5 million! In addition, Chicago house prices will decrease in 2020. According to Zillow, they will actually drop by 0.3% in 2020. This drop will be accompanied by a shift from a seller’s market to a buyer’s market in 2020. With relatively low property prices and favorable conditions for buyers, buying an investment property in Chicago will be very accessible in 2020.

• Local Real Estate Investors Can House Hack with Airbnb Chicago in 2020

We’ve discussed the profitability of Airbnb Chicago. However, is it legal? The answer is yes, but not for non-owner occupied rentals. Only owner-occupied properties may be used as Airbnb Chicago rentals. In addition, Chicago Airbnb laws differ for single-family properties and multi-family properties. You can learn more about these laws on Airbnb’s Chicago Help Page. The city’s Airbnb regulations also require that hosts pay a 4.5% Hotel Accommodations Tax, 4% Shared Housing Subcharge, and 1% Cook County Accommodations Tax.

Airbnb laws in the Chicago real estate market are clearly restrictive. However, investing in Chicago short-term rental properties can still be profitable. How? Through house hacking! What is house hacking? In a nutshell, it is when an investor resides in a multi-family unit and rents out the others. By doing so, investors will be able to enjoy the high Airbnb rental income of the Chicago real estate market in 2020.

Related: House Hacking: Your Entry Into Real Estate Investing

• Chicago Rental Properties Will Be in High Demand

Above all, rental properties in the Chicago real estate market will be in high demand in 2020. About 55% of Chicago’s population, or 1.5 million, reside in rental properties. The Chicago real estate market forecast for 2020 shows a continuing demand for rentals with a price to rent ratio of 16. Overall, the city’s high rental demand will make investing in Chicago real estate a must in 2020.

Related: Real Estate Supply & Demand and Your Decisions

The Best Neighborhoods in Chicago for the Traditional Rental Strategy

We now move on to the second part of this blog. Where to invest in real estate in Chicago in 2020? We’ll answer this with real estate data. According to Mashvisor’s rental property calculator, these are the best neighborhoods in the Windy City for traditional real estate investing:

Englewood

• Median Property Price: $80,860
• Price per Square Foot: $39
• Price-to-Rent Ratio: 7
• Traditional Rental Income: $917
• Traditional Cap Rate / Cash on Cash Return: 6.1%

LeClaire Courts

• Median Property Price: $154,563
• Price per Square Foot: $158
• Price-to-Rent Ratio: 8
• Traditional Rental Income: $1,600
• Traditional Cap Rate / Cash on Cash Return: 5.2%

Roseland

• Median Property Price: $95,650
• Price per Square Foot: $66
• Price-to-Rent Ratio: 7
• Traditional Rental Income: $1,082
• Traditional Cap Rate / Cash on Cash Return: 4.7%

North Austin

• Median Property Price: $198,360
• Price per Square Foot: $139
• Price-to-Rent Ratio: 10
• Traditional Rental Income: $1,700
• Traditional Cap Rate / Cash on Cash Return: 4.0%

South Austin

• Median Property Price: $166,758
• Price per Square Foot: $83
• Price-to-Rent Ratio: 10
• Traditional Rental Income: $1,356
• Traditional Cap Rate / Cash on Cash Return: 2.6%

The Best Neighborhoods in Chicago for the Airbnb Rental Strategy

What about Airbnb Chicago? According to Mashvisor, these are the best neighborhoods for Airbnb real estate investing in Chicago in 2020 (just keep in mind that you will have to implement the house hacking strategy if you wish to invest in Airbnb in these neighborhoods!):

Gage Park

• Median Property Price: $151,065
• Price per Square Foot: $147
• Price-to-Rent Ratio: 11
• Airbnb Rental Income: $2,253
• Airbnb Cap Rate / Cash on Cash Return: 5.8%
• Airbnb Occupancy Rate: 44.6%

Englewood

• Median Property Price: $80,860
• Price per Square Foot: $39
• Price-to-Rent Ratio: 7
• Airbnb Rental Income: $1,161
• Airbnb Cap Rate / Cash on Cash Return: 5.3%
• Airbnb Occupancy Rate: 49.4%

West Lawn

• Median Property Price: $223,680
• Price per Square Foot: $153
• Price-to-Rent Ratio: 18
• Airbnb Rental Income: $2,209
• Airbnb Cap Rate / Cash on Cash Return: 4.9%
• Airbnb Occupancy Rate: 46.4%

Powder Horn Lake

• Median Property Price: $109,413
• Price per Square Foot: $70
• Price-to-Rent Ratio: 12
• Airbnb Rental Income: $1,743
• Airbnb Cap Rate / Cash on Cash Return: 4.6%
• Airbnb Occupancy Rate: 51.7%

South Austin

• Median Property Price: $166,758
• Price per Square Foot: $83
• Price-to-Rent Ratio: 10
• Airbnb Rental Income: $1,962
• Airbnb Cap Rate / Cash on Cash Return: 4.5%
• Airbnb Occupancy Rate: 59%

The Bottom Line

The Chicago real estate market will be a top big-city market in 2020. Want to further analyze the Chicago housing market 2020? Interested in a Chicago real estate investment? Start your search now with Mashvisor’s real estate investment tools!