Sue Fox, @Properties. Direct 773.816.1788

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Flippers return to Chicago housing

filed under: Buyers, Chicago home prices, Foreclosures, Irving Park, Market conditions, Neighborhoods, Portage Park posted on October 12th, 2012

THE FLIP SIDE:

THE FLIP SIDE: With newly finished hardwood floors, fresh paint and wainscoting, this living room is typical of the houses being flipped in Portage Park and nearby neighborhoods. This 3-bedroom house, complete with 2 more bedrooms in the finished basement, sold for $306,000 in just five days in September. Before being rehabbed, it was just another beat-up bungalow in foreclosure until an investor bought it in March for $157,200.

Hundreds of investors, it seems, are now spotting opportunity in Chicago’s rejuvenated housing market.

House-flipping, a practice where someone buys a house (presumably at a discount) and quickly resells it for a profit, is once again on the rise. According to RealtyTrac, a real estate data firm, there were 1,067 homes flipped in the seven-county Chicago area during the first half of 2012 — a 30% jump from the previous year.

Investors often buy these homes as foreclosures and then fix them up, sometimes with cosmetic improvements like new paint, but often by gutting and replacing much of the interior and mechanicals. In many Chicago neighborhoods, the houses look almost new by the time they hit the market again three to six months later.

Over the past year, I’ve seen a good deal of flipping in areas like Irving Park, Logan Square, and Portage Park. These aren’t necessarily the hottest North side neighborhoods, but they are solid middle-class enclaves close to public transit and full of houses in the affordable $250,000 to $350,000 range.

Competition for distressed homes, which often sell below $150,000 in these neighborhoods, can be very fierce, and many ordinary buyers are outbid by investors willing to pay cash. But once the homes are rehabbed and offered for sale, they can be appealing deals for the end buyer. After all, it’s not easy to find a 3 or 4-bedroom house with a finished basement and new plumbing, electric, roof, paint, kitchen, baths etc. for $300,000 on Chicago’s North side.

I helped some first-time buyers find just such a house this year in Portage Park. This particular couple started out looking at condos in Uptown, but once they discovered they could afford a house if they were willing to move a few miles west, the house search was on. We looked at dozens of old and often rundown bungalows, Victorians, and ranch houses until we finally came across a lovely, fully rehabbed 4-bedroom Portage Park house for $279,000.

KITCH

REHABBED: Most buyers would prefer a new kitchen with stainless steel appliances. If the rehab work is done properly, these renovated houses tend to sell quickly. This one sold for $6,000 over the asking price, suggesting that there were multiple offers that drove up the price.

It was a great deal for my buyers, who knew how difficult it was to find a renovated house in their price range, and they snapped it up quickly. And it was apparently a great deal for the investor who flipped it as well. He bought it as a short sale for $115,000, renovated it, and sold it about five months later for more than double the price.

Written by Sue Fox //

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