Trending in Chicago… converting a Chicago 2 Flat basement into an apartment to help pay for your mortgage it’s a great way to pay your mortgage off quicker and easier. Home buyers have figured out that this is definitely better than renting.
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The problem is most of the 2 flats in Chicago are tiny and not really appealing as far as layout and modern necessities go for a first time home buyer to consider it worth it, when making the transition from their current apartment to home ownership. The more affordable single family starter homes are way too small too and end up costing almost twice as much as their current rent.
The Solution… buying an existing Chicago 2 flat and converting the first and second floors into a new layout for the home buyer. The first floor would be the living room, formal dining room, large kitchen with island a pantry, and a half bath. The second floor would have 3-4 bedrooms with 2 full bathrooms and a laundry room.
The basement now becomes the 2nd unit with 2 bedrooms and 1 bathroom as well as and in unit laundry room.
Example… you buy a 2 flat in your desired Chicago neighborhood. For this example let’s say you want to live in Avondale. (Update: the median Chicago 2 flat price in Avondale for 2023 is $524,000). Update: 2023 cost for 2 Flat rehab conversion is approximately $325,000. With the higher rehab costs we have now, it’s best to try and stay below 400k with the purchase price. Rentals in Avondale for rehabbed units are now $2,100-$2,300…even with the 7% interest rates after renting the basement unit you’re looking at around $2,500-$2,900 mortgage payment…this doesn’t look as appealing as it did in 2020 but remember that these interest rates will go down and you can save around $700 a month for each percentage point the rates improve. Ideally if it comes back down to even 5% your mortgage payment after renting the basement could be below $2,000). In 2020 the median sales price for 2 flats in Avondale was $425,000. The cost for the rehab conversion was approximately $220,000. The mortgage amount $585,000 with a monthly payment of about $3,100. The median rent for rehabbed garden units in Avondale was $1550. That’s exactly half of your mortgage payment paid for and you get live in a newly rehabbed 2200-2400sf unit that you own. Rehabbed 2 flats were selling for $650,000 in Avondale in 2020 but now in 2023 they sell as high as $1,000,000… the formula works as far as getting a lender to fund the project.
You could increase the rental amount exponentially by doing a short-term rental like an Airbnb or VRBO. The short-term rental is definitely more work but you could easily get $150-$200 per night…book it for only 10 nights and now you have half your mortgage paid and only had guests in the basement for a third of the month. Some homeowners prefer that over having someone living there constantly or you could go all out and max it out for $4500+ during the peak rental times.
The Steps… start out by searching for all the available 2 flats in the Chicago neighborhoods your interested in. You can sign up for alerts below. Look for the right 2 flat, not all of them are the same. You want one that has good bones and as much of the exterior already updated as possible. You can go here for my contact info. I specialize in finding 2 flats that would make a great conversion in Chicago.
