6 Alternative Investments for Real Estate Investors in Chicago

Real estate is a popular investment choice for many people. While many people stick to single-family rental properties, there are several alternative investment options that can be just as lucrative. These investments are less common, which means you may find less competition when looking to add them to your portfolio. Keep reading as we discuss six alternative investments that real estate investors in Chicago should consider.

1. Commercial Real Estate Options

Commercial real estate can be an excellent alternative investment for real estate investors. It includes shopping centers, office buildings, warehouses, and other commercial properties. These properties generate more income than residential properties and can offer a higher return on investment over time. Many people opt to work with a partner when investing in such investments so they can secure a greater amount of financing and have more resources at their disposal. 

2. Investing in Multi Unit Buildings

Multi-units are another excellent and highly popular alternative investment option for real estate investors in Chicago. 2, 3, 4 flats can be a great investment because they are a great way to enter the investing world and have a substantial portion (or at least part of it) of your monthly expenses (PITI) paid for. In addition, you can live in one unit (‘owner occupy’) and rent out the other(s) for a steady stream of income. Chicago has no shortage of multi unit buildings throughout the entire city, and they range in price depending on exact location. This type of investment can be a great way for novice investors to get their foot in the door. If the building needs renovations, you might consider opting for a special type of loan, called a 203k rehab loan, which helps to cover the cost of the purchase and rehab. If this sounds interesting to you, we’d be happy to connect you with our preferred source of lenders who offer this type of financing.

3. Private Lending

Private lending is a way for real estate investors to make money without actually owning any property. This is the most passive, hands-off form of real estate investing, and essentially puts you in the position of acting like the bank. Private lending involves lending money to other real estate investors, who then use the money to finance their real estate deals. The investor earns a fixed interest rate on the loan and can potentially make a good amount of money in a short amount of time (3-12 months). It is important to speak to an attorney about legal documentation recommended to protect you in the event your borrower defaults. The last thing you want (as a lender) is to get stuck owning property. Just like a bank – you’re in business to make money on your money, not to manage a renovation or own property.

4. Real Estate Investment Trusts (REITs)

REITs are a popular investment choice for many real estate investors. REITs are companies that own and operate income-generating real estate properties. By investing in a REIT, investors can earn a share of the income generated by the properties in the REIT’s portfolio. You should always fully research any investment partner before parting with your hard bearded cash. 

5. AirBNB Rentals

AirBNB rentals are another alternative investment option for real estate investors. AirBNB rentals can be an excellent investment because they offer a higher return on investment than traditional long-term rentals. In addition, AirBNB rentals can be more flexible and easier to manage. Caveat: Running an AirBNB business is very active, meaning, hands on. Unless you share profits with a ‘co-host’, basically someone else to manage the operations and marketing of your rental. There are a lot of moving parts with short (daily) and mid-term (32+ days) rentals, especially in a city like Chicago. The city requires you have a registration number to operate as a short term rental, and also limits the types of buildings that permit these types of businesses. Make sure to check with the city and connect with other experienced AirBNB investors in the area to glean insight into best practices.

6. Land Development

Land development is another alternative investment option for real estate investors. Land development involves buying land and then developing it for commercial or residential use. This can be a lucrative investment option, but it requires a lot of research and due diligence. If you do not have experience in new construction development, we recommend partnering with a company that does. This will not only help you qualify for a construction loan, but also provide an opportunity for you to learn the ins-and-outs firsthand.

Real estate investors in Chicago have several alternative investment options to consider. Whether it’s commercial real estate, mobile homes, private lending, REITs, AirBNB rentals, or land development, there is an investment option that can meet your needs.

Please feel free to reach out to us for a complimentary chat about your real estate goals. We’re always happy to help!

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