Thinking about a house-hack or your first multifamily in West Town but not sure if a 2-flat or 3-flat is the better move? You are not alone. Many buyers weigh lower entry costs against higher income potential, all while navigating Chicago rules and renovation realities. In this guide, you will learn how each building type performs in West Town or any multiunit building in Chicago, what to check before you buy, and how to build a simple pro-forma you can trust. Let’s dive in.
Quick definitions: 2-flat vs 3-flat
A 2-flat is a two-unit building. In Chicago, these are often vintage masonry buildings with one unit per floor or two mirror-image units.
A 3-flat is a three-unit building, usually stacked with one unit per floor. Some have two larger units plus one smaller unit.
Both are common in West Town’s older walk-up stock. Each structure carries different purchase prices, income potential, and management needs.
What you typically see in West Town
West Town has many late 19th and early 20th century greystones and brick walk-ups. Floor plans often feature high ceilings, bay windows, original woodwork, and smaller room footprints than modern condos.
Typical unit mixes you will see:
- 2-flats: often two 1BR/1BA or two 2BR/1BA units, sometimes a 1BR plus a 2BR.
- 3-flats: common mixes include 3 x 1BR, 2 x 1BR plus 1 x 2BR, or 3 x 2BR in larger footprints. One unit may be slightly smaller.
These building forms were shaped by Chicago lot sizes and alley access, so stacked layouts and similar footprints are normal.
How each option operates
- 2-flats: simpler to manage and often at a lower purchase price. They are a popular choice for first-time house-hackers who plan to live in one unit and rent the other.
- 3-flats: higher total rental income and better economies of scale on fixed expenses. Expect a higher purchase price and more complexity with repairs and tenant coordination.
Your comfort with management, capital outlay, and renovation appetite will steer you toward one option or the other.
Rules to check in Chicago and Cook County
Before you write an offer, confirm these items for any West Town 2-flat or 3-flat:
- Rental registration and inspections: Chicago requires rental properties to be registered, and they can be subject to inspection cycles. Verify current compliance.
- Permits and alterations: Structural changes, reconfigurations, unit-count conversions, and major mechanical, plumbing, or electrical work require permits with the City of Chicago.
- Zoning and unit count: Zoning determines allowable uses, parking requirements, and whether additions or extra units are possible. Check for any landmark or district rules that may add restrictions.
- Pre-1978 lead rules: Follow federal lead-based paint disclosure requirements. Chicago has local lead mitigation rules in certain cases. Budget for lead-safe work practices in older buildings.
- Property taxes: Cook County assessments and tax bills can be a major operating expense. Review the parcel’s assessment history and recent tax bills to avoid surprises.
- Tenant law basics: Chicago and Illinois set rules for deposits, notices, habitability, heat and hot water standards, and eviction procedures. Plan to consult an attorney or a local property manager.
- Utilities: Confirm who pays for gas, electric, and water. Older flats may have master-metered utilities, which changes your operating expenses and screening approach.
Rents, demand, and finding comps
West Town’s near-downtown location, transit access, and amenities support steady renter demand. One- and two-bedroom units in walkable locations tend to lease well, though market cycles still affect rent growth and vacancy.
To estimate rent today, use multiple sources and compare like-for-like:
- MLS (MRED) active and recently rented listings
- Neighborhood-level rent trackers and listing portals
- Local property manager and brokerage listings
- Address-level tools that compare nearby leases
Adjust comps for finish level, exact micro-location, bedroom count, utilities, and parking. Rents in West Town often sit above the city average, but they vary widely by condition and amenities.
Financing for house-hackers and investors
Owner-occupants have several loan paths for 2–4 unit properties:
- FHA: allows 2–4 unit purchases for primary residence buyers with historically lower down payment requirements, subject to current HUD rules. FHA 203(k) can finance eligible renovations.
- Conventional: lenders offer owner-occupant loans on 2–4 units. Down payment and reserve requirements are typically higher than for single units. Some rental income from other units may count in underwriting when documented.
- Portfolio/local banks: community lenders sometimes provide flexible terms for small multifamily.
- VA: eligible veterans may purchase 2–4 units as an owner-occupant under VA guidelines.
Investor loans without owner-occupancy usually require larger down payments and stronger debt service coverage. Insurance on small multifamily can be higher than single-family, and mortgage insurance may apply on low-down loans.
Renovation scopes and costs in vintage flats
Vintage West Town buildings often need attention in these areas: roof and flashing, masonry tuckpointing, exterior porches and stairs, windows, outdated electrical and cast-iron plumbing, boilers and hydronic systems, water heaters, kitchens and baths, and basement waterproofing.
Common scopes and why they matter:
- Light cosmetic: paint, flooring, cabinet refresh, appliances, bathroom touch-ups. Lower cost, faster to market, moderate rent bump.
- Mid-level rehab: new kitchens and baths, mechanical updates, windows, and code upgrades. A balanced approach for many house-hacks.
- Full gut: new mechanicals, reworked layouts, and full electrical and plumbing updates to current code. Higher capex, premium rents, longer useful life.
- Structural and exterior: tuckpointing, roof replacement, porches, foundation, and masonry restoration. Protects the asset but can be costly.
Directional cost ranges to plan for, subject to bids and site conditions:
- Light cosmetic: roughly tens of thousands total, often about $8k to $25k per unit.
- Mid-level rehab: commonly $25k to $70k per unit.
- Full gut: frequently $70k to $150k plus per unit in Chicago urban settings.
Always gather multiple local bids, include permit and inspection fees, and hold a 10 to 20 percent contingency for hidden conditions such as water damage or remediation. Budget time for permits and inspections since they can extend the schedule.
Build your pro-forma step by step
Create a simple model for each target property so you can compare 2-flat and 3-flat outcomes side by side.
- Income inputs
- Gross Scheduled Rent: sum of current or market rents for all units.
- Other Income: laundry, parking, storage.
- Vacancy and Credit Loss: start with 5 to 8 percent in a strong market and adjust to conditions.
- Effective Gross Income: Gross Scheduled Rent plus Other Income minus Vacancy.
- Operating expenses
- Property taxes, insurance, landlord-paid utilities, repairs and maintenance, management fees, marketing, trash/landscaping, legal and accounting, and reserves for replacement.
- Net Operating Income (NOI): Effective Gross Income minus Operating Expenses.
- Debt and cash flow
- Debt Service: your mortgage payment based on loan terms.
- Cash Flow Before Tax: NOI minus Debt Service.
- Capital Expenditures: annual reserves for big-ticket items.
- Key metrics to track
- Price per door: a useful cross-check across comparable assets.
- Cap rate: NOI divided by purchase price.
- Cash-on-cash return: annual cash flow divided by total cash invested, including down payment, closing costs, and immediate rehab.
- Debt service coverage ratio: NOI divided by Debt Service.
- Operating expense ratio: Operating Expenses divided by Effective Gross Income.
Run sensitivity tests for vacancy, rent growth, and renovation budgets. If you plan to owner-occupy, evaluate both lender underwriting with projected rents and your own cash flow without imputing rent for your unit.
2-flat or 3-flat: how to choose
A 2-flat often fits first-time house-hackers who want a lower purchase price, simpler operations, and owner-occupant financing options. It offers a practical entry point into West Town.
A 3-flat suits buyers seeking higher total income and better scale, with more units to spread fixed costs. Expect higher up-front capital and more management complexity.
Match the property to your plan by weighing purchase price availability, financing options, your renovation appetite, willingness to live on site, timeline, and rent growth expectations.
Next steps and due diligence checklist
Use this checklist as you evaluate addresses in West Town:
- Pull rent comps: same bedroom count, similar finishes, nearby micro-location, and utility assumptions.
- Confirm property status: rental registration, zoning, unit count, recent permits, and any inspection reports.
- Review taxes: Cook County assessment history and recent tax bills.
- Verify utilities: separate meters versus landlord-paid and current provider bills if available.
- Scope repairs: unit-level and building-level items with multiple bids and a contingency.
- Build two pro-formas: one for a 2-flat and one for a 3-flat scenario if you are still deciding.
- Talk to lenders early: confirm down payment, reserves, and how projected rents will be used in underwriting.
When you are ready, request a neighborhood-specific sample pro-forma that uses recent MLS comps and local vendor cost benchmarks. A clear model will help you choose the structure that best supports your cash flow and long-term goals.
Ready to compare live deals in West Town or map out your house-hack? Reach out for a tailored pro-forma, local lender intros, and a management plan that aligns with your goals. Connect with TGI Realty to get started.
FAQs
What financing options allow owner-occupied 2–4 units in Chicago?
- FHA, conventional, portfolio/local banks, and VA programs can allow owner-occupied 2–4 unit purchases, each with specific down payment, reserve, and underwriting rules.
How do I estimate current West Town rents accurately?
- Use multiple sources such as MLS comps, neighborhood rent trackers, and active listings, then adjust for finishes, utilities, parking, and micro-location.
Are 3-flats harder to finance than 2-flats in West Town?
- Investor loans on 3-flats may require more down and stronger coverage, while owner-occupant programs can include projected rents; speak with lenders early to confirm requirements.
What renovation costs surprise first-time small-multifamily buyers?
- Masonry and porch work, roof replacement, boiler or hydronic system upgrades, and electrical or plumbing updates in vintage buildings are frequent budget drivers.
How should I set a vacancy assumption in my pro-forma?
- Start with 5 to 8 percent in a strong rental market, then adjust based on specific unit appeal, seasonality, and your leasing plan.
