What if your next home could help pay its own mortgage? For many Chicago buyers, house hacking a small multi-unit is the most practical way to lower housing costs and build equity. If you are eyeing Washington Park, you are in the right spot to learn how this strategy works here, what to watch for, and how to run the numbers. You will leave with a simple plan to get pre-approved, evaluate buildings, and move in with confidence. Let’s dive in.

What is house hacking

House hacking means you buy a 2–4 unit property, live in one unit, and rent the others. The goal is to offset your monthly payment with rental income while you build long-term wealth. In Chicago, most house hackers hold traditional long-term rentals, not short-term rentals, unless clearly permitted. This guide focuses on practical steps for 2–4 unit buildings you intend to occupy.

Why Washington Park

Washington Park sits on Chicago’s South Side near major educational and cultural anchors, with access to city transit options to reach the Loop. Entry prices in this area can be more attainable than in many neighborhoods, which can make the numbers work for first-time buyers. That said, block-by-block conditions vary, and rental demand, property condition, and pricing can shift quickly. Plan for thorough due diligence on legal unit status, permits, building systems, and realistic rents.

Financing 2–4 units

FHA loans

FHA financing allows owner-occupants to buy 1–4 unit properties while living in one unit. Many buyers use FHA for its low down payment option, often about 3.5% for qualified borrowers. Expect an upfront and monthly mortgage insurance cost and an appraisal that checks key property condition items. FHA can be a strong fit if you want lower down payment flexibility.

Conventional loans

Fannie Mae and Freddie Mac support owner-occupied 2–4 unit mortgages. Down payment and reserve requirements are often stricter than for single-family homes, and mortgage insurance or higher rates may apply with less than 20% down. The upside is potentially lower long-term cost if you qualify. Underwriting will review your income, debt, and a portion of market rent from the other units.

VA loans

If you are eligible, VA loans can be used for up to 4 units with zero down, as long as you live in one unit. You must meet VA occupancy and appraisal rules. This path can be very favorable for qualified veterans and active-duty buyers.

Renovation financing

If the building needs work, look at owner-occupant rehab products like FHA 203(k) or conventional renovation options. These can combine purchase and rehab into one loan. Local programs may also support code or lead remediation. You will want detailed contractor bids to scope the work.

Local lenders and pre-approval

Some Chicago-area portfolio lenders and credit unions offer flexible options for small multifamily. Terms vary, so shop offers. Get pre-approved early. Lenders often count only a portion of projected rent for qualifying and may require several months of reserves. Always confirm current guidelines before you write an offer.

Run the numbers

A simple pro forma keeps you honest and helps you compare buildings:

• Gross Scheduled Rent (all units, full occupancy)
• Less Vacancy (%) = Vacancy Loss
• Effective Gross Income = Rent minus Vacancy Loss
• Less Operating Expenses (itemized) = Total Operating Expenses
• Net Operating Income = Effective Income minus Operating Expenses
• Less Debt Service = Cash Flow Before Taxes
• Cash-on-Cash Return = Annual Cash Flow divided by Cash Invested

Use conservative assumptions:

• Vacancy allowance: plan for 5–10%. In variable submarkets, lean toward 7–10% until you have data.
• Operating expenses: many small multifamily run 40–60% of effective income, excluding the mortgage. The simple “50% rule” is a quick screening tool, not a promise.
• Property management: budget about 8–12% of collected rent if you will not self-manage.
• Capital reserves: set aside about $250–$600 per unit per year, and more for older buildings.
• Utilities: Chicago multifamily often has master-metered water. If heat or electricity is not separately metered, your operating costs can rise.

Include closing costs, immediate repair needs, and a 6–12 month operating reserve in your model. Avoid assuming top-tier rents on day one.

Inspect before you buy

Focus on what affects safety, legality, and long-term cost. Older Chicago flats can have hidden issues, so a multifamily-savvy inspection is key.

Layout and livability

• Confirm separate entrances and private kitchens and baths for each unit.
• Check bedroom egress and smoke/CO detectors.
• Note unit mix. Smaller units often rent faster, but total rent may be lower.
• Evaluate kitchens and baths. Outdated spaces reduce rent potential and can drive rehab costs.

Mechanicals and systems

• Electrical service: many older buildings need capacity upgrades to support modern loads.
• Heating: know if heat is central or individual. Central boilers can be expensive to replace.
• Hot water: count the tanks, check their age, and confirm serviceability.
• Plumbing: look for cast iron and signs of leaks or sewer line issues.

Building shell and safety

• Roof, gutters, flashing, and chimneys: verify age and condition.
• Foundation and masonry: watch for water intrusion or cracking.
• Stairs and porches: exterior wood porches often need repairs in older buildings.
• Windows and insulation: energy efficiency impacts comfort and heating costs.

Due diligence checklist

• Verify unit count, legal permits, and past permit history.
• Inspect electrical panel, service size, and visible wiring.
• Evaluate heating system type, age, and service records.
• Check roof, gutters, and chimneys.
• Look for water intrusion in basements and walls.
• Confirm separate meters or understand master-meter implications.
• Test GFCI outlets and bathroom ventilation.
• Examine stairs and porches for safety.
• Confirm smoke/CO detectors and proper egress.
• Request the rent roll, active leases, and any eviction history.

Legal and compliance

• Legal units: confirm the property’s permitted unit count. Illegal units can lead to fines and forced deconversions.
• Permits and inspections: review the seller’s permit history and any city enforcement items.
• Lead-based paint: for pre-1978 buildings, federal law requires disclosure. Certain work may require specific remediation steps.
• Landlord-tenant rules: follow the Chicago Residential Landlord and Tenant Ordinance for leases, deposits, and disclosures.
• Zoning and use: ensure zoning matches the intended number of dwelling units and parking requirements.
• Registration and licensing: check for any city rental registration or inspection requirements.
• Taxes: review the Cook County assessed value and tax history. Owner-occupants may qualify for exemptions. Tax changes can impact cash flow.
• Insurance: secure an owner-occupant policy that covers rentals, with liability and loss-of-rent options as needed.

First-year plan

• Get pre-approved and set your buy box. Define unit count, target condition, and budget.
• Pull recent rent comps and confirm a conservative vacancy rate.
• Write offers with inspection and appraisal protection. Price in a repair budget.
• Complete a full inspection and obtain estimates for major items.
• Set up compliant leases and tenant screening aligned with local law.
• Build a 12-month maintenance calendar and reserve plan.

Mistakes to avoid

• Skipping legal unit verification. This is a top risk.
• Underestimating taxes and utilities. Master-metered buildings can swing expenses.
• Ignoring porches, roofs, and mechanicals. These are high-impact capital items.
• Assuming top-of-market rents from day one. Start conservative and adjust with data.
• Neglecting reserves. Keep 6–12 months of expenses on hand.

Next steps

If Washington Park is on your short list, the right process matters. Start with financing, then pair a focused search with careful inspections and a clean pro forma. With the proper plan, you can reduce your housing cost while building equity and stability.

Want a local partner who understands 2–4 unit deals, rehab planning, and lease-up on Chicago’s South Side? Connect with Naja Morris to align financing, find the right building, and execute your first house hack with confidence.

FAQs

Can I use FHA or VA for a 2–4 unit in Chicago?

• Yes, both FHA and VA allow owner-occupied 2–4 unit financing if you live in one unit and meet each program’s occupancy and appraisal rules.

How much projected rent can count for my mortgage?

• Lenders typically count a portion of market rent from the other units, using a standard rent schedule or leases, but the exact percentage varies by program and lender.

What vacancy rate should I use in Washington Park?

• Use a conservative 5–10% until you have reliable local data, and lean toward the higher end in areas with more turnover.

Do I need separate utility meters for each unit?

• Separate meters help control costs and clarify tenant responsibility, but converting a master-metered building can be costly and may have limits.

What repairs are often the most expensive?

• Electrical service upgrades, boiler or furnace replacement, roof work, foundation or drainage fixes, and main plumbing or sewer line repairs are common big-ticket items.

How much cash should I budget beyond the down payment?

• Plan for closing costs, immediate repairs, an initial capital reserve per unit, and 6–12 months of operating reserves after closing.