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Creating Your Dream Life

Through Real Estate

The right passive income portfolio is capable of producing quality cash flow well into retirement.

The right passive income portfolio is capable of producing quality cash flow well into retirement. In fact, most real estate investors will turn to passive income exit strategies when they want to secure their future. If for nothing else, passive income is the perfect complement to a secure nest egg. Combined with responsible spending habits, the right passive income portfolio can be your key to financial freedom. However, the best passive income portfolios are not simply made overnight; they are the result of years of work. If you want to start building your passive income portfolio sooner rather than later, I recommend using the following to get started.


A passive income portfolio is the equivalent of a buy-and-hold investor’s working resume. More specifically, however, a passive income portfolio is the figurative representation of a collection of real estate assets held by an investor. Traditionally, passive income portfolios are assembled to serve their holders as a hands-off or passive investment of securities. As they relate to real estate investors, passive income portfolios represent a collection of performing real estate assets that require little to no work to maintain.

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Passive Income vs Portfolio Income

Aside from representing the pinnacle of a real estate investor’s career aspirations, passive income has become synonymous with earnings that do not require a lot of effort (if any at all). To be clear, however, passive income has more in common with residual income than active income; the means to the end is incredibly “hands-off.” As its name suggests, passive income is the earnings a real estate investor can expect to make from a rental property in which they don’t need to be actively involved in to operate.

Portfolio income, on the other hand, is income investors receive from several different types of investments, not the least of which include stocks, bonds, mutual funds, and annuities. More specifically, portfolio income typically comes in the form of interest, dividends, and capital gains. It is also important to note that portfolio income is not passive.


The best passive income portfolios won’t build themselves. In fact, for a portfolio to become truly passive, you must put in a lot of leg work up front. To get things rolling, start with the following:

  1. The first step of building a passive income portfolio will require investors to draft a realistic financial model of what they hope to accomplish.

  2. The second step of building a passive income portfolio will have investors find the assets that complement their financial model. This is where investors will need to find rental properties that can get them one step closer to their ultimate goals.

  3. Identify the amount of cash flow required to maintain the desired lifestyle.

Draft A Financial Model

No lucrative passive income portfolio will come to fruition without the assistance of a plan, or a strategy to set things in motion. If for nothing else, establishing a blueprint for what you hope to achieve with your upcoming real estate endeavor should clarify your approach. Having said that, the first thing you need to do if you hope to build a lucrative passive income portfolio is to draft a realistic financial model. What is it you want to accomplish by obtaining rental properties?

In creating a financial model, you lay the groundwork for your entire buy and hold career. For what it’s worth, a well-drafted financial model is entirely capable of projecting cash flow over the life of a project. Without an idea of what to expect, there is literally no way you can ever hope to realize success with any degree of predictability. If real estate has taught me anything, you must have a system in place to realize success, and nothing compliments a system more so than a plan.

This is the part of the plan where you will run the numbers to make sure a property makes sense. Be sure to include a line item for each stream of income, and even more importantly, each expense. Only once the numbers make sense can I recommend moving forward with the initial phases of starting a passive income rental portfolio.

Identify Each Unit’s Target Cash Flow

While drafting a realistic financial model will require acute attention to detail and even more precise market analysis, it is by no means the only step in forecasting a profitable business model. As you have probably guessed, the model is just the first step; the second step will have you populate said model with real data. This is where you will have to put in a significant amount of groundwork.

At this time, you will be required to conduct the appropriate research. I can’t stress how important it is to mind your own due diligence, given the gross amount of misinformation made available to the masses. I encourage you to confirm all of the data you are presented with, as it is always safer to measure twice and cut once. That said, the more data you collect on a subject property, or even on a subject market, the more accurate your forecast will be.

In choosing a property, prospective passive income investors are advised to contact landlords and brokers in the region for a first-person analysis. Nobody will be able to give you more accurate information than those that already have boots on the ground. Delve in and uncover trends revolving around costs, rents, demand, and income.

Once you have compiled the data and are confident that it is as accurate as it is going to be, proceed to draft a financial model for as many similar properties as you can find — otherwise known as comparables. Next, create a single financial model using the average of every model you recently created. The process will essentially uncover an average of what you can expect from a single subject property. It is important to note, however, that this step should result in an expected cash flow estimate for a single unit. Before moving forward, it is important to identify what you can expect to receive from renting out a property.

Identify Your Desired Cash Flow

Running the numbers on a subject property has just as much to do with objective cash flow as it does with the amount you deem necessary. If for nothing else, managing a passive income portfolio is intended to provide a stream of income capable of maintaining the lifestyle you deem important. In other words, the right passive income portfolio will generate the amount of income you need to maintain the lifestyle you desire. With numbers in hand, you will have an official goal to shoot for.


In following these steps, you will have an idea of the amount of money you need to live comfortably and the number of properties it will take to maintain said lifestyle. However, it is important to note that the research you have conducted up to this point is just the beginning. Now it is important to implement all that you have learned to maximize your retirement investments.

There are several ways to start a passive income portfolio, but I am confident one holds an advantage over all others: multiunit properties. I am convinced that the easiest way to start your own passive income portfolio is to invest in a multifamily unit you intend to live in yourself. No other way, at least that I am aware of, will allow you to get into a property with less risk and upfront costs.

Consider this; acquiring a two-unit property will simultaneously give you a place to live and an additional unit to rent out. This method significantly reduces the expenses that may be asked of you. Instead of accounting for the costs of two separate properties, you only have to worry about one roof, one yard, and probably one plumbing/electrical system. While the consumption will probably be double that of a single household, the maintenance will not. In fact, the maintenance will probably be no different than if you were living in your own detached home.

What’s more, it is entirely possible for the additional unit you are renting out to pay down your entire mortgage, if not more so. In the right market, investors can very easily have their monthly mortgage premiums paid off by the subsequent unit they rent out. That said, committing to a multiunit rental property is typically the best way for investors to start a passive income portfolio.


A passive income portfolio of performing real estate assets has become synonymous with today’s greatest retirement strategies. If for nothing else, the passive returns on a well-managed rental property have proven they can support investors through their golden years. However, real estate isn’t the only passive investment capable of building retirement savings. There are several more options awarded to investors, not the least of which include:

  • Peer-To-Peer Lending: As its name suggests, peer-to-peer lending awards real estate investors the opportunity to act as the bank. In the event an investor has enough capital, they have every reason to lend it to promising borrowers who bring them a potential deal. That way, lenders may make interest on their financial investment—all without doing anything but acting as a source of financing. Meanwhile, peer-to-peer lending may result in upwards of a 15% return on investment. What’s more, peer-to-peer lending is an asset-based investment, as the investment itself is secured by the subject property.

  • Dividend Stocks: There’s a large contingent of investors who would argue the stock market is primarily an active investment, and they wouldn’t be wrong. Investing in the stock market takes a lot of work, particularly on the research end of things. However, dividend stock investing is another story. As it turns out, dividend stocks are one of the easiest ways to earn passive income. Simply owning a dividend stock is usually enough to receive a payout. As the company earns more money, they are required to allocate said profits to their shareholders in the form of dividends.

  • Index Funds: Index funds, as their names would lead you to believe, are mutual funds whose performances are tied directly to a specific market index. More specifically, index funds tend to mirror the performance of the index they are associated with. Not unlike the other options on this list, these assets are passively managed, and their individual securities are not subject to change unless the index itself undergoes a unique change.

  • Real Estate Investment Trusts (REITs): Not unlike dividend stocks, REITs pay their shareholders dividends. However, unlike dividend stocks, REITs are required to pay at least 90.0% of their taxable income to shareholders in the form of dividends. While dividend stocks aren’t required to pay out dividends, REITs are, which is enough to give them their own spot on this list. With strict SEC requirements placed on REITs, they often pay larger dividends than their traditional counterpart and are a great addition to any passive income portfolio.

  • Bonds: Bonds are the result of governments, municipalities and corporations trying to raise capital. Whether for building a park in the middle of a city or scaling a company, businesses and governments will issue bonds in an attempt to raise money. However, instead of asking for money from the bank, governments, municipalities, and corporations simply post bonds on the open market for investors to purchase. When an investor purchases a bond, they are essentially acting as the lender; their money goes towards whatever project the issuer had in mind, and the investor collects interest over the maturity date. In that time, the investor can expect to receive their initial investment, plus interest (also known as the coupon rate). Bonds are relatively safe and can hedge against a volatile stock market.

  • Certificates Of Deposit (CDs): Certificates of deposit are essentially glorified savings accounts. Investors will deposit money into a CD (not unlike a bank account), but they will also agree not to withdraw the money for a predetermined period of time. Subsequently, the person depositing the money will agree to let the bank use the money in exchange for earning interest on the deposited amount. Once again, the investor is simply acting as their own bank, and generating interest on the money they already have.


Few things epitomize the pinnacle of a real estate investor’s career more so than a properly performing passive income portfolio. Not only does building a passive income portfolio set one up for a more comfortable retirement, but it also awards savvy investors the ability to enjoy financial freedom. That said, the sooner investors can start building a rental portfolio, the better. Passive investments have a way of compounding themselves for decades, and those who start now will be happy they did. The sooner investors can set up a balanced passive income portfolio, the better their retirement will start to look.

Key Takeaways

  • Few things epitomize the pinnacle of a real estate investor’s career more so than a properly performing passive income portfolio

  • Building a passive income portfolio won’t happen overnight, but the initial work could prove to be a very good investment when it comes time to retire.

  • Building a rental portfolio will help investors achieve the financial freedom they always dreamed of.

The Chicago real estate market has recovered at its own pace. While not on the same level as the rest of the country, the recovery of real estate in Chicago has occurred at a pace that appears very attractive to local investors. In fact, The Windy City’s unique combination of relatively low prices and demand seems to tilt the scales heavily in favor of real estate investors. While some more changes are to be expected in the wake of the Coronavirus, however, this midwestern city looks poised to weather the storm and perhaps even come out on the other end even stronger than it went in.

Chicago Real Estate Market 2021 Overview

  1. Median Home Value: $288,168

  2. 1-Year Appreciation Rate: +8.2%

  3. Median Home Value (1-Year Forecast): N/A

  4. Median Rent Price: $1,761

  5. Price-To-Rent Ratio: 13.63

  6. Chicago-Naperville-Arlington Heights Unemployment Rate: 7.7% (latest estimate by the Bureau Of Labor Statistics)

  7. City Population: 2,693,976 (latest estimate by the U.S. Census Bureau)

  8. City Median Household Income: $58,247 (latest estimate by the U.S. Census Bureau)

  9. Percentage Of Vacant Homes: 13.75%

  10. Foreclosure Rate: 1 in every 5,583 (1.7%)

2021 Chicago Real Estate Investing

Flipping remains a viable strategy across the United States, but one question remains: Is Chicago a good place to invest in real estate? The answer is simple: yes, as long as investors work within the parameters of the current market landscape. As it turns out, the Chicago real estate market appears poised to benefit both flippers and rental property owners for the foreseeable future.

There are still plenty of opportunities to flip real estate in the Chicago housing market. However, nearly a decade’s worth of appreciation is doing its best to shift the investing landscape from flipping strategies to those of a more long-term nature. More specifically, building a rental property portfolio is perhaps more attractive now than ever before, and the presence of the Coronavirus could actually work in favor of today’s Chicago real estate trends.

The Chicago real estate investing community should consider adding to a rental property portfolio for three particular reasons:

  • Interest rates on traditional loans are historically low

  • Years of cash flow can easily justify today’s higher acquisition costs

  • The price-to-rent ratio suggests housing inventory will be harder to come by

The presence of the Coronavirus has forced the Fed’s hand into keeping interest rates low. In an attempt to buoy the economy, in fact, the Federal Reserve announced interest rates would remain low for at least the next couple of years. As of March, the average rate on a 30-year fixed-rate loan was 3.08%, according to Freddie Mac. While interest rates are up year-to-date, the latest numbers reported by Freddie Mac are still historically low. As a result, lower borrowing costs are helping to offset today’s higher prices in the Chicago real estate market. While it may not seem like much, investors using traditional loans may save thousands of dollars on interest over the life of a loan used to secure a rental property.

In addition to lower borrowing costs, real estate investors may be able to justify today’s higher home values with years of cash flow. In fact, years of collecting rent can simultaneously offset higher purchase prices and build equity in a physical asset with someone else’s money.

With a price-to-rent ratio of 13.63, it is actually more affordable to buy a home than to rent one. Consequently, more people may be willing to buy, which would traditionally hurt the prospects of rental property owners. However, affordability—combined with the current pandemic—has significantly detracted from inventory levels. There aren’t enough listings to satiate buyer demand. As a result, many people (even those who wish to buy) are forced to rent, which bodes incredibly well for today’s investors.

The Chicago real estate investing community is lucky to have several viable exit strategies at its disposal. Still, none appear more attractive than building a proper rental property portfolio at the moment. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.

[ Thinking about investing in real estate? Learn how to get started by registering to attend a FREE online real estate class from expert real estate investors. ]

2021 Foreclosure Statistics In Chicago

The Windy City has a fairly high foreclosure rate. With one in every 5,583 homes in some state of distress (default, auction or bank owned), Chicago’s foreclosure rate now sits at 1.7%. To put things into perspective, however, the entire United States currently has a foreclosure rate of 0.8%.

With the foreclosure rate as high as it is, the Chicago housing market appears to have plenty of opportunities for investors, which begs the question: Where can I buy an investment property in Chicago? Investors looking for higher profit margins will want to consider these best neighborhoods to buy in Chicago 2020, as they have the highest distributions of foreclosures:

  • 60628: 1 in every 1,145 homes is distressed

  • 60617: 1 in every 1,895 homes is distressed

  • 60636: 1 in every 2,108 homes is distressed

  • 60620: 1 in every 2,165 homes is distressed

  • 60633: 1 in every 2,655 homes is distressed

It is worth pointing out that Chicago’s foreclosure rate—not unlike every other major metropolitan city across the country—is expected to increase as we get farther into 2021. If for nothing else, the impact of the Coronavirus on the local housing market is expected to cause an influx of foreclosures as financial hardships become more abundant. While forbearance programs will keep people in their homes for the foreseeable future, there will come a day when mortgages must be made current. Those who can’t afford to do so may find themselves filing for foreclosure. Therefore, well-positioned investors may be able to simultaneously help distressed homeowners avoid bankruptcy and find themselves with their next deal.

2021 Median Home Prices In Chicago

Chicago’s median home value is $288,168, which is right in pace with the national average. However, real estate in Chicago has taken a slightly different recovery path over the last decade. Most notably, home values didn’t start to recover from the Great Recession till the third quarter of 2012. In September of that year, the median home value bottomed out around $169,000. However, in nearly nine years, the median home value has appreciated by as much as 70.5%. Thanks—in large part—to an improving economy, increasing sentiment, and (ironically enough) a lack of inventory, home values have grown for nine consecutive years.

Years of historic appreciation have made these the most expensive neighborhoods in Chicago (according to NeighborhoodScout):

  • N Rush St / E Bellevue Pl

  • N Halsted St / W Fullerton Ave

  • W Bloomingdale Ave / N Hermitage Ave

  • W Melrose St / N Hoyne Ave

  • N Cleveland Ave / W Armitage Ave

  • W Irving Park Rd / N Clark St

  • N Western Ave / W Grace St

  • Robert Morris U Illinois / S Wabash Ave

  • N Damen Ave / W Melrose St

  • N Halsted St / W Willow St

Real estate in Chicago has had an impressive run for the better part of a decade. Home values have appreciated for nearly eight consecutive years, which leaves one more important question to be answered: Is it a good time to buy property in Chicago?

Now is a great time to buy a home in Chicago for anyone looking to do so sooner rather than later. While prices have increased for the better part of a decade, interest rates are too attractive to pass up. Borrowing costs will most likely rise soon, driving prices up at the same time. Subsequently, the lack of inventory will maintain a high level of competition, allowing sellers to demand a premium. As the lack of inventory continues, prices will only increase. While prices are high, they are likely to go higher. Today’s home prices may actually end up resenting a value in the next few years.

Chicago Real Estate Market: 2020 Summary

  • Median Home Value: $249,152

  • 1-Year Appreciation Rate: +0.6%

  • Median Home Value (1-Year Forecast): -2.3%

  • Median Rent Price: $1,761

  • Price-To-Rent Ratio: 11.79

  • Chicago-Naperville-Arlington Heights Unemployment Rate: 17.6% (latest estimate by the Bureau Of Labor Statistics)

  • City Population: 2,693,976 (latest estimate by the U.S. Census Bureau)

  • City Median Household Income: $55,198 (latest estimate by the U.S. Census Bureau)

  • Percentage Of Vacant Homes: 13.75%

  • Foreclosure Rate: 1 in every 7,493 (1.3%)

Chicago Real Estate Investing 2020

Chicago real estate market trends in 2020 were the result of a new marketplace created by the pandemic. Once COVID-19 was officially declared a global emergency, real estate in Chicago responded just like everywhere else: it stalled in the face of fear and uncertainty. In a matter of weeks, activity dropped substantially. Lenders stopped underwriting, sellers took their homes off the market, and buyers refused to tour the homes of strangers. The impact of COVID-19 on the real estate market was significant, but it only lasted a few weeks.

Once it was apparent activity would slow, the Fed dropped interest rates well below three percent. As a result, buyers couldn’t help but try and take advantage of the once-in-a-generation rates. Shortly after the market shuttered, lower borrowing costs brought about more activity than anyone could have imagined. Buyers were inspired to participate in the market, and demand quickly turned into competition. A distinct lack of inventory in Chicago, combined with high demand, served to increase prices significantly. The median home value in Chicago increased just over five percent in the last three quarters of the year; that’s in addition to the nine consecutive years of appreciation that just took place.

The median home value in Chicago tested new highs each month in 2020, and investors were forced to change their exit strategies. The city’s high prices turned investors away from flips and towards long-term rental properties. In addition to profit margins being slimmer, the lower borrowing costs created in the wake of the pandemic simultaneously offset high home values and increase monthly cash flow from rental properties placed in operation. When all was said and done, the market favored long-term strategies in 2020, and the trend carried over into 2021.

Chicago Real Estate Market: 2018 Summary

For all intents and purposes, the Chicago housing market was about as healthy as they came in 2018. Unlike most other metropolitan areas of a similar size at the time, The Windy City stumbled across a balanced market—one that favored both buyers and sellers. At the very least, real estate in Chicago was firing on all cylinders while still boasting a relatively low cost of living. People were willing and able to buy homes, which spelled great news for those interested in Chicago real estate investing.

Chicago Real Estate Investing 2018

According to Zillow, the city had a median home value of $221,000 at some point in 2018. Despite being one of the largest metro areas in the country and the only primary market in the Midwest, home values were only slightly higher than the U.S. average. The median home value in the United States, also according to Zillow, was $207,600 at the same time. All things considered, homes were undervalued, which was the perfect storm for investors.

The Chicago housing market had its share of distressed properties. In fact, RealtyTrac identified some 9,275 in some state of foreclosure. That means there were close to 1,000 properties either in pre-foreclosure, up for auction, or had already been repossessed by the loan originator. More specifically, however, there are nearly 1,000 opportunities for investing in Chicago real estate.

At the time, distressed properties carried a median sales price of $98,000, or 44.0% below the average sales price of non-distressed homes. On average, investors could save an average of $77,000 if they choose to buy distressed homes over those in good standing.

Chicago Real Estate Market: 2016 Summary

  • Median Home Price: $208,600

  • 1-Year Appreciation Rate: 8.4%

  • 3-Year Appreciation Rate: 30.9%

  • Unemployment Rate: 6.6%

  • 1-Year Job Growth Rate: 1.8%

  • Population: 9,500,00

  • Median Household Income: $61,598

Chicago Real Estate Investing 2016

Chicago was among the largest and most desirable cities in the United States in 2016. Known for its illustrious architecture and culinary dishes, The Windy City also encompassed a growing real estate market that rebounded nicely from the housing recession of 2008. The average price for a home in the first quarter of 2016 was $208,600, an increase of 8.4% from the previous year and 2.3% better than the national average at the time.

According to Chicago real estate news in 2016, the city was a seller’s market. The average home was worth approximately $218/sq. ft., which represented a steady increase of 6.0% over the same period in 2015. However, unemployment prevented homes from reaching their true potential at the time. The unemployment rate was 6.6% compared to the national average of 5.5%.

Chicago Real Estate Market: 2014 Summary

  • Median Home Price: $208,600

  • 1-Year Appreciation Rate: 8.4%

  • 3-Year Appreciation Rate: 30.9%

  • Unemployment Rate: 6.6%

  • 1-Year Job Growth Rate: 1.8%

  • Population: 9,500,00

  • Median Household Income: $61,598

Chicago Real Estate Investing 2014

Real estate in Chicago was hit hard during the recession. At the onset of the downturn, houses and homeowners alike lost an average of $47,400. Two years later, problems continued, as the average homeowner lost $65,200 in equity. By 2011, homeowners had reestablished an average of $34,800 in equity. Home price increases in 2014 helped to pull the local market out of a state of post-recession price weakness.

According to a past Case-Shiller Home Price Index, Chicago had the lowest price gains in 2014 out of the 20 qualifying metros. According to the report, single-family homes in the Chicago housing market increased by a modest 1.3%. Condos, on the other hand, finished the year with an even smaller gain: 1.1%.

Nevertheless, the city still proved that it could make improvements to its real estate market in 2014. Perhaps even more encouraging than the gain was the market’s consistency. For 26 consecutive months, real estate had been the beneficiary of home price increases. Chicago homes increased in value significantly since they bottomed out during the recession. In fact, since they were at their lowest level, single-family home prices increased 23.6%, while condos surged 31.0% in 2014.

Despite having faced plenty of headwinds, real estate in Chicago benefited from an improving economy. Economists forecasted that the expansion of the economy would work in favor of the area. The city experienced moderate growth for at least the next year—at least according to an economic report issued by the University of Illinois’ Regional Economic Applications Laboratory.

Chicago County Map:

Chicago Real Estate Market Summary

The Chicago real estate market, much like the rest of the country, has been the beneficiary of several years of appreciation. Median home values have increased year over year since 2012, and experts are convinced the Coronavirus will only serve as a temporary obstacle. In fact, there’s a real chance real estate in Chicago comes out of the pandemic stronger than when it went in. While the unemployment rate will need to see marked improvement, a returning workforce could facilitate an active second half of 2020 for local investors.


*The information contained herein was pulled from third party sites. Although this information was found from sources believed to be reliable, Christian Arce Inc. makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. Any reliance on this information is at your own risk. All information presented should be independently verified. Christian Arce Inc. assumes no liability for any damages whatsoever, including any direct, indirect, punitive, exemplary, incidental, special, or consequential damages arising out of or in any way connected with your use of the information presented.

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