On Paper, a $500K Chicago Two-Flat Makes $740 a Month. In Real Life, It Loses $641.
On Sept. 10, the daily mortgage rate average tracked by Mortgage News Daily crossed 7% for the first time in more than a year. Freddie Mac's weekly average landed at 6.76%. Meanwhile, Chicago rents keep climbing, somewhere between 1.4% and 5.1% over the past year depending on whose data you trust.
Put that together and you get the most popular spreadsheet in Chicagoland investing right now: rents are up, so the building must cash flow. Plug in the rent, the mortgage, the tax bill from the listing and an insurance quote, and look at that. Money left over every month.
A spreadsheet is the only place in Chicago where it never snows, the boiler never quits and every tenant pays on the first.
So I ran the same building twice. Once the way a lot of listings and online calculators do it. Once the way the bills actually show up.
Same building, two spreadsheets
Here's the example: a $500,000 Chicago two-flat with two units renting for $2,000 each, so $4,000 a month. Thirty-year fixed loan, 25% down. That rent is deliberately below Zumper's $2,500 citywide median for a two-bedroom, because a hundred-year-old two-flat unit usually isn't competing with a brand-new high-rise.
Every month | Paper version | Real version |
Rent collected | $4,000 | $4,000 |
Mortgage (principal + interest) | $2,435 at 6.76% | $2,622 at 7.5% |
Property taxes | $625 (seller's bill) | $704 (your bill) |
Insurance | $200 (homeowner-style) | $250 (landlord policy) |
Water, sewer and garbage | $0 | $145 |
Vacancy (5%) | $0 | $200 |
Repairs and reserves (10%) | $0 | $400 |
Property management (8%) | $0 | $320 |
Total costs | $3,260 | $4,641 |
What's left over | +$740 | −$641 |
Same building. Same rent. A $1,381-a-month swing, or about $16,600 a year. Nothing in the real column is a worst case. It's just the stuff the paper column leaves out.
How the numbers were built: the paper version uses Freddie Mac's 6.76% weekly average, the seller's tax bill with a Homeowner Exemption on it, and a homeowner-style insurance quote. The real version uses 7.5% (a typical investment-property premium), taxes at Chicago's no-exemption effective rate, a landlord policy about 25% higher, water, sewer and garbage for two households, 5% vacancy, 10% of rent for repairs and reserves, and 8% management. All figures are rounded. Your building will be different, and that's the whole point.
The 7 costs the paper version leaves out
1. The tax bill on the listing belongs to the seller
If the seller lives in the building, their bill probably includes Cook County's Homeowner Exemption, which saves the average owner about $950 a year. It only applies to an owner who lives there. Buy the building as a pure rental and it comes off. If the seller is 65 or older, a Senior Exemption may be baked in too, and that one leaves with them as well.
Then there's the value itself. The Civic Federation's latest full estimate put Chicago's effective tax rate for a residential property with no exemptions at 1.69% of market value (tax year 2022), the lowest of the 12 Cook County communities it studied. Collar-county towns in the same study ranged from 1.09% in Oak Brook to 2.67% in Woodstock, and economically hard-pressed south suburbs like Harvey and Chicago Heights ran comparatively high. Budget taxes on the price you're paying, not on the seller's old assessment. The City of Chicago's next reassessment is in 2027, and reassessments are built on recent sales. Sales like yours.
2. The rate on the news isn't your rate
Freddie Mac's 6.76% is an average for conventional home purchase loans with 20% down and excellent credit. Investment property loans typically price about half a point to a full point above the rate on a home you live in. On this building, going from 6.76% to 7.5% adds about $187 a month.
The down payment is bigger too. Conventional loans on two-to-four-unit investment buildings generally require 25% down, which is $125,000 here before closing costs.
Here's the part that trips people up. On the real numbers, this building earns about 4.75% a year on its price before any mortgage. The loan costs 7.5%. When borrowing costs more than the building earns, borrowing more makes your cash flow worse, not better. If you're counting on the Fed to fix that, my post on why mortgage rates went up after the Fed cut is worth five minutes.
3. Landlord insurance isn't homeowners insurance
A rental needs a landlord policy. The Insurance Information Institute's rule of thumb is that it costs about 25% more than a homeowners policy on the same building, and keeping a homeowners policy on a rental is a good way to get a claim denied. The gap between insurance companies can be even bigger than the gap between policy types: when Steadily priced identical coverage on a typical three-unit Chicago rental, quotes ran from $2,400 to $6,600 a year. Get real quotes during your inspection period, not the week after closing.
4. Lake Michigan is right there. It isn't free.
In the city, buildings with four or fewer units get city garbage pickup at $9.50 per unit per month, billed on the same statement as water and sewer. Sewer is charged at 100% of the water charge, plus a separate water-sewer tax. For two households using around 12,000 gallons a month, figure roughly $145. That bill usually lands on the owner, not the tenants. Chicago's water rates adjust upward with inflation every June 1, and a group of aldermen floated raising the garbage fee to $18 a month during the last budget fight.
5. Nobody pays rent on an empty unit
Chicago's apartment market is tight. Cushman & Wakefield put metro occupancy at 94.9% in the second quarter, above its 10-year average. That still leaves about 5% vacancy, which is what this example budgets. One slow January turnover with painting, cleaning and showings eats most of it. And an empty unit can cost you more than lost rent, as anyone who read my post on Illinois' new squatter law already knows.
6. Your building is roughly as old as Wrigley Field
DePaul's Institute for Housing Studies found the median Chicago two-to-four-unit building is more than 100 years old, most of them built in the first few decades of the 1900s. That means boilers, back porches, roofs, tuckpointing, sewer lines and electrical that have outlived several owners. Setting aside 10% of rent for repairs and future replacements is a reasonable starting point, not a worst case. The inspection report tells you whether to go higher.
7. Your time has a price
Chicago-area property managers typically charge 8% to 12% of collected rent, plus a leasing fee of half to a full month's rent each time a unit turns over. Managing it yourself saves that. In this example it moves you from losing $641 a month to losing $321. It also makes you the person who gets the 2 a.m. call about the radiator. Self-managing is free the way assembling IKEA furniture is free.
So does anything in Chicagoland still pencil?
Yes. Plenty of smart investors buy buildings like this on purpose, with their eyes open. Here's what moves the math on the same two-flat:
Price. On the real numbers, this building breaks even at about $404,000, roughly $96,000 under the example price. Most sellers won't go there. Some will, especially on buildings that need work.
Rent. At $500,000, it breaks even at about $2,416 a unit. Whether a unit can get that depends on the block, the finishes and the bedroom count. Go by signed leases, not "projected" rents.
Living in one unit. Owner-occupants get owner-occupant loan rates, smaller down payment options and the Homeowner Exemption back. With 20% down at 6.76% and the other unit rented for $2,000, your own housing cost works out to about $2,100 a month, below Zumper's $2,500 citywide two-bedroom median. Put less down and mortgage insurance pushes that number up.
The returns that aren't cash flow. Even in the real version, the loan balance drops about $3,450 in year one. Chicago home prices were up 9.3% year over year over the three months ending in August, according to Redfin, though nobody can promise that continues. Rentals also come with tax deductions like depreciation that a CPA can size for your situation.
Negative cash flow isn't automatically a bad investment. It's a bad surprise. The point is knowing which one you're buying before you sign.
The fine print that doesn't show up every month
Security deposits in Chicago. The city's landlord-tenant ordinance covers most rentals, except owner-occupied buildings with six or fewer units. For covered units, deposits have to be handled by the book: a receipt, a separate interest-bearing account, and the city's annual interest rate summary attached to the lease. The 2026 rate is 0.01%, so the interest is pennies. The penalty for getting the process wrong can be two times the deposit plus the tenant's attorney fees. Ask how the seller is holding the deposits before you inherit them.
The rental ordinance vote. The mayor's revised Protecting Renters Ordinance is scheduled for a housing committee vote on Sept. 16, with a full City Council vote targeted for Sept. 23. The original draft included an annual rental registry fee of $20 to $60 per unit, and the September revision exempts some small landlords from several provisions. What passes, if anything, could change your numbers. I broke down the latest version here.
The suburbs have their own rules. Many villages run rental licensing or inspection programs, and the south and west Cook suburbs are in a reassessment year right now (more on that here). Call the village before you make an offer, not after.
Your 10-minute "is this listing telling the truth?" checklist
Pull the actual tax bill by PIN and see which exemptions are on it. Cook County's second-installment bills are out now, so it's a good week to look.
Ask for the signed leases and rent roll, not "market" or "projected" rents.
Ask for 12 months of water, gas and electric bills for anything the owner pays.
Get a landlord insurance quote before your inspection period ends.
Get an investment-property rate quote from a lender instead of using the rate from the news.
Ask the age of the roof, boiler or furnaces, water heaters, porches and electrical service.
Confirm how security deposits are being held and whether the leases have the city's required interest rate summary attached.
Check local rules: Chicago's pending rental ordinance, or the suburb's rental license and inspection requirements.
Send me the listing. I'll run the real numbers for free.
Text or call me at 312.882.9797 with a Zillow link, an MLS number or just an address. I'll send back both versions side by side: the actual tax bill and which exemptions come off, a realistic investment rate, insurance, water, vacancy, reserves, and the price or rent it would take to make the numbers work. No pressure, and no sales pitch disguised as a spreadsheet.
Still shopping? Tell me your buy box (areas, number of units, budget and cash on hand) and I'll set you up with a live MLS feed and flag the buildings where the real numbers hold up.
Already own a rental and the real numbers stopped working? I'll tell you what it would likely sell for. If selling makes more sense, I list at 1.25%, about $6,250 on a $500,000 building, with full service: professional photography, 3D Matterport tours and full online marketing. If you find your own buyer, you pay me nothing under my Zero Commission Clause, and you can cancel anytime. Thinking about trading up instead of cashing out? Ask me about a 1031 exchange.
The listing tells you what a building could make. The bills tell you what it does.
Example figures are illustrative and rounded, based on public data available Sept. 11, 2026. Your rate, taxes, insurance and rents will vary. I'm a licensed Illinois real estate broker, not a lender, attorney or tax advisor, so run your specific situation past the right professional. The rental ordinance discussed above is a proposal and may change before any vote.
Sources
Freddie Mac, Primary Mortgage Market Survey, Sept. 10, 2026 — freddiemac.com/pmms
Yahoo Finance, mortgage rates cross 7% (Mortgage News Daily data), Sept. 10, 2026 — finance.yahoo.com
LendingTree, Current Investment Property Mortgage Rates, September 2026 — lendingtree.com
Gustan Cho Associates, Fannie Mae 2-to-4 Unit Multi-Family Mortgage Guidelines, July 2026 — gustancho.com
Zillow Rental Market Report, Aug. 18, 2026 — zillow.mediaroom.com
Zumper, Chicago rent research, August 2026 — zumper.com
Civic Federation, Estimated Effective Property Tax Rates 2013–2022 — civicfed.org and press release
Cook County Assessor's Office, Homeowner Exemption and Property Tax Exemptions — Homeowner Exemption, Exemptions
Cook County Assessor's Office, Assessment and Appeal Calendar — cookcountyassessoril.gov; reassessment cycle via LowerMyTaxes
Steadily, Landlord Insurance Cost and Coverage 2026 — steadily.com
Awning, Landlord Insurance vs. Homeowners Insurance 2026 — awning.com
City of Chicago, Garbage Fee — chicago.gov
City of Chicago, Water and Sewer Rates and Water-Sewer Tax FAQ — Rates, Tax FAQ
Utility Rates, Average Monthly Utility Bills in Chicago (per-gallon water and sewer estimate), 2026 — utility-rates.com
City of Chicago Office of Financial Analysis, Garbage Fee Increase revenue proposal — chicago.gov
Cushman & Wakefield, MarketBeat Chicago Multifamily Q2 2026 — cushmanwakefield.com
DePaul Institute for Housing Studies, Characteristics of the 2 to 4 Stock in Chicago Neighborhoods — housingstudies.org
MF Cashflow, How Much Does Property Management Cost in Chicago? (2026) — mfcashflow.com; Fulton Grace, Property Management Fees in Chicago — fultongrace.com
City of Chicago, Security Deposit Interest Rates 2026 — chicago.gov; The Chicagoland Lawyer, Security Deposit Law in Chicago — thechicagolandlawyer.com
Block Club Chicago, revised Protecting Renters Ordinance, Sept. 4, 2026 — blockclubchicago.org; original registry fees, June 29, 2026 — blockclubchicago.org
Redfin, Chicago Housing Market, August 2026 — redfin.com
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