Why We Left a 2% Mortgage to Buy a Chicago Two-Flat

Choosing to relocate our two children and two dogs from Southern California to Chicago was not a smart financial decision. On paper, we were giving up an incredibly low 2% mortgage rate, extensive upgrades, and a 2,000 square foot home with four bedrooms plus an office, to move into a tiny 900 square foot apartment.

So why did we make that decision?

My husband and I met each other in Chicago and got married two years later. Our oldest was born here, but we moved when he was one. We went to Southern California to be closer to my family out there, and initially it was great. We enjoyed the sunshine and loved seeing my dad and stepmom fairly frequently.

But as time went on, the allure of endless sunny days wore off, and my husband and I realized we weren't as happy in the suburbs as we had been living in the city. On top of that, I lost my younger brother, and suddenly everything seemed to remind me of him.

So we started talking about relocating almost two years ago. At first we just joked about it. Then we started looking into the Chicago school system, and then we started looking at properties "for fun."

We quickly realized it was going to be difficult to move back anywhere near our old neighborhood, just because housing prices had gone up so significantly. We talked about buying a place where we could have tenants who helped pay our mortgage. But even then, the market had gotten incredibly competitive, so everything was going for well over ask.

I flew out to Illinois from California on three separate occasions. The first time was when we brought the kids here to see what they thought of it. The second time, I brought one of the kids out to look at properties with me. The third time, I was on my own, and I saw at least eight.

A cute multi-family two-flat on Paulina, pronounced Paul-eye-nuh for those of you who aren't from Chicago, captured my heart. It was a fixer-upper on the outside, but it was clean, livable, and had a basement I figured we could duplex down to create enough living space for our family. I dreamt of eventually turning it into a single family home.

I discussed it with my husband, and we agreed to make an offer. It was listed at $850,000, which is affordable by Chicago standards. Maybe too affordable, because there were plenty of other people also checking it out.

We made an offer right away, and I wrote the most heartfelt letter to the owners explaining how much I loved it and how I hoped to raise my family there. Ours was a cash offer, which we only managed because we took a $500,000 home equity loan against the house in California. We had bought that house for $645,000 nine years earlier and it was worth around $1.3 million by the time we borrowed against it. That is the entire reason this was possible, and it is worth saying plainly: we did not save our way into a cash offer. We were carried there by a housing market.

Our agent had been told there were at least seven more showings scheduled for the next day. Plus, we had already been outbid on a different property months earlier, so I really didn't have high hopes.

That being said, no one was more surprised, and more elated, than I was when our offer was accepted.

We ended up with a house in an amazing location that we knew we could eventually turn into the home of our dreams. The tenants could stay, which meant we had help paying the larger mortgage.

So all in all, it wasn't a smart decision. But it was the right one for us.

Here is where that leaves us today.

The basement has already been gutted. Six rooms came out and what's down there now is one bare shell with no interior walls in it. There's a rough plan (drawn by yours truly) for turning that basement and the first floor into a single apartment, with everything you sleep in downstairs and everything else above it. And there's a permit application sitting with the city, because before a single wall can go up, the basement floor has to come out and go lower so there's plenty of room to stand.

It has been more than seventy days. Nothing has come back yet.

Until it does, nothing happens. No excavation, no framing, no contractor. So what I'm doing in the meantime is working out what all of this is going to cost, line by line, before one real bid has arrived. Then I'm going to publish those numbers, and when the bids come in, I'm going to show you exactly how wrong I was.

That's the part nobody does. It's also the only part I ever wanted to read.

The exterior of our house in all of its neglected glory.