How to Invest in Chicago Real Estate Development | Roger Luri on Zoning, Condos, and Supply

Roger Luri (00:00)
There just is not much inventory here. So it’s quite different from the rest of the country where inventory is high and things are staying on the market a long time. In the better neighborhoods, I’m here in Lincoln Park and the surrounding areas here in Chicago.

And in these neighborhoods, things just, go like right away. And because of that, developers are desperate to find sites because there aren’t that many sites. And so they’re practically fighting over these. When something good comes on the market, there’s a bidding war.

Dylan Silver (02:02)
Hey folks, welcome back to the show. Today we’re joined by Roger Luri a real estate developer in Chicago and leader at LD2 Development. Roger focuses on identifying, structuring, and executing development opportunities in Chicago known for its complexity and his work involves navigating zoning, city approvals, construction, deal economics to bring projects from conception to completion while creating long-term value. Roger, welcome to the show.

Roger Luri (02:27)
Hey Dylan, good to be with you.

Dylan Silver (02:29)
Now, when we talk about developing in Chicago, as I was mentioning in the green room, a complex market to develop in, how long have you been active at?

Roger Luri (02:38)
I have been doing this since the early 1990s. So it’s been a while. Been around for a minute.

Dylan Silver (02:42)
Yeah. Now,

now, if we go back to the early 90s, right, and we go back to those first development projects, ⁓ was it a totally different process from the cradle to the grave? Was there any similarities between where it is now? Or is it just so different, not just with the technology, but with approvals with regulations, that it’s almost like two different businesses entirely?

Roger Luri (03:08)
You know, I wouldn’t say that really. It’s always been complex and ⁓ it’s just more now, you know. And, ⁓ you know, while the market, of course, has changed dramatically since that time, prices have gone up dramatically, certainly. ⁓ You know, it’s always been complex. And I think, you know, yeah, they put more hurdles in front of you now. ⁓

more fees, although they always try to say they’re lowering the fees, but that doesn’t happen.

Dylan Silver (03:42)
We were

talking about some of the other markets across the country, facing issues with days on market and also facing issues with vacancies and so forth. One of the big draws of Chicago is how there’s really none of that, right? And so you’re seeing immediate demand and then you’re also seeing effectively no vacancies from what I understand.

Roger Luri (04:53)
Right. mean, if you have a good product ⁓ for rent or condominiums or homes, ⁓ new homes or condominiums, whether rehab or new construction, if you’re in a good neighborhood, they tend to go right away.

There just is not much inventory here. So it’s quite different from the rest of the country where inventory is high and things are staying on the market a long time. In the better neighborhoods, I’m here in Lincoln Park and the surrounding areas here in Chicago.

And in these neighborhoods, things just, go like right away. And because of that, developers are desperate to find sites because there aren’t that many sites. And so they’re practically fighting over these. When something good comes on the market, there’s a bidding war.

Dylan Silver (05:39)
Now, when something does come on the market, is it typically a tear down from something that has been an existing structure for long period of time?

Roger Luri (05:48)
Yeah, normally we’re talking about tear downs and a lot of the buildings in Chicago are over 100 years old. And ⁓ so, I am a broker here and have been forever. So we sell development sites. So I’m always out there looking. And when I find sites, a lot of times I will sell them to other builders because I’m either not interested in them or I know they’re going to go for a price that’s so high. I’m not going to touch it.

So, ⁓ and you know, lot of the builders are calling me all the time looking for sites because they’re scarce here.

Dylan Silver (06:25)
Now it’s a years long potentially process from acquisition to completion of construction. What is the typical time length in a project like that?

Roger Luri (06:38)
A small project, you may purchase it and then you close in a couple of months and you tear it down and you can build it in less than a year. So you’re talking about a little bit over a year, but a big project can easily take several years. It’s got a lot more steps to it.

Dylan Silver (06:53)
Now, you had mentioned

condos ⁓ in the green room when we were talking before hopping on here. And one of the things that I think is interesting about certain markets is you do see, would say, a proliferation of condos. And it’s not just because of the scarcity of ⁓ land, although that is a big driving factor. It’s also because people are looking at pathways to ownership of anything. And they’re realizing, well,

Roger Luri (07:00)
Yeah.

Dylan Silver (07:22)
How am I going to live in the city where this is the cost of the homes, a condo is a way for me to get into the honor ramp of real estate home ownership.

Roger Luri (07:30)
Right, yeah, I mean, to get a home here in Lincoln Park or surrounding areas, you’re talking about, you know, I mean, an older home, a million and half, but usually two, $3 million for something that’s or more, you know, right? ⁓ so that’s why people, a condo is a good alternative here, you know, and as you say, it’s an on-ramp to ownership. ⁓

One thing that’s been very popular here now, which I’m just developing one right now, is a building where you’ve got two duplex condos in there. the duplex, you’re able to three bedrooms, two and a half baths, and a big living room, dining room, family room, floor with a lot of outdoor space. And so they’re attractive for people who are maybe starting a family or something like that, because they got a little bit of room there where they can actually have a family, you know, unlike a small condo.

where they might not have enough room. As soon as you have a family, you’ve got to move to a bigger place.

Dylan Silver (08:26)
Yeah, I think, you one of the things about and you mentioned families is, you know, what are people doing if they’re looking at ⁓ working in Chicago, but they’re also looking at the price of these homes and they’re saying, well, where can we afford to live? Are you seeing the commuting distance and how far people are willing to go to get into Chicago increasing as real estate costs increase as well?

Roger Luri (09:24)
Well, know, a lot more people are working from home and remotely. ⁓ commuting isn’t as big an issue as it used to be. ⁓ There are a lot of people in the suburbs who don’t come into the city to work, you know, right? ⁓ But the market that I’m in right in the city, they’re generally people who work in the city and or sometimes work at home. ⁓ And they want to live in the city here. So that’s

Dylan Silver (09:27)
Yeah.

Roger Luri (09:51)
why they wanna kinda put down roots here and send their kids to school here and everything.

Dylan Silver (09:55)
would like to get a little bit granular on the subject of developing in a major city. I think that there’s a lot of folks across the country. I’m a realtor in Texas, so the Sun Belt, right? And you’re seeing a lot of people who are getting into development, single family specifically, in the Sun Belt. Especially, and I think this is being driven by, it’s tougher to be a flipper when you’ve got so many new builds and new subdivisions going up across the country. But if someone wanted to…

become a developer in a major city, there might be some more hurdles. What’s the first step that you would advise they take if they’re looking at getting into ground-up construction in a city?

Roger Luri (10:32)
You know, there’s a lot of things you gotta be familiar with. Starting with the market, you gotta know what the product is and what people want, right? That’s the first thing. No sense in building something that nobody wants, right? So I actually have a book, my book here that I wrote a few years ago. You can focus it in there. Don’t buy multifamily, it. It’s a little bit out of focus. It’s on Amazon.

don’t buy a multifamily building. And it kind of goes through the whole process step by step. But I think the takeaway from the book is that for most people, this whole process is just too complicated and it is certainly a full-time job. And people have jobs and they’ve got income. So for an investor, it’s good if you’ve got somebody doing it for you that you can invest with and be able to take advantage of the

Dylan Silver (11:12)
Yeah.

Roger Luri (11:24)
market and the profit potential and the tax benefits, but still keep your income, right?

Dylan Silver (11:31)
Yeah, and I was just today speaking with a multifamily syndicator, actually in Dallas, Fort Worth Metro. And I do think that over the last however many so years, there’s just been more interest from the general public in investing in real estate without swinging a hammer, right? And as a way to diversify from just, you know, investing in index funds or mutual funds. And, you know, part of that too, is that people realize that

it at some point in time, you know, if homes are one to $2 million right now in Chicago or more, right? When is it going to be, you know, $4 million, right? And there’s no end to that, right? And so people are realizing, hey, look, you know, if we have an opportunity right now to invest, I’m willing to bank on these properties increasing over the next five or seven years, even if it means our capital is tied up for now, we’ll be getting some type of distributions and rents.

people are okay with that type of value proposition.

Roger Luri (12:31)
Yeah, if you’re talking about a rental building, ⁓ putting up multifamily buildings is still a good way to go here, you can refinance these after a few years and take that equity and use it on another project or something like that. So you don’t have to be tied up forever in there, right? And you’ve got the income. for most people, I think,

Dylan Silver (12:53)
That’s true.

Roger Luri (13:00)
getting into ⁓ some kind of a syndication or partnership is a better way to go. ⁓ The learning curve is very long and there’s a lot of mistakes to be made along the way. So it’s good to have the benefit of somebody else on your team who’s got the know-how to do things and who’s maybe made those mistakes years ago and knows better now.

Dylan Silver (13:22)
You know, there’s been a lot of talk recently, I would say about multifamily deals being harder to pencil. And as someone who’s not in this space myself, ⁓ it does seem to be interesting because I see multifamily going up everywhere. And so my perspective is, OK, well, it had to have been working at some point when people are saying it’s harder to pencil at multifamily development. Do you know specifically what they’re referring to?

Roger Luri (14:29)
Yeah, well, I think a lot of deals, for example, small deals, which I do a lot of, like a few units and for sale units, condos, homes, things like that, in the best neighborhoods here, like in Lincoln Park and that. The profit margins have gone down. They’re not what they were, you know, 25 years ago or something like that. ⁓ It’s more competitive.

And the way it works, if somebody, an investor goes in, let’s say you do it a couple of deals every year, right? And you’re doing, and over the course you do about 10 deals that you invested. You know, some of those would be huge winners because the market swung in your favor when you went into it, by chance, because we don’t know what the market’s gonna do tomorrow. Nobody knows that, right? And some of those,

they maybe won’t be so hot. The market got a little soft when you came to market because you’re not coming to market for a while when you start the deal, And you know, you may have one or two of those that’ll be losses, right? But when you look at overall, you’re making a lot of money over the years. And that’s the way you have to look at it, right? You can’t look at one individual deal, you know, because timing, it always varies, right?

Dylan Silver (15:43)
Yeah, no,

I think that that idea of these time horizons is something that people are looking more closely at because for a time period, and I wasn’t involved in the business, so this is secondhand, from let’s say 2014 till 2020, you could potentially buy a deal wrong and a lot of markets bank on the appreciation, you know, people were continuing to pay more for rents, there wasn’t as many of these deals coming on market as there were over last couple of years. And so

you know, people were still exiting with unscathed. But then especially in ⁓ Sunbelt markets, if you had lots of development going on, you couldn’t just buy a deal wrong and bank off the appreciation, especially from what I understand when, you know, potentially rents are stabilizing or even coming down in some markets, not Chicago, but in some markets. for sure, people are more cautious now to, hey, we might not hit this in three years, we have to

be cautious that we’ll hit this in five years, we may potentially be looking at a longer time horizon than that.

Roger Luri (16:44)
Yeah, you know, it’s always a process and you don’t know what’s going to happen. So you got to be able to navigate the waters, you know, as they come, you know. They say ⁓ you don’t hire a captain to captain the boat in fair weather. It’s what he can do when there’s a storm that matters, right?

Dylan Silver (17:06)
When there’s

a storm, that’s exactly right. And I think a lot of people felt that certainly over the last couple of years and a lot of syndicators. And I think we’re still feeling that right now. Bonus question here for you, Roger. Chicago has a lot of, I would say, sections within it, right? And many, many mayors or aldermen, right? Throughout the city of Chicago. For folks who may not be familiar with all the parts of Chicago, is there one area

right now currently we’re talking at the end of March 2026 that you’re particularly interested in or bullish on or if you are looking at developing or investing in a certain area of Chicago that you would look at right now.

Roger Luri (17:47)
Yeah, I mostly again, I work on the north side, which is Lincoln Park, Lakeview and surrounding areas, ⁓ Bucktown and all of these areas. know, Lincoln Park is probably the highest priced neighborhood in the city and development sites cost the most there, but they’re also in the biggest demand. So that’s where they know that they’ve got buyers, you know, who are well-heeled and ready to buy these places. Right.

So different markets are different. You’ve got the West Loop. I’ve built townhomes in the West Loop before. And the West Loop is a different market where you’ve got some mid-rise and high-rise buildings coming up over there.

Dylan Silver (18:27)
Now we are coming up on time here, Roger, any new projects that you’re working on and then as well, what’s the best way for folks to reach out to you or your team?

Roger Luri (18:36)
They can get ahold of me at ld2development.com and ⁓ grab my book on Amazon here. Don’t buy multifamily build it. A little bit out of focus there, but, ⁓ and yeah, get ahold of me. ⁓ Chicago is a great place to invest right now because inventory is very low and it’s gonna be very low for the foreseeable future. So it’s a great place to be.