CHICAGO—The market for multifamily properties on the city's North Side and in its affluent suburbs has gotten so competitive that buyers have grown accustomed to very low cap rates. But double-digit cap rates do exist in Chicago, and investors who feel priced out of the market just need to look south.

Although some properties in areas like Chicago's South Shore neighborhood can involve a higher degree of risk, including higher management fees, higher vacancy rates and more maintenance expenses, a number of stabilized assets in South Shore have recently traded with cap rates of 9 to 12%, and some even higher, Kevin Rocio of ROC Realty Group, a division of @properties Commercial, tells GlobeSt.com.

Rocio and his colleague Chikoo Patel recently represented a private investor that bought a 28-unit apartment building at 7601 S. Yates Blvd. for $1.26 million. The sales price represented a cap rate of 16.24%. Rocio says the building – which was 100% occupied at the time of the sale – had three years of strong financials as well as a laundry list of capital improvements over the past five years that significantly improved the property. The sale closed in June, and the buyer was LLJ Holdings, LLC, a Homer Glen, IL-based firm, according to Cook County property records.

By contrast Rocio recently represented another private investor in the $2.4 million sale of a 6-unit apartment building at 6900 N. Sheridan Rd., in the North Side Rogers Park neighborhood. That sale represented a pro-forma cap rate of 6.83%.

The opportunity to secure higher cap rates has begun attracting out-of-town investors to South Shore. For example, Rocio's firm helped complete the sale of 6700 S. Clyde Ave., a 13-unit building located on the southern edge of Jackson Park and near the campus of La Rabida Children's Hospital. The owner had updated the building to condos, and the buyer secured a 9% cap rate.

“There were 14 offers on this property,” says Rocio, “and the most aggressive were either from the East Coast or the West Coast.” According to county records, the November 2014 sale was for $1.25 million and the winning buyer was Beverly Hills, CA-based SGF Properties, LLC.

“People are starting to pay more attention to the South Side,” adds Patel. “I personally call it the Obama factor.” Cap rates have already compressed in the president's more affluent Hyde Park neighborhood, with some buildings trading at cap rates of 5% to 6%. That heightened level of interest was seen when 5531 S. Drexel Ave. in Hyde Park hit the market a little more than a week ago, says Rocio. The property is of similar quality to many buildings in affluent North Side communities, and “the first potential buyer came in from London.”

How long will double-digit returns last? Not long, according to Rocio, as more investors respond to the continued cap-rate compression on the North Side. Furthermore, the recent announcement that the University of Chicago will develop the Obama Presidential Library on either a Washington Park or Jackson Park site has further perked up interest in the neighborhoods surrounding Hyde Park such as South Shore.

“Once the location of the Obama library is chosen,” Rocio says, “we will see a lot of buyers go into that part of the market.”