Where Regular People Build Real Wealth
Most of Chicago’s real estate conversation focuses on single-family homes, shiny downtown condos, or giant apartment complexes. But the buildings that quietly change families’ lives are usually much smaller: the 2–12 unit multifamily properties lining our neighborhoods.
On this episode of Bow Tied in Real Estate, Illinois attorney Mahmoud “The Bow Tie Attorney” Elkhatib sits down with Chicago managing broker Niko Apostal to talk about that overlooked slice of the market. Niko has spent more than two decades helping clients buy, sell, and operate two-flats, three-flats, and small apartment buildings—often living in one unit while the rest of the building pays the mortgage.
Together, they walk through why these properties are so powerful, how to finance them, what it really takes to run 80–120-year-old Chicago buildings, and how to find opportunity even when everyone insists there are “no deals” left.
Whether you’re trading up from a condo, planning a house-hack, or thinking about building a small portfolio, this conversation is a practical roadmap to the “missing middle” of Chicago multifamily.
From condo living to running the whole building. From tenant to owner-operator.
If you’re thinking about buying a 2–12 unit building in Chicago—or already own one—Mahmoud “The Bow Tie Attorney” Elkhatib can help you line up the legal side with your investing strategy. He reviews contracts, riders, financing terms, and building issues so you’re not guessing about your biggest asset.
Who Is The Bow Tie Attorney?
- Represents Chicago buyers, sellers, landlords, and small investors in residential and small multifamily deals.
- Reviews and negotiates contracts, riders, financing contingencies, and operating agreements.
- Steps in when things go sideways: title problems, code issues, surprise liens, and pre-foreclosure stress.
On this show, he brings the legal lens: what’s allowed, what’s risky, and what comes back as a lawsuit or regulatory headache three years after closing.
Meet Niko Apostal: Chicago’s 2–12 Unit Specialist
Niko Apostal is the managing broker at a Chicago brokerage built specifically around the 3-to-12-unit multifamily market. Over more than 20 years in the business, he has:
- Built and led his own brokerage teams.
- Co-founded one of the largest Keller Williams offices in the city.
- Run a property management company responsible for hundreds of rental units.
These days, Niko and his team focus on helping investors and serious owner-occupants buy, sell, and operate small multifamily buildings—the 2–12 unit properties that form the backbone of Chicago’s housing stock but rarely get Wall Street headlines.
For Niko, these buildings are not just assets. They’re generational tools: a way for people with regular jobs and families to live in one unit, collect rent from the others, and slowly build a resilient portfolio.
Why 2–12 Unit Buildings Are Chicago’s “Missing Middle”
Most people either picture a single-family home or a massive apartment complex. In between sits a huge slice of Chicago real estate:
- Two-flats and three-flats on classic neighborhood blocks
- Four-unit courtyard buildings
- Six- to twelve-unit walk-ups tucked between homes and small retail
Niko explains that this “missing middle” is where a lot of real wealth is built:
- The buildings are small enough to be financed with residential-style loans in the 2–4 unit range or accessible commercial loans for 5+ units.
- Rents are tied to real neighborhood demand, not just luxury trends.
- You can live in one unit, rent the others, and let the building help pay your mortgage.
Mahmoud adds that from a legal perspective, these properties live in a hybrid world: they look like homes from the street, but the contracts, disclosures, and landlord-tenant issues behave much more like small businesses. Getting that wrong is where people get hurt.
From Condo to Two-Flat to Portfolio
Since the pandemic, Niko has watched a clear shift. Clients who dreamed of a downtown condo now ask about two- and three-flats in neighborhoods.
Instead of:
“How do I get the nicest condo my pre-approval allows?”
they’re asking:
“How can I live in one unit and have the others cover most of the mortgage?”
In the episode, Niko and Mahmoud walk through a realistic progression:
- Step 1: Buy a 2–4 unit building and live in one unit.
Use an owner-occupied loan, get into the building with a relatively low down payment, and let the other units keep your living costs down. - Step 2: Stabilize and learn.
Figure out leases, repairs, city inspections, and the real work of being a landlord—not just the Instagram version. - Step 3: Trade up, keep, or refinance.
Depending on your income and appetite, you either keep the first building and buy another, refinance to pull equity, or eventually move out and keep it as a pure rental.
The point: Chicago’s 2–12 unit stock is a ladder. Most people never climb it because they’ve only been sold the idea of one primary residence.
Financing 2–4 Units vs. 5+ Units
One of the biggest turning points is moving from 4 units to 5 units.
For 2–4 unit buildings (when you live in one unit):
- You’re usually in the residential lending world.
- You can often access smaller down payments and long-term fixed rates.
- Underwriting still looks at the building, but leans heavily on your personal income and credit.
For 5+ unit buildings:
- You’re in the commercial lending space.
- The bank cares much more about the building’s income and expenses.
- Terms, amortization, and rate structures change, and there’s more scrutiny on rent rolls, leases, and historical performance.
Mahmoud points out that the documents you sign in that shift—from residential to commercial—are longer, denser, and less forgiving. This is where:
- Boilerplate language hides real personal guarantees.
- Covenants about reserves, maintenance, or reporting can trigger default if ignored.
- Missing or sloppy due diligence can haunt you for years.
Your financing strategy and your legal strategy need to talk to each other.
Making Old Chicago Buildings Work
Most 2–12 unit buildings in Chicago are not new. They’re 80–120-year-old structures that have been through multiple owners, uses, and renovation waves.
Niko and Mahmoud talk through what that really means:
- You will have surprises. Hidden plumbing, quirky electrical, aging roofs, and legacy repairs are part of the package.
- You can’t be afraid of problems—only unpriced problems. The goal isn’t a perfect building; it’s a building where you understand the issues and the numbers still work.
- Maintenance is a strategy, not an afterthought. Roofs, boilers, porches, and life-safety items must be planned and budgeted, not left until they become emergencies.
Niko’s comfort comes from years in property management, where he learned that nearly every building problem has a solution—if you plan for it and act early.
Mahmoud’s legal angle: the wrong time to discover a building’s history is after a tenant gets hurt, a city inspector writes a violation, or a lender calls a default. Inspect, document, and put things in writing.
Turning Basements into Legal Units: ADUs and Value-Add
One of the most compelling parts of the episode is the discussion of ADUs (Accessory Dwelling Units) and garden apartments.
They talk about:
- Walking into a basement or garden level that clearly functions as a unit—bedrooms, kitchen, bathroom—but isn’t legally recognized.
- The cost to bring that space up to code—windows, egress, mechanicals, fire safety—usually in the tens of thousands, not hundreds of thousands.
- Chicago’s expanding ADU rules creating a clearer path to legalizing and adding value to these units.
The math can be powerful:
- You buy what the bank treats as a three-unit building.
- You invest to turn the basement into a legal fourth unit.
- You now own a four-unit building with more income and, often, a valuation jump far above your renovation cost.
From Mahmoud’s perspective, ADUs are a perfect example of where legal and physical reality must match. If you’re counting on that income to pay your debt, the unit needs to be permitted, inspected, and fully compliant.
Sharp in law. Invested in your next block.
If this episode has you thinking about a two-flat, three-flat, or small apartment building, don’t wait until after closing to bring in counsel. The Bow Tie Attorney can help you review contracts, riders, financing, and building risks before you commit, so your next property moves you closer to your long-term goals instead of just adding stress.
Finding Deals When Everyone Says There Are No Deals
Niko doesn’t pretend great small multifamily deals are just sitting on the MLS. But he strongly disagrees with the idea that “there are no deals left.”
He and Mahmoud walk through where opportunity really comes from:
- Sphere and reputation. Many clients find Niko after seeing him help friends or family quietly build wealth through small multifamily.
- Local relationships. Neighborhood groups, chambers of commerce, and community organizations put him in front of owners thinking about selling.
- Off-market conversations. Instead of chasing every public listing, he spends a lot of time talking directly with owners about their goals and timelines.
There is more deal flow in the 2–12-unit space than most people realize—but you have to play the long game, build trust, and be ready when the right building quietly becomes available.
FAQ — Small Multifamily & Illinois Real Estate Law
What counts as “small multifamily” in Chicago?
In most conversations, “small multifamily” means 2–12 unit buildings—two-flats, three-flats, and small apartment buildings on neighborhood blocks. Financing and legal issues usually shift once you move from four units (often residential lending) to five or more units (typically commercial lending).
Is it better to start with a condo or a two-flat?
A condo can be simpler from a maintenance standpoint, but a two-flat or three-flat gives you rental income from day one. For many buyers, living in one unit while renting the others is the fastest way to cut housing costs and start building equity in an asset that operates more like a business.
What legal issues should I check before buying a 2–12 unit building?
At minimum, review: title, existing leases, security deposits, city permits and violations, current zoning, and any open building code issues. In Illinois, misunderstanding a lease term, notice requirement, or unresolved code violation can turn a “great deal” into years of conflict.
How do ADUs and garden units affect value and risk?
Legal, permitted ADUs and garden units can meaningfully increase income and valuation. Unpermitted units, on the other hand, create risk with lenders, insurers, the city, and tenants. Before you buy, you should know whether those units are legal now, whether they can be legalized, and what it will cost.
When should I talk to an attorney in the process?
Ideally, before you’re fully committed—either before you write the offer or while your contract is still contingent on inspections and financing. That’s when there’s still time to negotiate repairs, fix language in the contract, or walk away without catastrophic cost.
Can out-of-state investors work with The Bow Tie Attorney on Chicago deals?
Yes. Mahmoud regularly works with out-of-state buyers investing in Chicago’s small multifamily market. With the right local broker and legal team, you can move from guessing based on online numbers to making decisions grounded in real contracts, real buildings, and real neighborhood context.
