No matter how nice the weather and how close the ocean, profitably investing in real estate, like every asset, comes down to the basic economic principle of supply-and-demand.  

That is what kept Barry Sternlicht, Chief Executive Office of Starwood Capital Group, which owns hotel chains, from investing in Miami real estate.  It is what should also keep others from investing in Miami real estate.  And it is what should have all looking to profit from passive investing with a long term approach in Chicago real estate.

 In an interview in Forbes magazine, Sternlicht was talking about his actions has an investor.  He notes that he wanted to invest in Miami real estate, but did not.  "I wanted desperately to be in Miami," declared Sterlicht.  "Then my staffers told me there 130 projects under construction.  So I changed my mind."

Miami is not that big, and there is certainly no shortage of  existing condo complexes.  There would be an overload of supply with not nearly enough demand after 130 new projects.  That is why Sternlicht wisely avoided investing into Miami real estate.

Those same reasons are why other shrewd real estate buyers are passively investing in the Chicago market with a long term approach.

As detailed in other articles this site, the Chicago market is improving and very strong.  The Illinois Association of Realtors just reported soaring sales and price increases.  Another article in that same issue of Forbes by Morgan Brennan, "Landlord, Inc," detailed how "billionaires and big institutional investors" are also plowing into Chicago real estate.  It is the same story with foreign investors, too, as reviewed in another piece on this site.

Chicago offers a variety of real estate options, while Miami is basically all condo action.  By contrast, Chicago has turnkey properties, small apartment buildings, single family homes and many others, including condos.  Turnkey properties, those fixed up with tenants in place and managed by experienced professionals, are particularly attractive to beginning investors.  As the third largest city, Chicago has a wide variety of neighborhoods to choose from for real estate investing, increasing the appeal to more investors.

That is certainly showing up in the Chicago housing market.

Real estate agents in the Chicago area are lamenting the lack of inventory.  That is resulting multiple offers for those units that do on sale...again, supply and demand!  There is nothing better for a seller than to have a bidding war when their property hits the market.  By contrast, Florida has the highest foreclosure rate in the country, up double digits from last year.

There should still be gains ahead for Chicago, unlike what could happen in Miami.  If there were profits to be made, Sternlicht would not have pulled back, even though he initially wanted to be invested in Miami.  By contrast, there are bidding wars for properties in Chicago.  For the passive, long term investor, there should be profits to be made from buying real estate in Chicago.