Hey BP! This is my first post. I've been considering getting into real estate for quite some time, and so I've been reaching out the contacts in my local church and otherwise to get their thoughts and opinions. I'm looking for my first purchase, and one of the guys I talked to said he's definitely moving his purchases over to Indiana because of the lower taxes and better opportunities. I can understand this conceptually, however, I feel like I want to purchase a property close to me so that I can have a hands-on experience and take part in every part of property management as a way to pay my tuition and earn my education in the School of Real Estate.
Am I thinking about this correctly? Is it silly to want to manage a property close by me as my first property?
I am a newbie in Illinois too so I can’t help you with your question, per se. But, my hubby and I live very close to Indiana so I am, like your friend, looking at that market as well. He is right about the taxes being a whole lot lower. Good luck on your journey.
Welcome to bp @Mark Hagge ! While the taxes are high here, rents reflect that, so you can still make enough money to cashflow if you find the right deal. If you got a place in Indiana then you would have to pay and rely on a property manager, so I would compare that to the cost of self managing in Illinois and seeing how much of a difference it would make. Message me if you have any other real estate questions, I'm always happy to help out new investors!
Not silly at all. In fact, once you get some experience managing your first property, you will have more confidence in buying the next one.
Every property has its own plus and minus. complete your profile for more accurate advice
@Mark Hagge I also live in Illinois and haven’t pulled the trigger on purchasing a place. Property taxes are high without a doubt but there are many cities and towns where there’s robust employment prospects. With that being said, it sure seems like everything is expensive here but rents reflect this. If you were looking out of state, I’ve read on the forums that Indianapolis is a good place to invest! I’m always open to meeting new people on here and getting more involved in the biggerpockets community
I own a number of rentals in Illinois. Yes, taxes are high compared to other areas, but the rents are all also higher. You can make money anywhere. I manage my own rentals and it is a great learning experience. Once you have managed your own, it will be easier for you to manage a pm since you will know what it takes to manage. In the Chicagoland area you will be able to also get the benefit of appreciation even though you should never count in it. Being in a large market as in the Chicagoland market it provides for a larger and stronger tenant pool. It does not mean you need to invest in Chicago. The advantage of the suburbs is higher rents and all the advantages of the city without living there.
If you have a full time job, I'd recommend self managing a multi-unit property within a 20 minute drive. A single SFR, you can get by with further. Little calls and showings add up - 20 minutes there and back is 40 minutes, let alone in rush hour after work. I definitely would not self manage a property in Indiana if you live in Illinois unless you are right on the boarder.
As far as management goes, always buffer in management costs into your investment. If you can't make the numbers work with management costs, it's probably not a great deal unless you are bullish on appreciation. I always invest for cash flow personally. If you want to self manage, it only accelerates your investment path.
There are many areas of Chicago with good cash flow and low taxes. However, overall, Illinois taxes (especially in Cook/DuPage counties) are quite high relative to other states including Indiana. But... rents and the tenant pool are usually greater. Do the math and you will see what works best.
@Mark Hagge I bought my first and it was 5 minutes away from me. I do recommend you purchase your first one close to you.
@Mark Hagge You don't say where in Illinois you are so it's hard to say if it makes sense to buy in your hometown. I'm assuming you're in Chicago. If that's the case, there are a number of things that I like about Indiana over Chicago but property taxes aren't one of them. You're going to find that taxes on a non owner occupied property will be pretty similar to Chicago. The advantage that a market like Indianapolis has is much stronger economic and demographic trends like population and job growth, a more business friendly climate and more favorable landlord/tenant laws. Although returns are pretty similar, Indy has a lower cost of entry due to more affordable prices.
@Mark Hagge - I feel the same way about my investments with regards to being close. I think as we gain experience releasing that control comes with the territory of scaling and growing a business. I personally invest in a good neighborhood in Chicago. Yes, the taxes are higher and cash flow is lower, but a good neighborhood on Chicago's NW side will always appreciate over the LONG run, much more than in Indiana. Like @George Skidis said all properties have their + and - you'll have to decide for yourself what is important for you. Best of luck!
I would say it's definitely better to buy that first rental property close to home. Once you get a feel for being a landlord and figure out whether you really do enjoy it or not then you can start to explore investments further away and out of state.