Advice on Buying in Lansing Illinois
I am an investor in NW Indiana and I know that market pretty much. However, I recently stumbled upon a 6-unit building right across the border, in Lansing, Illinois. Sellers are mom & pop type, friends of friends, ready to retire and go back to their homeland in Europe. They've kept the property in pretty good shape, based on what I saw.
Anyway, I think I can get it for $430k and they would be willing to do seller financing with a 3-5 year balloon and favorable terms.
Current Rents are under market, approximately $800-$900 per 2b+1 unit. I would describe the area as B- and based on what I've found through Zillow the expected rent should be $1,100 per unit. So, there is a nice value add right there.
Expenses:
Tax: $20k (based on 2022 assessment of $290k)
Insurance: $3,000
Water: $1,400
Common Power: $900
Garbage: $900
Lawn: $1,200
Repairs: $4,000
PM: myself, (or, to put a price tag of 6% Revenue - $4,300)
Based on the numbers, I will have a decent CoC return of 15% and Total annual ROI of 20% at the first year of stabilization. It looks enticing in this market, doesn't it?
Here are my questions:
1. How particularly hard is property management in Lansing, IL? Does anyone have first-hand experience in stabilizing MF properties in this area?
2. When can I expect the next tax hike? On the Cook County assessor site it says that the next re-assessment is scheduled for 2023. If they reassess the property based on the sale price I can expect tax to be close to $30k, almost half of my Income?! How does it make sense for anyone to invest in Cook County then? Am I missing something?
Thanks for your insight in advance.
I am a complete and utter newbie, but I used to live in that area and I am not sure it is worth the risk. In addition to the very unfavorable tax environment, the local judiciary and regulatory environment appears to heavily disfavor property owners — and moratoriums on evictions are common during the winter months. The local law stipulates that evictions cannot take place on days where the temperature is under 15 degrees, which is reasonable, but this past winter a Cook County judge made a blanket moratorium that lasted for multiple weeks. This does not bode well if there are other weather/health emergencies in the future.
Also, as you are probably aware, the economic situation is more dire in that part of Cook County than others — especially as far as suburban areas go. This is not an area with a lot of high tech jobs or booming industries. I remember living there during the 2008 financial crisis, and I recall that landlords had to drop rents significantly to accommodate their renters. I would think that $1100 per unit may be realistic in the current market, but I am unsure if that would be a realistic price during a recession. I also note that relative to neighboring communities (i.e. Homewood) there are quite a few more rental listings in Lansing at the moment which may indicate that property managers are having a hard time filling vacancies with reliable tenants. I could be wrong about this though, since I no longer live in the area.
@Greg C. Thank you for your feedback and information you provided. I've already took into account the IL and Cook County failed policies but it's always good to be reminded about them.
