I see a lot of wholesalers offering properties without a lot of sells. Is this area hard to find buyers for or do buyers want to be closer to the city? Areas like University Park, Steger and nearby. They seem like some nice homes. Anyone with experience in this area care to shed some light? Debating if I should give effort around there.
I actually have a couple houses in that area. Steger anyway. Crete, etc.
Some of the houses are actually really nice. The problems with those areas are:
1) Some areas are not the greatest. University Park is awful. Steger is so-so but might be going down. Crete is decent. Just need to be careful.
2) Some of those are in cook county. Stay OUT of cook county. Its a landlord nightmare. Terrible landlord laws and the tenants all know it. I have a couple in southern cook county and can't wait to sell every last one of them.
3) Taxes. That is the thing that an Indiana-ite like yourself is going to choke on. The Steger tax rate is almost 13%!!!!! Indiana has a law that caps the rate at, what, 3.3%?
That rate equates to 4.3% of the assessed value and that eats away a ton of cash flow.
So if the house is assessed at 100k in steger, your taxes are going to be 4,300. One other thing, assessments do NOT equal market value down here either. That 100k assessment is more likely only worth about 60k in the real world. These counties in illinois are so strapped for cash, they make getting the assessments reduced to their actual value almost impossible.
So would I recommend anyone buy any of these houses down here. Not a chance. Taxes and assessments are so crazy high, I just don't see the long term value there.
Crete has some really nice homes for 100k or less. But the assessments are all in the 150's so the taxes are going to run you 5k to 6k. Its just not a good model IMO.
If this state ever passed a bill like Indiana that restricts the tax rate to 3.3% instead of allowing the counties to go to any number they want (i.e. over 12%), then I would recommend you pick every house up here that you could.
Until that time, I'd avoid this area. To me, areas like Merrillville, Scherrerville, Crown Point, etc would be far better if I was living in Indiana. Landlord laws appear to be much more favorable and the taxes are a huge differentiator in being able to cash flow at a much higher rate.
@Mike York I hear there are some really great buys your way, not sure you could convince me though. Stick to ares you know and start there.
@Mike York; We invest in the city & Chicago's south suburbs. We run the numbers in the suburbs like any other deal taking in to consideration taxes, days on market or market time... It's tough to generalize that taxes are high for the entire area. We had 2 deals this past week for properties in the same neighborhood. Exact same houses, one w/ taxes of $7K per year, the other $2K. (We figured one owner appealed taxes while the other did not) The latter we considered for cash flow because of the price point & the low taxes. The former we considered for a flip.
Regarding Steger, we have a property under consideration in Steger that we originally considered for a flip but the average Days on Market was much to long, but the price is right & we're now considering it for cash flow instead.
@Crystal Smith I would be very leery of buying a house for cash flow based on a recent tax drop. One thing to keep in mind on contesting taxes, the county board of review may drop the price in an appeal but the assessor may jack the assessment right back up the following year.
As an fyi, though, there is a neat little trick that seems to be working with the county board appeals. If you recently purchased the home, you are entitled to appeal the assessment based on the purchase price. And the counties are agreeing with that now.
It used to be you had to go to the state level to get that type of reduction. But apparently, the counties have finally been told to stop contesting it because thats the law in this state.
But the catch is that the assessment is only good for 1 to 4 years depending on how long between assessments the county goes. Also, that only works if the house was a "regular" sale - i.e. it had to have been listed on the MLS so that it was truly a market-set price.
The benefit is that you're talking about some pretty big savings.
example of one I just got back the BOR on:
It was assessed at 141k in bourbonnais. I contested based on my purchase price and got it reduced to 72k (which is what I paid). :-)
When you're talking about tax rates of 9 and 10% here in kankakee county, thats a pretty good chunk of savings - even if it only last a year or two. (2k in savings?)
I contested 14 properties in will and kankakee county so far based on this rule. I've had 3 in will county approved. 3 in kankakee approved. But 2 in kankakee not. Makes no sense why the county board approved 3 to the purchase price and 2 not when none of these are actual market values. If anything, the 2 they declined are actually assessed way over market. They're townhomes assessed for 150k and they're really only worth 130k tops.
But I would just be careful of buying properties based on a seemingly low tax assessment and/or recent adjustment. There's a very good chance that its going to be bumped right back up in the future based on the other surrounding properties. These counties down here don't care one lick about actual market value. Its all about the surrounding assessments and conforming. They don't want to lower everybody's assessments.
btw: Steger - if its in the will county side - is one of the worst areas in the entire state for tax rates (13%). I would strongly recommend anybody not buy any homes there. With that kind of tax rate, its only going to drive people to want to move which will drive prices down and force tax rates even higher.
In illinois, they increase the tax money the county wants every single year and then use that to set the tax rate to whatever they need to get that number - so lower assessments do NOT equal lower taxes in this crazy state.
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