Investor · Palo Alto, CA · Member since 2016 · 13 posts · 6 votes
Just curious about the folks that invest in Illinois properties. I'm from CA and have been investing in Nashville SFHs, but would like to start invest in the Chicago area, since I have roots there and many connections. But the property taxes seem so extremely high that I've been hesitant. Wondering if those of you who invest in that area have found the rents high enough to justify property taxes that seem about 5 times higher than TN. Can you really make a decent return if you're investing for cash flow?
Take a look at Northwest Indiana. That's where we do most of our business. The property taxes can be over 60% less than Illinois, depending on the area. However the rents aren't much lower. That extra cash flow, drops right down to your bottom line. Home prices are less as well. I'm only about 35 minutes to Chicago, so our area is NOT in the sticks! I'm talking about Merrillville, Crown Point, Highland, Hammond and Griffith. More and more people have been moving to Indiana, because of the outrageous taxes. I made the move over 15 years ago and still don't regret it. Check it out and PM me, if you'd like more information. We also have our own crew, property manager and realtor for flipping. So we can provide those services if you need them. Good Luck.
it is possible, but not as easy as it was two years ago. The good thing is that rents are going sky high still. Several B- areas near me have 1 bedroom apartments renting for $950 a month...
Take a look at Northwest Indiana. That's where we do most of our business. The property taxes can be over 60% less than Illinois, depending on the area. However the rents aren't much lower. That extra cash flow, drops right down to your bottom line. Home prices are less as well. I'm only about 35 minutes to Chicago, so our area is NOT in the sticks! I'm talking about Merrillville, Crown Point, Highland, Hammond and Griffith. More and more people have been moving to Indiana, because of the outrageous taxes. I made the move over 15 years ago and still don't regret it. Check it out and PM me, if you'd like more information. We also have our own crew, property manager and realtor for flipping. So we can provide those services if you need them. Good Luck.
Thanks Scott - I'll ponder this. The reason for me to invest in the area I grew up, is that I do know quite a few folks in the construction trades there. Electricians, plumbers, heating/AC folks and just boots on the ground. But I haven't really seen the numbers work.
I must say, having good connections in the trades is huge. I've been doing RE for over 10 years and it took me 3 years to find a crew that I trusted, did good work and didn't rip me off! I had more problems with crews, than any other part of the RE business. We can assist you in flipping or holding homes. We have all of the tools, so you don't have to worry about putting a "team" together. I'm not sure where you're from, but downtown Chicago is only about 35 minutes from where I live in Indiana. If you decide to do business with us, it's nice if you have people that can check up on us. I've seen a lot of long distance investors get ripped off. So where ever you purchase, be careful!
I do have one city in the south suburbs of Illinois that is a complete cash cow, for B&H's. I can get you into a property for less than $50k and that includes rehab costs. The cash on cash return can be as high as 24%. The rents are anywhere from $950-$1400. I know of at least 10 investors that buy and hold there. PM me, if you'd like more information.
Adrien is right on the money. If you can purchase something for a good price in Munster, jump on it quickly. They go very fast! It is a great rental and flipping market. Crown Point is also a great city for flipping. Good Luck
@jackt I'm an investor in the Northwest neighborhoods of Chicago, namely Portage Park. I'm definitely concerned about not only the direction our property taxes are going, but also our water bills. We're on the hook to cover a badly managed city worker pension program. The problem: we don't know how outrageous it's going to be and I'm not sure I can increase rent enough to support it. So looking elsewhere for my next property - like Indiana.
@Adrien C.@Scott Steffek Are places like Munster supported by the local economy, or are most people commuting to Chicago?
Scott, you brought a few towns in Indiana earlier but not Munster - what keeps you away from there?
I've also looked at Chicago but am curious what else is around there.
Munster is in a county of 450,000 and basically 30mins from Chicago. The county has 3 steel mills, BP, a billion union jobs, plus whatever is available in Chicago and the western suburbs. We had layoffs during the recession but not nearly as bad as other parts of the country.
I've purchased 3 in munster this year and sold them all in under 2 days.
@Adrien C.@Scott Steffek Are places like Munster supported by the local economy, or are most people commuting to Chicago?
Scott, you brought a few towns in Indiana earlier but not Munster - what keeps you away from there?
I've also looked at Chicago but am curious what else is around there.
Munster is in a county of 450,000 and basically 30mins from Chicago. The county has 3 steel mills, BP, a billion union jobs, plus whatever is available in Chicago and the western suburbs. We had layoffs during the recession but not nearly as bad as other parts of the country.
I've purchased 3 in munster this year and sold them all in under 2 days.
Thanks, makes sense. What about for longer term holds? What do the economics look like? Do you tend to do those at all or are you mostly focused on flips?
fantastic rental area. Can get 1.5% rents to purchase price in solid C+\B areas (like 1000-1000 rents per $65-70k). Low taxes. Landlord friendly state and an area not dependent on 1-2 industries.
Adrien S. where are you sourcing these properties? Yellow letters? REOs? Wholesalers?
Adrien is right about the jobs. When Chicago had a construction slow down 5 years ago NW Indiana was booming.
Adrien S. where are you sourcing these properties? Yellow letters? REOs? Wholesalers?
Adrien is right about the jobs. When Chicago had a construction slow down 5 years ago NW Indiana was booming.
The Munster ones were sourced from a referral, and 2 from driving. We do direct mail to Munster and other forms of marketing but getting stuff is tough this year. You can list a moldy dump and get 60% ARV or higher.
You also may want to look is the South Bend/Mishawaka IN area. It's only a train ride away from Chicago and there is a lot going on in this area right now. Notre Dame has been investing in a new project called "Ignition Park" which is in short a technology park that is going to generate a lot of jobs as well as a demand for housing. This is just one example of what is going on in this area. And as previously stated in this thread, the taxes are much less and your money can go a long way in this area! I have some opportunities if you are interested. We have our own crew for rehabs, though we have properties that are turnkey and don't need a rehab. And we offer management services as well.
Those that have properties in NW Indiana, how far do you live away? I personally live around an hour away, and I have a 9-5 job, so it seems very difficult to find/invest in properties there.
We have people at 3030 who do deals in Northern Indiana, even the ones who are still W2. You need someone on your team who can find deals which you put together after hours and on weekends. Then, that person can do the leg work while you're at work.
@Jack T. properties in Chicago, and in Cook County are set to go up another 20-25% over the next 3 years.
To answer your question, I will say depends on what you are looking for! A lot of the suburbs around have taxes much higher than the city!
Regarding tenants and return, is all about the location! I've owned properties in A, B and C neighborhoods. Let's be fair, C-type neighborhoods look good mostly on paper. When tenants move out, you will spend a lot of money to remodel the units and it will take a fair time to get a new tenant, so in the end, I am buying now only Type A &B neighborhoods and I've liquidated everything else.
Appreciation -Type A & B neighborhoods did best for me and for my clients.
And going back to your question: "Are taxes too high in Chicago?" - My answer "Why does it matter? - The tenants pay them" All you have to do is run your numbers well! Good luck to you and make sure you buy close to transportation, universities, hospitals, close to where there is an unlimited number of tenants to choose from.
@Jack T. I have to agree with @Lumi Ispas, there are suburbs out of the 606 with 2x the property taxes as within...take La Grange as an example, but their school system is also much better than inside the city. Since you're an out-of-state investor, it shouldn't really matter to you that much.
I also agree with her on tenants and return. Some of you may not agree with this, but you might have to put a little more of the equation onto the appreciation side when it comes to Chicago city limits. Yes, you can still cash flow (although not by a lot) with Type A and B properties/locations, but that's where you're going to see the most resale value in the city. If you can afford and make the numbers work with new and unique construction properties (despite it being at retail), there will always be a healthy demand.
@Adam Juodis our company actually handles the properties for our out of area investors. We have clients who live out of state, out of country, and just down the road. They buy their properties through us and we manage and rehab the properties for them so that they just collect a worry free check. It sounds like you would need someone to do the leg work for you which is very common for investors. I hope that this helps!
Can you really make a decent return if you're investing for cash flow?
We sold all our SFHs that we were holding for multiple reasons. One of reasons is taxes. We decided to only hold Multi's. Even w/ the projected increase in taxes we still have good returns. We don't plan on passing on all the increases to tenants but eventually....
Although we don't invest in SFHS to hold there are some opportunities to get good returns, even w/ tax increases, if you're willing to invest on A/B type blocks in what some consider C neighborhoods. I guess it also depends on what you consider a "decent return".
@Adam Juodis The goal is to get the properties to a turn key state for our investors. Some of them choose to do flips. They aren't all buy and hold deals.
@Jack T. Property taxes are certainly a cause for concern in Chicago and the surrounding collar counties. The state and local pension obligations have many municipalities and counties cash strapped. Long term debt obligations for public schools backed by taxpayers (especially within the boundaries city of Chicago, as opposed to the larger metro area) are of concern. As many have stated, rising rents, hot neighborhoods and gentrification within many neighborhoods have investors cash flowing at levels that satisfy their investment objectives.
A remedy to those taxes is protesting (appealing) property taxes. The practice is common and results differ based on the neighborhoods and specific property characteristics. Many Associations or Condo's do not permit individual owners to undertake these efforts themselves and instead retain counsel on behalf of the building/subdivision at large to fight these ever increasing liabilities.
If and when you decide to invest in Illinois, I would suggest reaching out to a local lawyer who handles these matters to determine if relief is possible. Best of luck!
In a lot of the suburbs, like the ones near me, it is absolutely worth it for cash flow. Rent is very high too especially for single family homes to rent out. You can get pretty good properties to rehab for very low, and with these areas being as desirable as they are, you won't have a problem renting it at the high prices.
Good luck and let me know if you need anything!