Appreciation and Long Term Investing Illinois vs Washington state
Member since 2019 · 3 posts · 3 votes
Appreciation and Long Term Investing Illinois vs Washington state
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Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
5yOriginally posted by @John Powers:
Looking to buy a single family home or duplex in north central Illinois or in Washington state. Advantages to Illinois include more affordable home values, lower mortgage payments, cheaper cost of living, closer to family/friends.
I make 30-40k a year from seasonal jobs as a restaurant server. 2020 has been a bad year for the hospitality industry, but I have hope that by the summer and next fall the industry will start to recover. If it doesn't I will try to find a job where I an make at least $20 an hour. I have 20k set aside for the downpayment, fees, and basic repairs and cosmetic work. 750 credit score.
My big decision is where to buy my first property? Should I buy in Illinois where my monthly payment will be lower, and I can house hack a single family or duplex? Or should I buy a single family in Washington state, where I will be working and want to live on a more permanent basis? It also looks like the long term appreciation might be more in than in central Illinois.
What do you all think?
Thanks
John
John, I grew up and lived in Peoria IL for over 20 years. I currently live in Wenatchee WA. I will never be moving back to IL and will never own property in IL. The state gov has constantly raised property taxes and other income taxes year after year and shows no signs of stopping. The state has lost more people, than gained, for 7 years straight now. It lost a net of 80k people this past year alone. Until the government gets its act together and the debt gets under control it is not as friendly as other midwest states. Yes, IL has really cheap property but so does other mid west states like Ohio or Michigan. If you are going to be living in WA and want to own property in the midwest....just pick another midwest state.
As your first rental property though I would advise against renting from out of state, especially half way across the country. If you are set on living in WA then I would focus on finding one there. The key for WA state though is location. Price can vary A LOT. From pricey that looks somewhat similar to the midwest to prices that are stereotypical of what you would think west coast prices would be. The trend is that the east side of the mountains is cheaper than the west, though be aware that that is not firm and you can find small pockets that go the opposite of that trend.
Let me know if you have any questions about either state. This is obviously my personal opinion and others could have their own too.
9 Replies
- Rental Property Investor · Everett, WA · Member since 2015 · 457 posts · 386 votes5y
@John Powers Based on your post, it seems like long term you would like to live in WA state. If that is the case, I would be looking to narrow down what part of the state you would like to live as this will greatly impact the purchase price of the property you are looking at. A duplex in Spokane is roughly $275-$400K vs $500-$700K in the Seattle area. In both cases purchasing as an owner occupant, you will be able to use first time home buyer programs and lower down payment options.
Best of luck,
John
- Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes5y
John -thanks for the post ... the numbers you list point towards IL being your best bet ....but if you plan to live in WA - I would advise looking in WA , but you will need to look in the more remote / rural areas ....if you will need financing - you will need 2 solid yrs of tax returns and positive income for qualifying
- Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes5y
Originally posted by @John Powers:
Looking to buy a single family home or duplex in north central Illinois or in Washington state. Advantages to Illinois include more affordable home values, lower mortgage payments, cheaper cost of living, closer to family/friends.
I make 30-40k a year from seasonal jobs as a restaurant server. 2020 has been a bad year for the hospitality industry, but I have hope that by the summer and next fall the industry will start to recover. If it doesn't I will try to find a job where I an make at least $20 an hour. I have 20k set aside for the downpayment, fees, and basic repairs and cosmetic work. 750 credit score.
My big decision is where to buy my first property? Should I buy in Illinois where my monthly payment will be lower, and I can house hack a single family or duplex? Or should I buy a single family in Washington state, where I will be working and want to live on a more permanent basis? It also looks like the long term appreciation might be more in than in central Illinois.
What do you all think?
Thanks
John
John, I grew up and lived in Peoria IL for over 20 years. I currently live in Wenatchee WA. I will never be moving back to IL and will never own property in IL. The state gov has constantly raised property taxes and other income taxes year after year and shows no signs of stopping. The state has lost more people, than gained, for 7 years straight now. It lost a net of 80k people this past year alone. Until the government gets its act together and the debt gets under control it is not as friendly as other midwest states. Yes, IL has really cheap property but so does other mid west states like Ohio or Michigan. If you are going to be living in WA and want to own property in the midwest....just pick another midwest state.
As your first rental property though I would advise against renting from out of state, especially half way across the country. If you are set on living in WA then I would focus on finding one there. The key for WA state though is location. Price can vary A LOT. From pricey that looks somewhat similar to the midwest to prices that are stereotypical of what you would think west coast prices would be. The trend is that the east side of the mountains is cheaper than the west, though be aware that that is not firm and you can find small pockets that go the opposite of that trend.
Let me know if you have any questions about either state. This is obviously my personal opinion and others could have their own too.
- Member since 2019 · 3 posts · 3 votes5y
Hey thank you all for your feedback. It's a tough decision because the barrier to entry is so much lower in midwest, than in Washington. I'm actually living in the Leavenworth area right now, so I'm right in your neighborhood Nic! I totally agree with you that Illinois has serious problems with their state goverment and Illinois taxes are a real pain.
Do any Washington state investors have input on finding off market single family homes that only need cosmetic work for $120,000 or less? I am looking to get a conventional loan for the property so I am not interested in properties that need a full rehab. I'm more interested in finding a below market value deal and building some equity in the property than renting it out. Perhaps after a year or two I would consider using it as a rental property.
Thanks
John
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes5y
Originally posted by @John Powers:
Do any Washington state investors have input on finding off market single family homes that only need cosmetic work for $120,000 or less? I am not interested in properties that need a full rehab.
There is a difference between price and cost. A neighborhood in our area that may come close to this will have an extremely high cost over time. Picture an old mobile on a rural lot.
I'm all about capturing equity with off-market solo purchases, but even doubling your price point will still be tough here in the Wenatchee area.
Maybe a burb of Yakima? Again, low price = high cost, including missed future appreciation.
A couple advantages to WA over a lot of states is no state income tax and reasonable (1.3% or so of assessed value) property taxes.
- 5yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Steve Vaughan:
Originally posted by @John Powers:
Do any Washington state investors have input on finding off market single family homes that only need cosmetic work for $120,000 or less? I am not interested in properties that need a full rehab.
There is a difference between price and cost. A neighborhood in our area that may come close to this will have an extremely high cost over time. Picture an old mobile on a rural lot.
I'm all about capturing equity with off-market solo purchases, but even doubling your price point will still be tough here in the Wenatchee area.
Maybe a burb of Yakima? Again, low price = high cost, including missed future appreciation.
A couple advantages to WA over a lot of states is no state income tax and reasonable (1.3% or so of assessed value) property taxes.
Steve, Quincy ,, Ephrata better price points ??? I can see where Leavenworth area would be prime for hospitality though for sure.
what about a little town just north of Chelan and then work in Chelan in the summer months ?? just spit balling.
- Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes5y
Originally posted by @Jay Hinrichs:
Originally posted by @Steve Vaughan:
Originally posted by @John Powers:
Do any Washington state investors have input on finding off market single family homes that only need cosmetic work for $120,000 or less? I am not interested in properties that need a full rehab.
There is a difference between price and cost. A neighborhood in our area that may come close to this will have an extremely high cost over time. Picture an old mobile on a rural lot.
I'm all about capturing equity with off-market solo purchases, but even doubling your price point will still be tough here in the Wenatchee area.
Maybe a burb of Yakima? Again, low price = high cost, including missed future appreciation.
A couple advantages to WA over a lot of states is no state income tax and reasonable (1.3% or so of assessed value) property taxes.
Steve, Quincy ,, Ephrata better price points ??? I can see where Leavenworth area would be prime for hospitality though for sure.
what about a little town just north of Chelan and then work in Chelan in the summer months ?? just spit balling.
Jay, I don't know the Ephrata or Quincy markets very well, but they appear to have median home prices of $213k Ephrata and Quincy $275k. Wenatchee is more like $360k.
Rent to value ratios are probably similar with all 3. Not good.
- Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes5y
Both @Steve Vaughan and @Jay Hinrichs have good points. If you are worried about, or just cant afford, the entry cost then you will need to start looking at farther out properties. Steve has the 411 on Waterville not sure if its low enough for you or not. Ephrata and Quincy are decent places to look as well. They are both good locations because Quincy has a huge draw for the data centers. With Microsoft dumping a bunch of money into the schools in Quincy it is primed to see a small boost. It will never get to Wenatchee level but its a decent area with lower costs. Ephratas a bit farther away than Quincy and thus a bit cheaper...but its even smaller than Quincy. So its a trade off as rents will be lower too. If you go north of Chelan you need to go up to Brewster till you get prices dropping to be affordable. I have a co-worker who lives in Brewster and commutes to Wenatchee every day....its a minimum 90min one way but its just that much cheaper that they can afford to live there. I'm not sure what the rental market up there is though.
- 5yAaron ZimmermanBusiness MemberAccountant · Chicago, IL · Member since 2018 · 2k+ posts · 1k+ votes
Perhaps you could do a house in IL on a duplex, triplex, fourplex and then when you move, do the same thing in Washington state. That'd be the lowest cost way with the best financing. You'd qualify for both under FHA assuming one year a part.
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