Investing in Missouri vs Illinois

21 Replies

I would like to start a discussion over the pros and cons of investing in MO vs IL.  I am considering both.  Topics to discuss could be asset protection, landlord/tenant law, market stability, honestly anything.

Well I would guess that taxes would be a big issue. Also you may want to focus on the strength of the specific rental market where you are looking.

Also, I'd look at property management in Illinois.. I haven't done much research, but looks like a lot of the PM's work on St. Louis, but once you get across the river might not be as prevalent..But you're also down south in Illinois, I know even less about it down there, (even though that's where I'm from - SEMO)

Yeah I would definitely look at taxes, and how much growth is going on in the area your looking at investing. I don't see much growth on the east side of the river but there is a lot of growth on the west side of the river, like Cape Girardeau. I don't know what goes on in Illinois but from the times I drive over there I haven't heard a whole lot. At least for the Mississippi River side of Illinois.

I guess I should add, I am in Glen Carbon. When I say IL vs MO, I mean the Metro East (Madison and St. Clair counties specifically) vs St. Louis city and county. For example, LLC's are roughly $600 to set up (with attorney fees) and $250 to renew, where as they are $50 online in MO. I assume LLP's are about the same. Illinois has a specific kind of Land Trust a lot of investors take advantage of as a layer of asset protection. I also have heard property taxes are way higher in Madison and St. Clair counties vs St. Louis city and county.

You invest where you can make money. You are analyzing everything but a deal! Find a good property and worry about the rest after you do that.

@Robert Hursey

That is a good useful thread, Madison & Saint Clair Counties vs Saint Louis County. I know right of the bet, Saint Louis County taxes are lower than Madison and Saint Clari Counties. Crime rate is another one. 

Would be interesting to see what else we find out. 

Good luck.

Illinois is broke and has a tyrannical state government. It's not nearly as bad down south as it is in/around Chicago, but personally I'd rather invest in a freer state like Missouri. Although we certainly have our own problems with government here in St. Louis, overall I think people as well as businesses are starting to turn away from overbearing governments toward states with less regulation and lower cost of living. See the growth in places like Tennessee, Texas, Florida, etc. vs. the gov.-caused problems in places like NY, CA, and IL. Just my $0.02 Freedom in the 50 States dot org

You should just invest in both and hedge your bet! I know many owners who own on border of IA/IL, WI/IL, MI/IL, IN/IL and own on both sides of the border! Both will have pros and cons over time. IL happens to contain Chicago as well as many major INTL shipping routes. Rents in IL range from .80/SF to $5.50/SF! So yes, taxes can be an issue, but if you can generate large rents, and run a good property (self-managed or professionally managed), it can certainly help! Also, certain counties in IL have much worse taxes than others, even in similar locations, so it helps to identify those that will benefit you most. You should also consider researching the eviction/tenant laws, as they can vary vastly among counties and towns.

Interesting thread; thanks for starting it! 

I live in Edwardsville and presently invest in both Glen Carbon and Edwardsville. I'm trying to get educated about the Missouri side. So far there are pros and cons and it's a trade-off. Here's my thinking:

I know this (IL) area a lot better so it would be easier to accidentally invest in a declining area in St, Louis/STL County. That said, as noted above taxes are lower in MO. But that could be offset by higher insurance in a higher crime area, Edwardsville/Glen Carbon doesn't have any declining areas that I'm aware of. 

Between the two cities I prefer Edwardsville. Glen Carbon has a yearly inspection requirement (not a bad idea on its own) but the pass/fail decision is purely subjective and depends on the mood of the inspector. I've been bitten by some pretty bogus violations. To be fair other inspectors have pointed out potential issues and saved me headaches so maybe the glass is half full. But between the two cities I prefer Edwardsville and Glen Carbon would have to be a pretty good deal for me to buy. 

Lastly I'm starting to look at Bethalto but can't say anything intelligent about that market yet. Good luck and thanks again for starting this thread!

Thanks everyone who has replied so far.  I would like to keep this discussion focused on the St. Louis metropolitan region. Chicagoland is an entirely different animal. 

Vince, that's a good point about my analysis, but I need to know where to look first.  I do not want to analyze every deal in the St. Louis area if there are places where I would NEVER (or never again) own a property (eg Belleville , IL, with it's non-owner repair restrictions. 

Marvin, you are pretty on point with the type of information I am trying to gather.  I am putting together a document to aggregate info on municipal property laws, restrictions, regulations, etc. Per information on their city website, Edwardsville DOES have a yearly inspection as well as rental property registration (http://www.cityofedwardsville.com/index.asp?SEC={0B9F5ACC-A8C0-4B03-9F59-8BA98B689F2E}&Type=SUPERFORMS). If anyone would like to help me gather information, please PM me.  I have a document to share on Google Drive.

Originally posted by @Robert Hursey :

Thanks everyone who has replied so far.  I would like to keep this discussion focused on the St. Louis metropolitan region. Chicagoland is an entirely different animal. 

Vince, that's a good point about my analysis, but I need to know where to look first.  I do not want to analyze every deal in the St. Louis area if there are places where I would NEVER (or never again) own a property (eg Belleville , IL, with it's non-owner repair restrictions. 

Marvin, you are pretty on point with the type of information I am trying to gather.  I am putting together a document to aggregate info on municipal property laws, restrictions, regulations, etc. Per information on their city website, Edwardsville DOES have a yearly inspection as well as rental property registration (http://www.cityofedwardsville.com/index.asp?SEC={0B9F5ACC-A8C0-4B03-9F59-8BA98B689F2E}&Type=SUPERFORMS). If anyone would like to help me gather information, please PM me.  I have a document to share on Google Drive.

 What non-owner repair restrictions are you talking about?

I called the office of Health, Housing, and Building (http://www.belleville.net/index.aspx?NID=345) directly and they told me Belleville requires all non-owner occupied repairs to be done by a licensed contractor. They will not allow a landlord to do his/her own repairs.  Due to this restriction, I am selling my one house in Belleville as long as I can get a decent price and I will never own there again.

I think for repairs (replacing something defective that is already in place), the permits aren't going to always apply but it depends on the scope of the work. For a major remodel, I could see where this could be applicable. When I got an inspection for running a new 20A circuit to the bathroom in my personal residence, I asked about getting another permit for installing a new ceiling fan or recessed lights in a different room. The inspector said that I didn't need one for what he considered to be something that small. He basically said they "would rather be concerned with bigger things."

So I think in your situation, it depends on what you consider a repair, what repairs merit a permit, and if the city really actually cares about it. Considering I was told that I could remove asbestos tile on my own on anything less than a 4-unit, it makes me think the city doesn't care about much.

This has nothing to do with permits.  I did not call about permits.  I told them I heard Belleville has some regulations that make it tough on landlords and the woman I spoke to explained their requirements for non-owner occupied repairs. She said if I am a landlord and I don't live at the residence, I have to to hire a licensed contractor to do any work. Period. If they told you something different, I'd like to know.

This has everything to do with permits because the Housing and Building dept is all about permits and cracking down on people that aren't getting permits. There is no information outside of the permit applications that says who can or cannot do repairs or perform repairs on a property when those repairs don't require a permit. If something falls outside of building, electrical or plumbing code or is defined as a "minor repair/replacement" (per the electrical code for example), they have no concern or authority over it. They do not have any documented restrictions telling you that you cannot replace flooring, a faucet, electrical outlets, light fixtures, repair drywall, paint, etc as a non-occupant because that is not within the scope of their permits.

Fernando, all I am telling you is what I was told and that the word "permit" was never uttered in the conversation. I do not work for Belleville.

It is my understanding that basically all cities require a contract to be licensed to do any sort of work in that city. Home Depot had to obtain a permit to install my dishwasher. That being said there isn't a municipality on the planet that has enough time or resources to file and track every minor repair made to homes in their city.

Upon sale the inspector will require anything out of compliance to be fixed before sale. If you do it yourself and everything is within compliance you should be fine. I doubt painting or putting in new carpet would ever result in an inspection issue. If your doing electrical work you have a lot more risk of running into a problem. Again this is just my understanding but I believe if you actually call and ask any city if a contractor has to be licensed to do work the answer will always be yes.

I looked through what I thought were the relevant city ordinances and couldn't find anything that would remotely back up what they told you other than for permits. 

Thanks Mike.  Thanks Ronald.  I agree with everything you all are saying.  I am simply relaying what I was told, which may have been wrong, or may have been misunderstood on my part.  If anyone feels like calling to verify what I heard is in fact incorrect, go for it.  I'd love to know the TRUTH.  I looked for this info online and read through all I could find and this was stated nowhere, yet when I called, that is what I was told.

I am not an expert yes, but i am working my way there. ha. That being said, i am closing on a SFH in Bethalto, Illinois today. I already own a 4-unit in East Alton, Illinois. I have done quite a bit of research on both sides of the river, and I feel like in my opinion, this just comes down to what you are comfortable with. The tax amount might be higher in Illinois, but that isn't really a big deal. There are so many other important factors. When i have looked in Missouri, i don't know the area, and it is quite a far drive when you are managing yourself. When you look on the MO side of the river, each street in a certain city is like its own "neighborhood." If you aren't really good with that market, I feel like you leave yourself open to extra liabilities. Missouri also seems to have much more competition, and the purchase prices are higher, but the comparable rents really aren't much different.

As someone said above, look for the right deal, not the right location. That would be my advice. My 5 units are all within 7-8 minutes of my house, and once i get this SFH ready to rent in the next month or so, my positive cash flow should be between $1100.00 - 1200.00 per month(after PITIA, cap ex, and vacancy). $1100 per month might not sound like a lot to some people, but i am really happy with that, and I can already see where this is going to snowball and help me keep growing. Hoping to buy 2 more properties by this time next year.

You can do well in either market, i am sure of that.  You just have to figure out what is the most important thing(s) for you.

Good luck, and keep asking questions.  that is how i have learned/continue to keep on learning!

DJ

@Robert Hursey As a wholesaler and lease option guy ,I just look for where there is buying interest both from investors and retail buyers. I find growing interest in Monroe county in Illinois and Jefferson county in Missouri. I can see where you have concerns about housing regulations, you should but retail buyers and tenants are just looking for a good area to live. 

It seems like areas that are looking to attract a larger tax base have more relaxed regulations than areas that are established and now have nit picky activists pestering the government for rules to control those evil, real estate investors. In Jefferson county, where I live, as long as your work is up to code, they don't care who does it.  

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