Huntington Beach, CA · Member since 2015 · 58 posts · 8 votes
Do you guys/gals ever predetermine which state/area to invest in by state/county tax rate?
When I view some of the properties for sale in the marketplace; I review the figures and get to the taxes and see a big difference between say Indiana and Illinois.
Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
10y
Yes-
If the ROI is the same in 2 areas, then that's when I start to look at other factors in investing there- the potential growth of that area, landlord friendliness, which sports team I like, etc.
Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
10y
The tax rate is just one of the big differences between IL & IN. Indiana for the most part has a lower price point yet rents are still on par w IL. Indiana is a landlord friendly state where IL is pro-tenant (Cook county can be a pain to evict anyone).
People invest based on location (is it close enough for them to manage or are they comfortable with a PM doing it) and numbers (where is the best ROI).
Real Estate Agent · Wheaton, IL · Member since 2013 · 54 posts · 14 votes
10y
I agree with Adrien. There are several reason to invest or not invest in Illinois. Indiana is a better state from a tax and landlord-friendly perspective. However, you may find that Illinois gets you a better return. There are some areas of Illinois that, even though there are higher tax rates and such, the ROI is so good that it might be more enticing to invest there rather than in NW Indiana.
Do you guys/gals ever predetermine which state/area to invest in by state/county tax rate?
When I view some of the properties for sale in the marketplace; I review the figures and get to the taxes and see a big difference between say Indiana and Illinois.
Thoughts?
Yup, there can be a huge difference in tax rates. Some of the suburbs of Chicago are particularly high for SFR, while just across the border in NW Indiana taxes are much lower and the environment much friendlier for landlords. Taxes shouldn't be the only reason to invest in one state/county over another, but they should certainly be factored in.
Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
10y
@Bob Ewoldt I'm not an expert on the IL side of the fence - can you give an example with legit numbers of what you mean by a better deal? In reality, the particular tax rate of an area and other area related expenses are irrelevant in deciding where to invest. What I mean by that is the decision shouldn't be made on say tax rates but on ROI. Who cares if you pay 4% in property taxes if the ROI is still 15%? Is it better to invest in an area with 0.5% property taxes but get an ROI of 4%?
@Bob Ewoldt I'm not an expert on the IL side of the fence - can you give an example with legit numbers of what you mean by a better deal? In reality, the particular tax rate of an area and other area related expenses are irrelevant in deciding where to invest. What I mean by that is the decision shouldn't be made on say tax rates but on ROI. Who cares if you pay 4% in property taxes if the ROI is still 15%? Is it better to invest in an area with 0.5% property taxes but get an ROI of 4%?
That makes sense however does the friendliness of a state toward a landlord come into play in your estimation?
Property Manager · Griffith, IN · Member since 2015 · 1k+ posts · 913 votes
10y
Yes-
If the ROI is the same in 2 areas, then that's when I start to look at other factors in investing there- the potential growth of that area, landlord friendliness, which sports team I like, etc.
Investor · Chicago, IL · Member since 2014 · 36 posts · 1 vote
9y
I know I'm late to this party, but spent some time researching and thinking about this today. I invest in central IL, and a big challenge has been property taxes. First, thought you all may benefit from seeing this break down by state. Yikes! From a cost stand point in measuring returns, it does matter (all costs are not equal). IL is nearly the highest property tax rate in the nation AND those are fixed costs. If we had the highest water costs for example, those are variable and you can manage that better. In distressed situations, if you're turning around a building, or are managing through some higher vacancies (as I'm now dealing with), this fixed cost is devastating. I'm certainly going to give more thought to investing in Indiana.