I am doing my due diligence and exploring different areas in Chicago. My goal is to purchase a 2/3 flat property, strictly as an investment. I noticed that some areas, like the Town of Cicero/Berwyn, have high property taxes. Are these types of areas worth exploring? I am a bit of a skeptic as the property taxes really eat into the profits.
Allentown, PA · Member since 2016 · 515 posts · 404 votes
7y
@Rene Miguel
You are right. Property Taxes do eat up on your profits. The only time it in my opinion it is ok to pay higher property taxes is if its an in demand area or has one of the best school districts.
Tenants are willing to pay top dollar for good, safe, upcoming, or in demand neighborhoods. Tenants are also willing to pay whatever they can to get their children into good districts.
Those two scenarios make it where you can charge nearly whatever you want to offset the cost of higher taxes. Outside of that, personally, its not worth it.
Allentown, PA · Member since 2016 · 515 posts · 404 votes
7y
@Rene Miguel
You are right. Property Taxes do eat up on your profits. The only time it in my opinion it is ok to pay higher property taxes is if its an in demand area or has one of the best school districts.
Tenants are willing to pay top dollar for good, safe, upcoming, or in demand neighborhoods. Tenants are also willing to pay whatever they can to get their children into good districts.
Those two scenarios make it where you can charge nearly whatever you want to offset the cost of higher taxes. Outside of that, personally, its not worth it.
@Brian Adzadi, I like what you said. Quick follow-up question for you: What would you consider a good school and what tools are you using to determine it?
I was using Greatschools.org and considering anything above 6 a good school but I am still a newbie.
Rental Property Investor · Hastings, NE · Member since 2018 · 57 posts · 53 votes
7y
@Rene Miguel - Just run the numbers and see if it is still a good deal. Sure higher property taxes do eat into profits, but if there is enough meat on the bone in terms of cash flow and/or potential appreciation than higher property taxes may be just fine. It's no different than using leverage. Paying 10% interest and 5 points on hard money may seem ridiculous, but if the deal is good enough than it is simply a cost of doing business.
@Brian Adzadi makes great points about school districts and safe neighborhoods.