Invest in small multi unit in Chicago south suburb

[KC Zhang]

Anyone invest in 4-plex, 6-plex in Chicago south suburb? I came across few listings that look good on paper. For example, one 6-plex list for about 80k, and market rent is around $800/month /unit on rentometer.com. Definitely in low income area, so tenant turn over could be high. Crime rate seems low. Even with high property tax, if you get $500/month/unit, the numbers still look very good. Is this too good to be true? Is this area a good place to invest in small multi buildings? Would love to hear your story. 

Thanks 

Casey 

[Rick P.]

For some perspective, I have owned 4 plex's in Lansing, IL,  a south suburb of Chicago that borders Indiana.  At the time of this writing I currently still own 1 of them.  I purchased it for $180,000 & the gross rents are approximately $3,000/mo.  On the surface everything looks great.  However, the number one thing you need to pay attention to in the south suburbs of Chicago (Really all of Chicagoland) when evaluating a building is the tax rate.  The tax rates in these suburbs will absolutely kill you.  Do your research and pay attention to the trajectory of the taxes.  The effective property tax rate in Illinois is 2.25% (2nd behind NJ but not for long)  and that will be revised higher after the property tax hike in Chicago gets implemented.  In some of these south suburbs such as Harvey, Dolton, Park Forest, etc it is not uncommon to see effective tax rates of 4-6%, sometimes even higher.  I know this sounds absurd but it is true.  That means for every $100,000 you shell out you may be on the hook for $4,000-6,000 a yr in property taxes.  I am currently paying an effective tax rate of over 4% on my 4 plex in Lansing.  I hope this helps some.