Fixed vs. Variable expenses - Property taxes

[Masroor Ahmed]

Hey folks. I current own in IL - 2nd highest property tax rates in the country. Like any business, in MF real estate, not all costs are the same. Meaning all else people equal, if you're looking at 2 deals, both 8% caps, in IL vs IN.  The IL property naturally has a higher portion of its costs dedicated to property taxes.  So, as I think about protecting on the downside, if vacancy increases, there's simply less levers to pull if my property taxes are fixed (Yes, i understand they can be contested, but even if successful, its not moving much).  The hypothetical IN property would likely have more variable costs to adjust, providing more downside protection.  I haven't seen much discussion about this and given my state and my neighboring state are so different, this can potentially change my strategy. 

[Patrick Roob]

Hey there @Joel Owens and @Masroor Ahmed!

I could not agree more with your issues with Illinois property taxes! I recently purchase my first multi-family property in Lake County this past March, and since then the taxes had increased to $14,700 which is absolutely absurd! 

With this cruel reality awakening, I have certainly adjusted my REI plan and have shifted focus to the Milwaukee market and southern Wisconsin along the border. With annual tax hikes of 15%+ year over year in the DuPage, Lake and Cook County markets, it is only a matter of time until expenses far surpass a point which market rents can be raised too.

Best of luck!
Patrick