Curious about everyone's thoughts on this. 2020 was a weird year for so many reasons, but one result of the pandemic here in Chicago was a temporary decrease in Assessed Value of properties for the 2020 fiscal year. Our quaint 4-Flat on the Northwest Side saw a 13% reduction in Assessed Tax Value from 2019, raising the Cap Rate, Cash Flow, and Cash on Cash Return for our property. Meanwhile, rents didn't change and neither did our occupancy. This meant extra cash in our pocket without having to do anything creative, like raising rents, cutting expenses, etc. I'm sure we aren't the only ones.

However, as we approach the time for the second property tax installment for the 2021 and realize the full impact of the new Assessed Values for 2021, I'm curious how much other Landlords think they can pass the tax hit onto their tenants via rents? Our property and other similar ones nearby are seeing 35-40% jumps in Assessed Tax Value for 2021 compared to 2020. Regardless of how you've financed your deal and how creative you are, this is likely to make a very noticeable impact on all the financials, namely cash flow. I'm sitting here kicking myself for not raising rents through the pandemic, but that would have been a tough sell if I had decided to. Sure, the City of Chicago gave us a nice break on taxes for 2020, but are jumping right back in for their money.

Who's inevitably passing this onto their tenants, and what else are you doing to improve your financials in light of tax hikes?

I will start with outlining the 2021 and projected 2022 financials for our 4 flat, with nothing else changed besides taxes. These numbers use the purchase price for the Cap Rate, and take into account a fully rented property (we are house hacking in one unit right now) as well as a pretty high mortgage (we put 3.5% down in Q3 2020), YMMV of course.

2020 Tax Year (2021 Fiscal Year)

Cap Rate: 8.62%

Cash Flow: $6,735/yr

Cash on Cash Return: 34%

2021 Tax Year (2022 Fiscal Year)

Cap Rate: 8.14%

Cash Flow: $3,547/yr

Cash on Cash Return: 18%

My plan is to set a smart and realistic strategy to raise rents over the next 12 months, shop around for a cheaper insurance policy, do more repairs myself, lower heating costs (I pay for heating the entire building), and install water-saving toilets and fixtures in all of my units

Chicago, Illinois

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