Illinois Property Taxes

[Marc Allen]

Hi All,

I'm curious how people are continuing to justify buy-and-hold investments in Illinois suburbs with the current state of property taxes. I've got my eye one pretty inexpensive property which is listed at $80K, with rents at $1,200 a month, which is a decent ratio, but the property taxes are $3K a year - a whopping 3.8% of the appraised value. I see similar ratios all over Illinois, where the current property tax as a % of the property value is hovering between 3%-4%.  $200K properties paying $6K a year in taxes. That is just crazy vs. the 1%-1.5% I see in many other states I have looked.

The other 2 scary factors are 1) with the pension obligations, I don't see IL property tax doing anything but increasing, all while the state continues to lose residents which diminishes the tax basis  2) Property taxes are a low/no value add expense. As I see it, I would rather that percentage of the expense be going towards improvements or mortgage paydown, not a set of state/city services that are not any better than neighboring states.

Curious how others are continuing to invest. Yes, "list prices" to rent looks good on paper, but the taxes . . . .

[Jeff Burdick]

Originally posted by @Marc Allen:

Hi All,

I'm curious how people are continuing to justify buy-and-hold investments in Illinois suburbs with the current state of property taxes. I've got my eye one pretty inexpensive property which is listed at $80K, with rents at $1,200 a month, which is a decent ratio, but the property taxes are $3K a year - a whopping 3.8% of the appraised value. I see similar ratios all over Illinois, where the current property tax as a % of the property value is hovering between 3%-4%.  $200K properties paying $6K a year in taxes. That is just crazy vs. the 1%-1.5% I see in many other states I have looked.

The other 2 scary factors are 1) with the pension obligations, I don't see IL property tax doing anything but increasing, all while the state continues to lose residents which diminishes the tax basis  2) Property taxes are a low/no value add expense. As I see it, I would rather that percentage of the expense be going towards improvements or mortgage paydown, not a set of state/city services that are not any better than neighboring states.

Curious how others are continuing to invest. Yes, "list prices" to rent looks good on paper, but the taxes . . . .

 A few thoughts.  I agree that IL property taxes are higher, as a whole, than many other states.  IL state income taxes are lower than many other states, which IMO is part of the reason the property taxes are so high.  IL state income tax is a flat rate of 3.75%...not as low as some states like FL and TX with 0, but much lower than many states.  North Carolina's is a flat rate of 5.75%, for example.  Utah's is 5%. 

The high property taxes are not universal across the board though.  Some small municipalities really jack them up, it appears.   I have a property in the city of Chicago with a current rate of 1.2%(it was 1.0% prior to the recent increases), which I think is fair for all of the services we receive in the city.  

I disagree that services are not any better than neighboring states, as our mass transit, parks, and museums, for example, are incredible and second-to-none in the region.    

In regards to losing population, the population decline is very small as a percentage of the entire population.  However, if you look at the demographics of the population changes, you'll see that it largely lower and working class people leaving the state while upper-middle and upper class people are moving into the state at almost as quickly of a rate.   So while the overall population is at a slight decline, the state's purchasing power is growing.