Chicago Investing / Property Taxes
I'm originally from Chicago, but moved out to the west after college and bought my first MF duplex in Sacramento. Sacramento investing has a lot of bonuses -taxes are pretty low(~1%), rents are high, appreciation is high, and fairly new construction. The only con at the moment is high competition, and prices have sky rocketed. So naturally I'm looking elsewhere and I still have family in Chicago.
The picture I'm getting from Chi is low appreciation, fair rents, fair prices(not a very hot market) and very very high property taxes. So my question for you guys is how do you swallow the tax pill? I'm looking at a property on MLS going for 430K being taxed at 13.9K. That, that's roughly 3.2% and unbelievable to people in other states.
Considering all of this, what is your cash flow looking like? Is it increasing/stable or declining year by year? Are rents keeping up with increasing taxes? What makes it worth it for you guys? - For me it seems like a pretty risky market, taxes can kill cash flow and property values
Most Popular Reply
Chicago is worth it for us because it is the 3rd largest Metropolitan Statistical Area (MSA) in the US, which includes Chicago proper, south & northern suburbs & western suburbs out to Naperville & Joliet. Chicago proper has 77 distinct communities & when you add up all the suburbs the number of communities is well over 200. We think of Chicago as 100+ sub-markets, which make it a target rich environment to find opportunities where we can meet our hurdle rate goals. Some submarkets are better than others for our particular strategy where we combine purchasing SFRs to flip along w/ purchasing distressed Multi's to renovate then hold. We buy in other markets as well but Chicago remains the focus because of its size & costs.
Regarding taxes- We've increased rents ~7% between 2016 & 2017 on our holdings. Expenses, including taxes, have increased ~4%. In some locations the property value has increased 10 to 15%; in others, there's been no increase.