Investing in Illinois OR Indiana?

Question

Thanks again to this wonderful community.

I have laid out my post here before on 1031 exchanges and have a better idea of where to begin, as i am on my journey to make THE DEAL happen, i am wondering as where to begin purchasing. I have the cash and 6 months reserves for each rental property i want to acquire. My goal is to acquire 4 Rental Properties between 60-75k that are for the most part move in ready, basically just small cosmetics like changing the carpets and paints if i have to make any kind of rehab expenses. and ONE primary residency where i plan to live for a year before renting out (it can be SFH or multi unit). I live in Illinois in the Chicago northwest suburbs in Mchenry County. and i see that there's definitely a demand for rentals here, taxes are however VERY HIGH, i spoke to an attorney who told me in Illinois that only place to stayt away from is COOK COUNTY (CROOK COUNTY) because evictions can take up to 8 months+, however in Mchenry, lake county etc up to 2 months at most.

On the other hand I have been looking and reading other people's experiences in Indiana and it really seems like a mix of answers, from what i personally saw it seems to be harder to get homes rented in Indiana than in Illinois, due to the amount of supply of rental units since there are LOT of inverstors, and alot more crime than Illinois, now i dont know how true this is. But if i can get my hands on 4 good cash flowing propertie in Indiana i might consider moving there with the primary so i can be close while i learn more about the market before purchasing more.

i am really facing a what to do scenario at this point,

1- Do i buy in Illinois where taxes are extremely high, there are more jobs, better economy, i LIVE here is Tenant friendly

2-Do i buy in Indiana where taxes are lower, more landlord friendly, more crime etc.

So many choices and yet so little time!!

your input based on experience is GREATLY appreciated!

Adrien C. · Answer

I'm not sure where you are getting the data, but Indiana (at least NW Indiana) is not the high crime, low job inventory, and high rental vacancy many of you have mentioned. Unless you are only looking at Gary stats. As far as crime, you're in the Chicago area which has more killings a day than a horror movie. NW Indiana has plenty of areas that haven't seen a murder in years. The other areas have your typical petty crime. Heck, over the border in south Chicago area, the crime is 10X higher. As far as jobs, we are just as close to Chicago as McHenry county. Our people have vehicles or the train to access those jobs. Keep in mind, the jobs are starting to jump the boarder too because Illinois is so jacked up. 1) We've seen huge appreciation in all NWI markets the past 2 years2) There is a shortage of good priced rentals. I've had 0 vacancy (not even a month) on my 3 rentals in 4 years and each one turns over every 18 months on average. 3) Taxes are crazy low4) Landlord friendly state (Just evicted a tenant and from start to getting his A out- 3 weeks)5) Indiana is not going bankrupt and raising our taxes

Alex Bok · Answer

Am biased here but Illinois and its south suburbs are great investment areas. Especially the south burbs where we have seen a dramatic increase in rent. Yes taxes are higher as well but the rent is helping offset this

Neil Goradia · Answer

I personally don't think its hard to find renters in Indianapolis at all, especially in the B- or C+ areas. I would much rather base your decision on which states are the most landlord friendly as far as eviction, etc. I have heard Illinois is a very tenant friendly state and it takes a long time to get bad tenants out. In Indy, I can file an eviction and have them out within 3 weeks or less.

Kenneth Garrett · Answer

@Oscar ChirinosOne of the first things is to pick a market or two and become an expert in that market. This way when something appears you can do a quick analysis and determine whether its worth your time to investigate further. Remember there is more to a market then picking the least expensive property. You need to look at what class area it is. A, B ,C or D. I won't go to D (war zone). You want to look at C markets that are trending to C+ or B. I tell my business partner less expensive is not always the best. Quality of tenant pool, job growth/stability are just as important. I self manage most of my properties so they need to be relatively close. I think it is important to self manage first so when you hire a property manager you know what it takes to get the job done. You still need to manage your property manager.

Ritch Bonisa · Answer

There are alot of millenials looking to rent in Indianapolis these days.

Crystal Smith · Answer

We lean towards investing in areas with a large pool of potential renters. W/ that said if were up to us Chicagoland would be preferred but exploring opportunities in Indianapolis would be a good option. The other cities in Indian are too small.

Robert Leach · Answer

I think Indiana has a lot of positives but also several negatives like crime rates, schools, traffic patterns and employment opportunities. Chicago has plenty of it's own challenges and the taxes are nutty but a much larger renter pool. I suppose it all depends on what you feel most comfortable with. In the end, are you in positive cash flow with the deal and is the property appreciating in value. My argument against Indiana has always been the 10 yr outlook on property values in case I want to sell. In this area, Chicago dominates the discussion.

Spencer Gray · Answer

Illinois w/ higher taxes and tenant friendly laws vs. Indiana with lower taxes and landlord friendly laws -Indiana has a number of great markets for cash flow investing, if cash flow is what you looking for vs. appreciation. I'm not incredibly familiar with the Illinois market (because of before mentioned reasons!) but unless the returns are significantly better in Illinois relative to your investment goals after taxes and extra legal costs, to me it's a pretty simple decision. That being said Indiana is a relatively diverse market - Northern Indiana/ South Chicago is completely different from the majority of the state.

Oscar Chirinos · Answer

Hi guys, thanks for your replies. Well from what i have seen it seems i can bring around 400-500 a month after expenses are paid. and yet they arent as common in Illinois as Indiana they still are, but with taxes being this high i worry at times.

Kenneth Garrett · Answer

@Oscar ChirinosHi Oscar,I invest in Lake and McHenry counties for the most part. The taxes are high compared to Indiana but you can find good rentals that cash flow. My goal is to cash flow 300 and over. 60-75 Turnkey properties is low for the these areas. While the market has gone up you may have to adjust your numbers. I have a number of SFH, but in the past year have moved on to Multi-Family units. The investment is higher, but you have to adjust to the economy. I like Value-Add properties where you can build the equity.If I can help let me know.Good Luck.