Talk to me about taxes (Chicago, Downers Grove: real estate, apartments, rentals)

[Taco1234]

Originally Posted by RJA29

As is further, people generally need a place to live. Over a longer period time, relative to rents (which are increasing quite a bit), housing is still a break even investment, or better. Economically speaking, if you're here for a job and it pays well, housing can be a good investment, where renting would not be.

I don't disagree that renting long term isn't a great idea... But I would venture to guess buying a house in Illinois is just not a good idea, period. Comes up on worst of worst lists for everything.

Highest tax burden

Illinois' property taxes highest in nation, study finds - Chicago Tribune

Highest foreclosure (top 10)
Foreclosures: Illinois | Bankrate.com


Decreasing values
Chicago overtakes Detroit as the worst performing housing market: San Diego outperforms while Los Angeles hits a snag. » Dr. Housing Bubble Blog

And that MiMi index tool is scary as well. Idk, seems like everyone is in denial.

[numberfive]

Originally Posted by RJA29

As is further, people generally need a place to live. Over a longer period time, relative to rents (which are increasing quite a bit), housing is still a break even investment, or better. Economically speaking, if you're here for a job and it pays well, housing can be a good investment, where renting would not be.

This is true, in the long haul owning a home beats renting. Short-term, renting almost always wins.

Breaking even is a much harder feat. Take these two scenarios for the Chicagoland market...

Scenario 1: buy a house at the median price, $200k in 2011. In 2016, sell for $208k (typical gain over this timeframe is ~4.3%). Add in selling fees ($20k), property taxes over 5 years ($30k), and home repair/reno ($10k), and the home owner is at -$52,000 total paid for housing.
Scenario 2: rent for $1600 over the same time period. The renter is at -$96,000. Now let's assume they had a 20% downpayment ($40k) to invest in the S&P 500 instead. Over that timeframe, their down payment would grow by $32k to offset the rent cost. This puts the renter at -$63k total paid for housing.

The homeowner "wins" because they're only out $53,000. The renter is out $63,000. Neither scenario has the homeowner even close to breaking even though.

Originally Posted by My Kind Of Town

Gotcha, phrasing it that way, Chicago metro relative to most other metros, I would agree. That wasn't clear from your previous reply.

However, it is incorrect to confirm a blanket statement which stated "don't think of buying a home in Chicagoland is a "good investment", economically speaking. it's not." As the latest available data indicates, home prices have been rising in recent years (not flat-lining) and if one plans to stay in the area for 5 or more years it is a good investment, economically speaking, when compared to the other option (renting) even if prices eventually do "flat-line."

See the above scenario. Rent or buy, you're still "losing" on your investment on a house in the Chicagoland area, even though home prices increase. The selling fees and property taxes eat up all of the gains of home value increases for many of us.

[My Kind Of Town]

Originally Posted by Taco1234

I don't disagree that renting long term isn't a great idea... But I would venture to guess buying a house in Illinois is just not a good idea, period. Comes up on worst of worst lists for everything.

Highest tax burden

Illinois' property taxes highest in nation, study finds - Chicago Tribune

Highest foreclosure (top 10)
Foreclosures: Illinois | Bankrate.com


Decreasing values
Chicago overtakes Detroit as the worst performing housing market: San Diego outperforms while Los Angeles hits a snag. » Dr. Housing Bubble Blog

And that MiMi index tool is scary as well. Idk, seems like everyone is in denial.

See my previous post. The numbers have worked heavily in favor of buying in my situation over the past 7 years. Even if property taxes continue to increase, the numbers still work in favor of buying because rent is increasing at a much more alarming rate. Again, this assumes one is committed to staying put for 5+ years. If not, then yea sure renting might come out slightly ahead and certainly offers greater flexibility for moving.

[Taco1234]

Originally Posted by My Kind Of Town

See my previous post. The numbers have worked heavily in favor of buying in my situation over the past 7 years. Even if property taxes continue to increase, the numbers still work in favor of buying because rent is increasing at a much more alarming rate. Again, this assumes one is committed to staying put for 5+ years. If not, then yea sure renting might come out slightly ahead and certainly offers greater flexibility for moving.

Again, I'm not saying renting > buying in general. I'm saying buying in Illinois is scary. We fully plan to buy when we leave the state.

Also, how is one to predict what their home value will be when they sell? What if you bought for 800k and when you eventually sell it, it sells for 500k because the taxes have gone up to 25k annually and not many can afford it? Then what?

[My Kind Of Town]

Originally Posted by numberfive

This is true, in the long haul owning a home beats renting. Short-term, renting almost always wins.

Breaking even is a much harder feat. Take these two scenarios for the Chicagoland market...

Scenario 1: buy a house at the median price, $200k in 2011. In 2016, sell for $208k (typical gain over this timeframe is ~4.3%). Add in selling fees ($20k), property taxes over 5 years ($30k), and home repair/reno ($10k), and the home owner is at -$52,000 total paid for housing.
Scenario 2: rent for $1600 over the same time period. The renter is at -$96,000. Now let's assume they had a 20% downpayment ($40k) to invest in the S&P 500 instead. Over that timeframe, their down payment would grow by $32k to offset the rent cost. This puts the renter at -$63k total paid for housing.

The homeowner "wins" because they're only out $53,000. The renter is out $63,000. Neither scenario has the homeowner even close to breaking even though.


See the above scenario. Rent or buy, you're still "losing" on your investment on a house in the Chicagoland area, even though home prices increase. The selling fees and property taxes eat up all of the gains of home value increases for many of us.

You proved my point. Buying > renting if you are staying put for a minimum of 5 years. That is my definition of "winning" on your investment as it pertains to home buying since the only alternative is renting. Also, not sure where you see an increase of only 4.3% since 2011. I'm seeing a median price of ~$735k in 2011 vs. $840k in 2016 in Hinsdale (14.3% increase).

[Taco1234]

Like this:


https://www.redfin.com/IL/Hinsdale/5.../home/18033030

Bought for 1.8 in 2005... Sold for 1.5 this May. Taxes 25k. So, they lost 300k and spent 250k in taxes. How's that a good idea?

[My Kind Of Town]

Originally Posted by Taco1234

Like this:


https://www.redfin.com/IL/Hinsdale/5.../home/18033030

Bought for 1.8 in 2005... Sold for 1.5 this May. Taxes 25k. So, they lost 300k and spent 250k in taxes. How's that a good idea?

Probably. What would it have cost to rent that same house? $10k/month? That's $1.2M in rent over the same timeframe. Even if it "only" cost $8k/month to rent, still $960k in rent.

[Taco1234]

Originally Posted by My Kind Of Town

Probably. What would it have cost to rent that same house? $10k/month? That's $1.2M in rent over the same timeframe. Even if it "only" cost $8k/month to rent, still $960k in rent.

Right, neither situation is ideal. Bottom line is Illinois is just not a good idea. It's a sinking ship, whether you lose on home value or pay inflated rent. Crime is rising, taxes rising... Get out while you can

[My Kind Of Town]

Originally Posted by Taco1234

Right, neither situation is ideal. Bottom line is Illinois is just not a good idea. It's a sinking ship, whether you lose on home value or pay inflated rent. Crime is rising, taxes rising... Get out while you can

But that's the thing. I haven't lost on home value, prices have appreciated by ~13% since I bought. Also, if you think Chicagoland has "inflated rent" you clearly haven't looked at rentals in NYC, LA, DC, SF, other metros comparable in size to Chicago. Rent in Chicago is peanuts compared to those markets. I have a friend that pays $4500/mo for a 2 bed, 1 bath 950 SF apartment in East Village. Now that's inflated.

[Taco1234]

Originally Posted by My Kind Of Town

But that's the thing. I haven't lost on home value, prices have appreciated by ~13% since I bought. Also, if you think Chicagoland has "inflated rent" you clearly haven't looked at rentals in NYC, LA, DC, SF, other metros comparable in size to Chicago. Rent in Chicago is peanuts compared to those markets. I have a friend that pays $4500/mo for a 2 bed, 1 bath 950 SF apartment in East Village. Now that's inflated.

I don't necessarily think Chicago has the worst rent prices, but somebody on here has mentioned several times that run prices are skyrocketing and Chicagoland.

I won't hold my breath though, about home prices actually staying put. I see new construction homes selling for crazy prices but we track all of the sales and I'm seeing more and more that are selling or listed for a lower than they were previously purchased for. And when property taxes do you go even higher, there is zero chance that home prices won't drop dramatically.

And as far as the debate about renting versus buying with that Hinsdale house. How ridiculous is it that the debate is: which is the lesser of two evils? Losing 500,000 or losing 950 K? Obviously losing the 950 is worse, but the fact that that even has to be a debate for somebody is what blows my mind. That brings me back to my previous point of Illinois being a sinking ship. I hope for all of those good people here that they don't lose value on their homes, but something tells me Illinois is going to screw many people over.