One thing I’ve realized over the years is that real estate investing is a business and some rules need to be followed. I always try to look for rental properties in ideal locations—in good school districts with public transportation and a bustling business district. However, sometimes I’ve run across outliers. I’ve bought homes in neighborhoods that flew under the radar and sat more on the up-and-coming side of Chicago. I’ve scooped up deals in towns such as Edwardsville, which presents renters with a manageable commute to St. Louis while offering a small-town feel.
But, no matter where you invest in Illinois, the byproduct of the state’s economic woes follows. Greater financial burdens haunt residents who witness larger chunks of their income being exhausted by skyrocketing real estate taxes. Those taxes are growing much faster than incomes in a state that has hundreds of billions in unfunded pension obligations.
What does all this economic tumult mean for rental investors? In towns such as Edwardsville, rising property, state, and local taxes have homeowners questioning whether they can sustain mortgage payments on homes that are steadily declining in value. While no one wants to hop aboard a sinking ship, income property investors have longer time horizons. The timely collection of monthly rents provides some stability to buyers who hold properties rather than enter and exit quickly while home prices sink.
In 2018, statewide median prices still sit well below highs achieved prior to the financial crisis of 2009. Potential first-time homebuyers, battered by tax increases, may delay purchases while many pre-retirees expedite plans to sell before prices decline much further. Piecing it all together, rental markets in towns such as Edwardsville thrive as demand heats up. Along the way, distressed homeowners offer investors a chance to buy at below-market values.