Rental Property in Illinois: What the Numbers Actually Look Like

Illinois is the Midwest state that looks like it should work and does not.

The houses are cheap — a $315,000 statewide median, below the national middle. Insurance is ordinary: $2,697 a year at $300,000 of dwelling coverage, roughly a third of what a Florida landlord pays. Rents in the Chicago metro are respectable. Every input a first-pass screen looks at says yes.

Then there is the property tax. Illinois's effective rate is 2.01%, second-highest in the country behind New Jersey. On that $315,000 median that is $6,331.50 a year, or $527.63 a month — more than an entire month's worth of the rent this article assumes, gone before the mortgage, and 2.35 times the insurance bill.

If you take one thing from this article: in Illinois, the property tax line is the deal. It is bigger than insurance, bigger than management, bigger than any rate you will negotiate, and unlike almost every other operating expense it does not shrink when you shop harder.

A note before you start: this is general educational information about how rental property arithmetic works in Illinois. It is not investment, tax, insurance, or legal advice, and it is not a recommendation about any property. Illinois property tax is administered township by township and county by county with wildly varying local levies, and insurance is priced per structure. Talk to an Illinois CPA about tax treatment, a licensed Illinois insurance agent about a real quote, and an Illinois real estate attorney about anything contractual — Illinois is a de facto attorney-closing state and you will have one anyway.

1. What a rental costs to buy here

The statewide median sale price is $315,000 (Illinois REALTORS closed-sale statistic, March 2026, up 6.8% year over year). That figure is genuinely disputed: Houzeo's live-MLS series reads $375,000, a 19% gap that looks like a different measurement basis rather than a different answer. Treat the true statewide number as somewhere in a $315,000 to $375,000 band and use the actual comparable sales for your submarket rather than either.

County medians diverge:

• Cook County (Chicago): $364,200, effective property tax rate 1.90%, average insurance $3,311
• DuPage County: $461,100, effective property tax rate 1.98%, average insurance $2,372

The cash you actually need

Illinois's transaction taxes are mostly a seller problem, which is unusually good news for a buyer:

• State real estate transfer tax: 0.1% ($0.50 per $500), customarily paid by the seller. On $315,000 that is $315.
• County transfer tax: up to 0.05% ($0.25 per $500) where a county imposes one — $157.50 on the same price in Cook.
• Municipal transfer tax, which is where Illinois gets expensive and where the buyer can get pulled in. The City of Chicago charges $3.75 per $500 (0.75%) on most residential sales, seller-paid, plus an additional $1.50 per $500 paid by the buyer on transactions above $1,000,000. A typical sub-$1M Chicago sale therefore layers roughly 0.9% combined — about $2,835 on a $315,000 price — but essentially all of it lands on the seller.
• No mortgage recording tax and no intangible tax. Illinois's transfer tax applies to deeds, not to mortgage instruments. County recorders charge a flat per-document fee instead. Unlike Florida, Minnesota, or New York, an Illinois buyer pays nothing that scales with the loan.
• Closing costs: 2% to 5%. This article uses a 3.5% midpoint. Chicago-area purchases skew to the high end because of local fees and near-universal attorney involvement.

On the $315,000 statewide median at 25% down:

• Down payment: $315,000 x 0.25 = $78,750
• Loan amount: $236,250
• Closing costs: $315,000 x 3.5% = $11,025
• Buyer-side transfer or mortgage tax: $0 below the Chicago $1M tier
• Total cash in: $89,775

That is a materially cheaper entry than Florida, Colorado, or Massachusetts, and it is the reason out-of-state investors keep looking at Illinois. Section 3 is where the reason they leave shows up.

On price growth: FHFA's 2026 Q1 Purchase-Only index put Illinois at +7.31% year over year — the largest gain of any state that quarter. That is a real and unusual number, and it is worth being honest about what it means. It is an argument for buying Illinois on appreciation. It is not an argument that the cash flow works, and an analysis that needs a repeat of 2026's print to survive is a bet on a single year's print.

2. The two expenses that decide whether it works

Property tax: the number that decides everything

Sources cluster tightly and all agree on the direction. WalletHub reads Illinois's effective real-estate tax rate at 2.01%, second-highest of the fifty states. The Tax Foundation reads 1.88% on owner-occupied housing value. propertytaxrates.org averages 2.07% across 102 counties. The honest range is 1.88% to 2.08%, and this article uses 2.01%.

On the $315,000 example: $315,000 x 2.01% = $6,331.50 a year, or $527.63 a month.

Here is what that costs you, holding everything else constant. Same house, same $2,100 rent, same $2,697 insurance — change only the effective tax rate:

Property tax alone is worth 1.13 percentage points of cap rate between Illinois and Missouri on the identical house, and $296.62 a month of cash flow. Note also that the 1.88% to 2.08% disagreement inside Illinois's own source cluster is itself worth 0.20 points of cap rate — which is why you compute the tax from the actual parcel rather than from a state average.

Two Illinois-specific mechanics a landlord has to know:

The General Homestead Exemption does not apply to a rental. Illinois's GHE (35 ILCS 200/15-175) reduces equalized assessed value by $10,000 in Cook County, $8,000 in the counties contiguous to Cook (DuPage, Kane, Lake, McHenry, Will), and $6,000 elsewhere — and only for an owner's primary residence. If you are converting your own home into a rental, that exemption comes off and the bill steps up. If you are buying from an owner-occupant, the tax figure on the listing may include an exemption you will not get.

Illinois assessments and levies both move. Illinois taxes are levy-driven: taxing districts set a dollar levy and rates fall out of it, so a reassessment does not automatically raise your bill and a falling market does not automatically lower it. Cook County reassesses on a triennial cycle by township. Never underwrite an Illinois rental from the seller's current tax bill. Pull the parcel's assessment history from the county assessor and the current tax rate from the county clerk, and assume the number moves.

Insurance: real, rising, and still the smaller line

The reference figure is $2,697 a year at $300,000 of dwelling coverage with a $1,000 typical all-perils deductible. That is the average of two independent 2026 surveys quoting the same tier (Insurance.com at $2,802, Insurify at $2,592). Other reads run higher — MoneyGeek at $3,164 on a lower $250,000 basis, NerdWallet at $3,240 at $400,000 — so the honest read is that published Illinois averages in 2026 span roughly $2,600 to $3,200, and this site's mortgage-side dataset separately carries a lower $2,060 NerdWallet figure at a different tier. A landlord shopping after the 2025 rate increases may well see quotes above the top of that band.

At $2,697 the premium is $224.75 a month and 10.70% of gross rent on Section 3's example — meaningful, but less than half the property tax line.

Here is the same house with only the premium changed:

Insurance is worth 1.01 points of cap rate across that whole range. Property tax was worth 1.13 points across a narrower and more realistic one. That is the Illinois story in two tables.

The wind/hail deductible, and why it is a landlord's problem specifically

Illinois is not a hurricane state and does not appear on the Insurance Information Institute's list of nineteen states plus DC with named-storm deductibles. What Illinois has instead is hail, and the market has reached for the same tool.

In its 2025 Illinois rate filing, State Farm stated that Illinois has had more hail damage than any state except Texas, and that catastrophe losses exceeded its annual provision in 13 of the last 15 years. Alongside an average 27% rate increase (28.3% on homeowners specifically), effective July 15, 2025 for new business and August 15, 2025 for renewals, it imposed a minimum 1% wind/hail deductible on Illinois homeowners policies — customers who did not already meet it were automatically moved to 1%. Because State Farm insures roughly one in three Illinois homeowners, that single filing made the percentage wind/hail deductible a mainstream Illinois structure. Other carriers use the same approach, and 2% deductibles are common.

The mechanics matter. This is a separate deductible from the $1,000 on your declarations page, and it is a percentage of the dwelling limit, not of the damage. On a $300,000 dwelling limit:

• 1% = $3,000
• 2% = $6,000

Section 3 works out that this rental produces $9,317.10 of net operating income in a good year. So:

• A 1% wind/hail deductible ($3,000) is 32.20% of a full year's NOI
• A 2% deductible ($6,000) is 64.40% of a full year's NOI
• A 5% deductible ($15,000), which exists, is 160.99%

You cannot pass any of it to a tenant. It is not a lease obligation, it is not billable, and it arrives on the insurer's timetable rather than yours. It also lands on precisely the claim an Illinois landlord is most likely to file. Unlike a Florida hurricane deductible, there is no statutory once-per-calendar-year limit here — this is a carrier underwriting term, so two hail events can mean two full deductibles.

Roof settlement is the other half of the same problem. Illinois carriers have increasingly attached roof schedules alongside those percentage deductibles. The typical tiering pays full replacement cost on roofs roughly 0 to 10 years old, a declining depreciated percentage from about 10 years, and actual cash value at roughly 15 years and older. On a hail-damaged 15-year-old roof, that is the difference between a funded replacement and a large gap — stacked on top of a deductible that is already several thousand dollars. Get the roof age in writing and ask, in writing, whether the roof settles at replacement cost or ACV.

Coverage adequacy, which is a separate question from premium. Illinois rebuild cost runs about $260 per square foot (a midpoint of a published $200 to $320 band, and that band is the honest width of the figure). A 1,500 square foot house therefore has a replacement cost near $390,000 — 23.81% above the $315,000 statewide median sale price. A $300,000 dwelling limit buys roughly 1,154 square feet of rebuild in Illinois. Market price does not set your coverage limit; rebuild cost does, and in Illinois it runs higher than price on a typical small house. Insuring to the purchase price is how a landlord ends up underinsured.

3. A full worked example

The property. A single-family house at the Illinois statewide median of $315,000.

The rent — read this carefully. This site does not carry rent data. The $2,100 a month used below is an assumption chosen to be plausible for a house at that price. It is not a market observation. Pull three to five real comparable listings for the specific neighborhood and substitute the actual number, because Section 4 shows how sensitive the answer is to it.

The other assumptions:

• Vacancy: 8% of gross rent (roughly one month of turnover a year)
• Property management: 10% of collected rent
• Repairs and maintenance: 5% of gross scheduled rent
• Capital reserve: 5% of gross scheduled rent
• Financing: 25% down, 30-year fixed at 7.00% — the rate is an assumption, not a quote
• No HOA and no condo association

Step 1 — income

• Gross scheduled rent: $2,100 x 12 = $25,200
• Vacancy loss: $25,200 x 8% = $2,016
• Effective gross income: $25,200 - $2,016 = $23,184

Step 2 — operating expenses

Management is charged on rent actually collected, not scheduled rent:

• Management: $23,184 x 10% = $2,318.40
• Property tax: $315,000 x 2.01% = $6,331.50
• Insurance: $2,697
• Maintenance: $25,200 x 5% = $1,260
• Capital reserve: $25,200 x 5% = $1,260
• Total operating expenses: $13,866.90

Expense ratio: $13,866.90 / $23,184 = 59.81% of collected rent — at the top of the 35% to 55% band most rentals land in. Property tax alone is 45.66% of that entire expense line.

Step 3 — net operating income and cap rate

• NOI = $23,184 - $13,866.90 = $9,317.10
• Cap rate = $9,317.10 / $315,000 = 2.96%

The mortgage is deliberately absent from that figure. Cap rate exists to compare properties independently of how they are financed; putting debt service into it is the most common error in this whole exercise, and it makes two identical houses look like different investments because one buyer put more down.

Step 4 — debt service and cash flow

Loan: $315,000 x 75% = $236,250. At 7.00% over 30 years, principal and interest is $1,571.78 a month, or $18,861.36 a year.

• Annual cash flow = $9,317.10 - $18,861.36 = -$9,544.26
• Monthly cash flow = -$795.35
• Debt service coverage ratio = $9,317.10 / $18,861.36 = 0.49

Step 5 — cash-on-cash return

• Cash invested: $89,775 (Section 1)
• Cash-on-cash = -$9,544.26 / $89,775 = -10.63%

Rate sensitivity, since 7.00% was an assumption

• At 6.50%: P&I $1,493.26/mo, annual cash flow -$8,602.02
• At 7.00%: P&I $1,571.78/mo, annual cash flow -$9,544.26
• At 7.50%: P&I $1,651.89/mo, annual cash flow -$10,505.58

A full point of rate is worth about $1,903.56 a year. The gap between Illinois's tax rate and Missouri's, on this same house, was $3,559.50 — nearly two full points of mortgage rate.

The simplest version of the same finding

Add up the three bills a lender escrows:

• Principal and interest: $1,571.78
• Property tax: $6,331.50 / 12 = $527.63
• Insurance: $2,697 / 12 = $224.75
• Total: $2,324.15 a month

Against $2,100 of assumed rent, that is -$224.15 a month before vacancy, management, or a single repair. Illinois is one of only two states in the Midwest batch where the naive "does the rent cover the mortgage" check fails outright, and the reason it fails is that $527.63 tax line.

4. The expenses people leave out

Vacancy, management, and capital reserves do not arrive as invoices. Nobody bills you for the month the house sits empty, or for the roof you will need in nine years, or — if you self-manage — for your own weekends. So they fall out of the mental model, and the property looks better than it is.

Here is the same house with those three removed and everything else identical:

The three omissions are worth $5,594.40 a year — $2,016 of vacancy, $2,318.40 of management, $1,260 of reserve. They flatter the cap rate by 1.77 percentage points and hide 58.62% of the annual loss. A 4.73% cap rate is a number an investor might accept in a low-tax appreciation market. A 2.96% cap rate is not. Those are the same house.

Vacancy. Eight percent is roughly one month a year, which is what a single clean turnover costs between move-out and the next tenant's first full month. Setting it to zero assumes the house is never empty, including between tenants.

Management. Set it to zero and the return is paying you for your own labor rather than for the property. Self-managing this house saves $2,318.40 a year, lifting NOI to $11,635.50 and the cap rate to 3.69%, with cash flow improving to -$602.15 a month. It is a real saving. It does not fix the deal, and it stops being free the moment you stop being available — which for an out-of-state owner of a Chicago-area rental is most of the time.

Capital reserves. Roofs, HVAC, water heaters, and flooring have known lives, and Section 2 explains that in Illinois the insurance market effectively shortens the roof clock: carriers begin depreciating around 10 years and commonly settle at actual cash value by 15, which means you will replace the roof on the carrier's schedule rather than the shingle's. The 5%-of-rent convention used above is one option. A harsher and equally common convention is 1% of purchase price a year for maintenance and 1% for capital, which here is $3,150 each. Run that way: total operating expenses $17,646.90, expense ratio 76.12%, NOI $5,537.10, cap rate 1.76%, cash flow -$1,110.35 a month, DSCR 0.29.

So the honest cap-rate range for this property is 1.76% to 2.96% depending on which reserve convention you choose. Choose one deliberately.

What would actually have to be true

The rent this property needs. For cash flow to reach zero at this price and this financing, gross scheduled rent must reach about $38,310.25 a year, or $3,192.52 a month — 1.01% of purchase price per month. That is where the old "1% rule" comes from: at 2026 financing costs it is roughly the point at which a leveraged single-family rental stops bleeding. The assumed $2,100 rent is 0.67% of price.

The price this rent supports. Hold rent at $2,100 and solve for the price at which cash flow reaches zero with 25% down: about $195,663. That is 62% of the statewide median.

The down payment this price needs. Keep the $315,000 price and the $2,100 rent and solve for the loan the NOI can service: about $116,703 — which means roughly $198,297 down, or 62.95% of the price. At that point you have bought a 2.96% cap rate mostly with cash, and 2.96% is available from instruments that do not need a roof.

The property tax line is what makes all three of those numbers so demanding. At Missouri's 0.88% the breakeven rent falls by roughly $408 a month.

5. What actually varies by county here

Illinois property tax rates are high almost everywhere, and the interesting variation is not the rate — it is the interaction of rate, price, and insurance.

Take the identical $315,000 house at $2,100 rent and apply each county's actual tax rate and average premium:

The counties trade places: Cook has the lower tax rate but $939 more insurance, and the insurance wins. DuPage comes out 0.22 points of cap rate ahead of Cook on the identical house.

Now run each county at its own real median price, which is where the second Illinois trap lives:

• Cook County at $364,200 with a $2,400 assumed rent, 1.90% tax ($6,919.80) and $3,311 insurance: cash in $103,797, NOI $10,735.60, cap rate 2.95%, cash flow -$922.64 a month, cash-on-cash -10.67%, DSCR 0.49.
• DuPage County at $461,100 with a $2,900 assumed rent, 1.98% tax and $2,372 insurance: cash in $131,413.50, NOI $13,832.62, cap rate 3.00%, cash flow -$1,148.06 a month, cash-on-cash -10.48%, DSCR 0.50.

Note the DuPage tax bill in dollars: $461,100 x 1.98% = $9,129.78 a year, or $760.82 a month. The higher-priced county does not escape; it pays the same rate on a larger base.

Three further Illinois facts to check for a specific address, none of which is in a county average:

Township and taxing-district variation inside a county. A county effective rate is an average of dozens of taxing districts. Two houses a mile apart in Cook County can sit in different school districts, park districts, and municipalities, with materially different composite rates. The county clerk publishes the actual rate for the tax code your parcel is in. Use that one.

Cook County's triennial reassessment cycle. Assessments are updated by township on a three-year rotation. Buying in the year before a reassessment in a rapidly appreciating township is a specific, knowable risk.

Chicago's rental ordinances are municipal. The city's Residential Landlord and Tenant Ordinance (Chicago Municipal Code Chapter 5-12) applies to most Chicago rentals and does not apply outside the city. Evanston, Oak Park, Cook County outside Chicago, and other jurisdictions have their own. See Section 7 — read the ordinance itself, not a summary of it.

6. Financing a rental is not financing a home

These are the standard mechanisms across the mortgage market. Any specific rate or overlay is your lender's, not this article's.

Down payment. Conventional financing on a non-owner-occupied one-unit property generally requires more equity than an owner-occupied purchase — 20% is usually the floor and 25% the common expectation, which is why this article models 25%. FHA and VA are not available for a property you do not occupy. The genuine exception is house hacking: a two-to-four-unit property you live in one unit of qualifies for owner-occupied programs. Illinois's two-flat and three-flat stock, particularly in Chicago, makes this a more realistic option here than in most states.

Rate. Investment-property loans price above owner-occupied loans. Fannie Mae and Freddie Mac apply loan-level price adjustments for investment occupancy that scale with loan-to-value and credit score; lenders pass those through as rate or points. The 7.00% modeled above is an assumption. Get a real quote.

Reserves. Lenders typically require post-closing reserves — months of principal, interest, taxes, and insurance held in liquid assets — scaling with the number of financed properties you own. In Illinois, size your own reserves against the wind/hail deductible in dollars from Section 2, not against a month of payments.

Rental income counting. Lenders credit a portion of market or lease rent toward qualifying, not all of it. Ask what percentage yours uses and whether they need an appraiser's rent schedule.

DSCR loans. A debt service coverage ratio loan qualifies the property rather than the borrower, comparing property income to debt service and largely skipping personal income documentation. The trade is a higher rate, a larger down payment, frequent prepayment penalties, and a minimum DSCR — commonly stated at or above 1.0 and often above 1.2.

Look at Section 3. This property's DSCR is 0.49, and even with vacancy, management, and reserves stripped out it is 0.79. It does not qualify at 75% loan-to-value. The DSCR underwriting is telling you the same thing the cash flow line is, and in Illinois the reason is a tax bill, not a rent problem.

Escrow shock is an Illinois specialty. Because Illinois taxes are paid in arrears and reassessments move in steps, a lender's first-year escrow estimate can be built on a bill that no longer exists. Ask the lender exactly which tax figure they escrowed and check it against the assessor's current assessed value, not last year's bill.

7. What to check before you buy in this state

Property tax, from the parcel rather than the listing.

1. Pull the parcel's assessment history from the county assessor and the composite rate for its tax code from the county clerk. A statewide 2.01% is for articles; the tax code rate is for underwriting.
2. Recompute the bill with no General Homestead Exemption. A rental does not get it, and the seller's bill may include it.
3. Find out where the parcel sits in its county's reassessment cycle — in Cook County, which township and which year.
4. Check for special service areas (SSAs), TIF districts, and any special assessments that appear on the bill and are invisible in an effective-rate average.
5. Ask whether the seller has an open assessment appeal, and what the assessor did with the last one.

Insurance, second, and before your contingency period ends.

1. Get a bindable landlord policy quote for the specific address — a dwelling fire form with loss-of-rents coverage, not a homeowners quote and not a statewide average.
2. Read the wind/hail deductible off the quote and multiply it into dollars against the dwelling limit. Write that number down. It is your minimum cash reserve.
3. Get the roof age in writing and ask specifically whether the roof settles at replacement cost or actual cash value. Ten years is when depreciation typically starts; fifteen is when ACV typically takes over.
4. Confirm the policy carries loss of rents and find out how many months it pays.
5. Check the replacement cost, not the purchase price. At roughly $260 per square foot, a 1,500 square foot Illinois house rebuilds for about $390,000 against a $315,000 median sale price.
6. Flood and sewer backup are separate. No property policy covers flood, and water/sewer backup is an endorsement, not a default — relevant in older Chicago-area housing stock with basements.

The rent, from the market.

1. Pull three to five genuine comparable rentals for the specific neighborhood and note how long they sat.
2. Divide monthly rent by purchase price. Section 4's breakeven for this example was 1.01%. Knowing where you sit against that tells you immediately whether you are buying cash flow or betting on appreciation — and Illinois's appreciation case is currently the strongest in the country at +7.31%, which is exactly why you should be clear about which bet you are making.

The law, from the statute rather than from an article.

1. Do not take eviction timelines, notice periods, security-deposit handling, or late-fee rules from a blog — including this one. Illinois residential tenancies are governed primarily by the Landlord and Tenant Act (765 ILCS 705) and the eviction process by the Forcible Entry and Detainer article of the Code of Civil Procedure (735 ILCS 5, Article IX). Read them at the Illinois General Assembly's own site, https://www.ilga.gov/legislation/ilcs/, or have an Illinois real estate attorney walk you through them.
2. Check the municipality separately, and check it first if the property is in Chicago. The Chicago Residential Landlord and Tenant Ordinance (Municipal Code Ch. 5-12) imposes obligations that state law does not, and Cook County and several suburbs have their own ordinances. Rental registration and inspection requirements are also local.

The money and the tax treatment.

1. Size your cash reserves against the wind/hail deductible in dollars, not against a month of mortgage payments.
2. Ask an Illinois CPA how the property will be taxed, including depreciation, passive activity loss rules, Illinois's replacement tax treatment of certain entities, and treatment on sale. Illinois has a state income tax, which makes this conversation different from Florida's or Texas's.

What to do next

Every figure above came from a data file or was computed in front of you. Re-run all of it with your own numbers.

The Illinois rental analysis calculator does exactly the work in Sections 3 and 4 — enter your price, your real local rent, and your own vacancy, management, and reserve assumptions, and it produces NOI, cap rate, cash flow, cash-on-cash, and DSCR. It also warns you when you have left out the expenses Section 4 is about, rather than letting them pass silently.

The Illinois insurance premium estimator will get you closer to a real figure than the $2,697 statewide average, and it converts a 1% or 2% wind/hail deductible into actual dollars rather than leaving it as a percentage.

The Illinois mortgage payment calculator gives you the principal and interest figure for the rate you are actually quoted, which Section 3 shows is worth about $1,904 a year per point — and it will also show you the property tax line that this whole article is about.

This article is general educational information about rental property arithmetic in Illinois, based on figures current as of August 2026. It is not investment, tax, insurance, or legal advice. The rent figures in the worked examples are stated assumptions, not market data. Insurance premiums, property tax assessments, and mortgage rates change and vary by property. Consult an Illinois CPA, a licensed Illinois insurance agent, and an Illinois real estate attorney before buying.