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Thinking of buying in Des Plaines, Illinois? Get our financial spreadsheet tailored to the city.
Some people have lost a lot of money in Des Plaines' housing market.
We've all heard of that person who bought a single-family home somewhere like in the Cumberland area in 2018, expecting prices to keep skyrocketing. Instead, the market dipped, and their property value dropped by 15%.
With high mortgage payments and maintenance costs, their rental income couldn't cover expenses, giving them a negative ROI. They ended up losing thousands of dollars every year.
But then, there are the success stories.
Some folks prepared well, using a solid spreadsheet tailored to the Des Plaines market. They bought a multi-family unit in places like the Downtown Des Plaines area during a market dip in 2010. They renovated it, adding energy-efficient appliances and modern amenities. Commuters loved it for its proximity to the Metra station and paid premium rents.
Over the years, the property value more than doubled, and their rental income kept rising. Their ROI is over 10% annually because they bought smart and renovated wisely.
Thinking of buying in Des Plaines? Want to be one of the successful ones and see some nice cash flow hitting your bank account every month? Let us give you some advice now.
Don't lose money on your next property in Des Plaines!
Unprepared first-time buyers often end up losing money. Invest only after reviewing all the performance metrics. Get our spreadsheet tailored to Des Plaines, Illinois.
NOI, Cash Flow, Rental Yield and ROI in Des Plaines, Illinois
Net Operating Income (NOI)
NOI, or Net Operating Income, is a key metric for property investors in Des Plaines, Illinois, a city known for its suburban charm and relatively moderate operating costs.
Simply put, it measures your property's profitability after subtracting operating expenses from rental income.
The formula is straightforward: NOI = Rental Income - Operating Expenses.
If you have a single-family home near Lake Opeka that earns $30,000 a year in rent and costs $10,000 annually to maintain, your NOI would be $20,000.
In Des Plaines, a high NOI, say $25,000, indicates a well-performing investment, given the city's stable demand and reasonable rental prices.
A low NOI, like $5,000, might suggest excessive maintenance costs or underperforming rent, both common issues in older properties or less desirable neighborhoods.
Cash Flow
Cash flow is the lifeblood of your property investment, especially in a city like Des Plaines where property values and mortgage payments are moderate but still significant.
It’s calculated by subtracting your debt service (mortgage payments) from your NOI: Cash Flow = NOI - Debt Service.
For instance, if your NOI is $20,000 and your annual mortgage payments are $15,000, your cash flow is $5,000.
In a city with stable property prices like Des Plaines, positive cash flow means your property is generating excess income, which is crucial for long-term sustainability.
A positive cash flow of $500 a month can provide a cushion for unexpected expenses.
Negative cash flow, where expenses exceed income, could mean you’re over-leveraged or the property isn’t as profitable, a common scenario in areas with higher property taxes or older homes needing more maintenance.
Rental Yield
Rental yield is particularly important in Des Plaines, where property values are moderate but rental demand is steady.
It measures your annual return as a percentage of the property's value: Rental Yield = (Annual Rental Income / Property Value) x 100. For example, if you have a townhouse near the Des Plaines Metra station worth $300,000 and it generates $24,000 in annual rent, your rental yield is 8%.
A high rental yield, like 9%, is excellent in Des Plaines, indicating a strong return relative to the property costs.
Conversely, a low rental yield, like 4%, might suggest that the property value is high relative to the income it generates, which can be a challenge in more upscale neighborhoods or newly developed areas.
Return on Investment (ROI)
ROI measures your overall profitability, factoring in all costs and income, which is vital in Des Plaines’ evolving housing market.
The formula is: ROI = (Net Profit / Total Investment) x 100. Suppose you bought a property in the Cumberland area for $250,000, spent $50,000 on renovations, and it’s now worth $400,000.
If your net profit is $100,000, your ROI would be 25%.
In Des Plaines, a high ROI, like 30%, reflects a strong investment given the city's steady appreciation potential and rental demand.
A low ROI, like 7%, may indicate either high acquisition and renovation costs or that the property is not appreciating as expected, which can happen in areas with slower growth or high maintenance needs.
This is how a good property investment looks like in Des Plaines
If you're making a property investment in Des Plaines, Illinois, these are the performance metric values you should be aiming for.
| Metric | Threshold for Good Value | Potential Reasons for Good Value in Des Plaines |
|---|---|---|
| Net Operating Income (NOI) | Above $50,000 | Steady rental income due to proximity to O'Hare International Airport, efficient property management reducing operating costs, properties in desirable neighborhoods like Cumberland or Lake Opeka. |
| Cash Flow | Positive and above $500/month | Consistent rental demand from airport and city commuters, manageable mortgage payments due to favorable interest rates, and strategic location near major highways attracting tenants. |
| Rental Yield | Above 5% | Strong rental demand driven by airport employees and city workers, relatively affordable property prices in areas like Algonquin Road, and potential for rent increases due to limited housing supply and growing local economy. |
| Return on Investment (ROI) | Above 8% over a few years | Property appreciation in neighborhoods benefiting from local development projects, strategic property improvements adding value, effective property management keeping vacancy rates low, and favorable local policies encouraging investment. |
How much cash flow can you generate in Des Plaines?
Get a clear view of your next investment, with all the metrics explained and reviewed accurately.
A real-life example of a successful property investment in Des Plaines
Here is what a good property investment in Des Plaines, Illinois could look like.
Imagine you purchase a multi-family unit in the downtown area of Des Plaines, a neighborhood known for its excellent schools, parks, and proximity to O'Hare International Airport.
You buy a four-unit building for $800,000. Each unit rents for $1,500 per month, giving you an annual rental income of $72,000.
Your annual operating expenses, including maintenance, property management, and taxes, amount to $20,000.
You have a mortgage with annual payments of $40,000.
If we input everything in the real estate spreadsheet tailored to Des Plaines, we would get a comprehensive view of more than 200 metrics.
But, as for now, let's check the 4 metrics we mentioned before.
Detailed metrics
- Net Operating Income (NOI)
Calculation: $72,000 (rental income) - $20,000 (operating expenses) = $52,000
This high NOI indicates strong profitability, thanks to steady rental income and controlled expenses.
- Cash Flow
Calculation: $52,000 (NOI) - $40,000 (mortgage payments) = $12,000
Positive cash flow of $12,000 annually (or about $1,000 monthly) shows the property generates extra income after covering all costs, providing financial stability and flexibility.
- Rental Yield
Calculation: ($72,000 / $800,000) x 100 = 9%
A rental yield of 9% signifies a solid return on the investment relative to the property’s value, highlighting its profitability.
- Return on Investment (ROI)
Assume you sell the property after five years for $1,000,000. Your net profit, considering purchase price, renovation costs of $50,000, and selling expenses of $30,000, would be $120,000.
Calculation: ($120,000 / $850,000) x 100 = 14.1%
An ROI of 14.1% over five years indicates significant appreciation and effective management, making it a lucrative investment.
This is how a bad property investment looks like in Des Plaines
These are the performance metric values that indicate potential issues in your real estate investment in Des Plaines, Illinois.
| Metric | Threshold for Bad Value | Potential Reasons for Bad Value in Des Plaines |
|---|---|---|
| Net Operating Income (NOI) | Below $30,000 | High operating costs due to local property taxes, lower rental income from properties in less desirable neighborhoods, or high vacancy rates during off-peak seasons. |
| Cash Flow | Negative or below $300/month | High mortgage payments outweighing rental income, unexpected maintenance costs due to older property infrastructure, or difficulty finding reliable tenants in a competitive market. |
| Rental Yield | Below 4% | Moderate property prices with insufficient rental returns, seasonal fluctuations in rental demand, or properties located in areas with lower rental desirability. |
| Return on Investment (ROI) | Below 6% over a few years | Slow property appreciation in certain neighborhoods, high costs of property management, frequent vacancies, and local regulations impacting rental profitability. |
Don't lose money on your next property in Des Plaines!
Unprepared first-time buyers often end up losing money. Invest only after reviewing all the performance metrics. Get our spreadsheet tailored to Des Plaines, Illinois.
A real-life example of a disastrous property investment in Des Plaines
Here is what a bad real estate investment in Des Plaines, Illinois could look like.
Imagine you purchase a multi-family unit in an overlooked and declining neighborhood, far from the bustling areas near O'Hare Airport or the Des Plaines River.
You buy a four-unit building for $800,000. Each unit struggles to rent for $1,200 per month, giving you an annual rental income of $57,600.
Your annual operating expenses, including maintenance, property management, and taxes, amount to $50,000.
You have a mortgage with annual payments of $60,000.
If we input everything in the real estate spreadsheet tailored to Des Plaines, we would get a comprehensive view of 200+ metrics, and we would know, before buying, that it's a bad investment.
But, as for now, let's check the 4 metrics we mentioned before.
Detailed metrics
- Net Operating Income (NOI)
Calculation: $57,600 (rental income) - $50,000 (operating expenses) = $7,600
This low NOI indicates weak profitability, due to low rental income and high expenses.
- Cash Flow
Calculation: $7,600 (NOI) - $60,000 (mortgage payments) = -$52,400
Negative cash flow of -$52,400 annually (or about -$4,367 monthly) shows the property incurs significant losses, straining financial resources.
- Rental Yield
Calculation: ($57,600 / $800,000) x 100 = 7.2%
A rental yield of 7.2% signifies a poor return on the investment relative to the property’s value, highlighting its lack of profitability.
- Return on Investment (ROI)
Assume you sell the property after five years for $700,000. Your net loss, considering purchase price, renovation costs of $50,000, and selling expenses of $30,000, would be $180,000.
Calculation: (-$180,000 / $850,000) x 100 = -21.2%
An ROI of -21.2% over five years indicates significant depreciation and poor management, making it a disastrous investment.
What initiatives should you take to improve all the performance metrics of your real estate investment in Des Plaines, Illinois?
When you are looking for a property
To boost your cash flow potential in Des Plaines, Illinois, take these steps before buying a property.
| Specific Strategy/Initiative | Impact Potential | Metric(s) Impacted |
|---|---|---|
| Analyze Proximity to O'Hare Airport: Focus on properties within a short commute to O'Hare International Airport, a major employment hub. | High | ROI, Rental Yield |
| Plan Everything and Make Different Scenarios: use a solid spreadsheet already tailored to Des Plaines’ housing market | High | NOI, Cash Flow, ROI |
| Understand Local Legislation: Familiarize yourself with Des Plaines' rental regulations and tenant rights. | High | NOI, Cash Flow |
| Compare Rental Rates: Use rental comparables from similar units in desirable neighborhoods like Cumberland and Lake Opeka to estimate potential rental income. | High | Cash Flow, Rental Yield |
| Review Financial Records: Obtain and analyze the financial history, including previous rental income and expenses, for multi-family units in Des Plaines. | High | NOI, Cash Flow |
| Assess Property Condition: Hire a professional inspector to identify any potential costly repairs or renovations needed in older Des Plaines properties. | Medium | NOI, Cash Flow, ROI |
| Investigate Future Developments: Check for planned infrastructure projects like new Metra stations or commercial developments in neighborhoods like Downtown Des Plaines. | Medium | ROI, Rental Yield |
| Partner with a Local Realtor: Engage a realtor who specializes in Des Plaines properties to access exclusive listings and local market insights. | Medium | ROI, Rental Yield, NOI |
| Assess Property Management Companies: Research and interview property management firms with strong track records in Des Plaines. | Medium | NOI, Cash Flow |
| Check Environmental Risks: Ensure the property is not in flood zones or areas prone to environmental hazards, and verify compliance with Des Plaines' environmental regulations. | Medium | ROI, NOI |
99% of successful investors meticulously planned their investments!
Don’t make costly mistakes with your next property in Des Plaines. Make sure you have all the necessary information and data before making a decision.
When you are holding a property
These initiatives will help you get performance metrics while you hold your property in Des Plaines, Illinois
| Specific Strategy/Initiative | Impact Potential | Metric(s) Impacted |
|---|---|---|
| Regular Maintenance: Schedule consistent maintenance to avoid costly repairs and maintain property value. Des Plaines experiences seasonal weather changes, so ensure HVAC systems and roofing are regularly inspected. | High | NOI, Cash Flow |
| Maximize Rent: Adjust rent annually based on market rates and tenant feedback. Des Plaines has a diverse rental market, so consider the local demand and amenities when setting prices. | High | NOI, Cash Flow, Rental Yield |
| Energy Efficiency Improvements: Implement energy-saving measures like energy-efficient windows and insulation to reduce utility costs, especially during cold Illinois winters. | High | NOI, ROI |
| Leverage Tax Benefits: Utilize tax benefits available in Illinois, such as property tax exemptions for energy-efficient upgrades or historic preservation incentives. | High | ROI, Cash Flow |
| Tenant Retention Programs: Offer incentives like lease renewal bonuses or upgrades to retain good tenants. Des Plaines has a competitive rental market, so retaining quality tenants is crucial. | Medium | NOI, Cash Flow |
| Renovate Units: Upgrade units between tenants to increase rent potential and property value. Focus on modernizing kitchens and bathrooms, which are highly valued by renters in Des Plaines. | Medium | NOI, ROI, Rental Yield |
| Engage with Community: Build relationships with local community groups and attend neighborhood meetings to stay informed and involved. Des Plaines has a strong community spirit, and being active can enhance your property's reputation. | Medium | NOI, ROI |
| Monitor Market Conditions: Keep an eye on Des Plaines' real estate market trends to make informed decisions about holding or selling the property. The market can be influenced by factors like proximity to Chicago and local economic conditions. | Medium | ROI, Rental Yield |
| Property Management Services: Hire a reputable property management company with experience in Des Plaines to handle day-to-day operations. Local expertise can be invaluable in managing tenant relations and maintenance. | Medium | NOI, Cash Flow |
| Implement Smart Technology: Install smart home devices like thermostats and security systems to attract tech-savvy tenants and reduce operational costs. This can be particularly appealing in a suburban setting like Des Plaines. | Medium | NOI, Rental Yield |
When you are selling a property
Some tips for when you are selling your property in Des Plaines, Illinois.
| Specific Strategy/Initiative | Impact Potential | Metric(s) Impacted |
|---|---|---|
| Highlight Proximity to O'Hare Airport: Emphasize the property's close distance to O'Hare International Airport, which is a major selling point for frequent travelers and airline employees. | High | ROI, Rental Yield |
| Leverage Access to Public Transit: Market the property's proximity to the Metra train station and other public transit options, making it attractive for commuters to Chicago. | High | ROI, Cash Flow |
| Showcase Local Amenities: Highlight nearby amenities such as the Des Plaines River Trail, local parks, and the Des Plaines Theatre, which can attract families and young professionals. | High | ROI, Rental Yield |
| Engage Local Realtors: Partner with realtors who have a deep understanding of Des Plaines neighborhoods and can effectively market the property to the right buyers. | High | ROI, Cash Flow |
| Highlight School Districts: Emphasize the quality of local school districts, which can be a significant factor for families looking to move to Des Plaines. | Medium | ROI, Rental Yield |
| Compliance with Local Regulations: Ensure all property upgrades and renovations comply with Des Plaines’ building codes and regulations, which can be a selling point. | Medium | ROI, NOI |
| Offer Turnkey Solutions: If selling to investors, provide fully furnished or turnkey solutions, emphasizing the ease of renting out immediately after purchase. | Medium | ROI, Cash Flow |
| Highlight Walkability and Transit Access: Market the property's walkability score and access to public transit, which is highly valued in Des Plaines. | Medium | ROI, Rental Yield |
| Smart Home Features: Advertise any smart home technology installed, such as security systems or smart thermostats, appealing to the tech-savvy market. | Medium | ROI, NOI |
| Professional Photography and Virtual Tours: Use high-quality photos and virtual tours to attract out-of-state or international buyers, a growing market in Des Plaines. | Medium | ROI, Cash Flow |
Buying in Des Plaines, Illinois? Monitor all your performance metrics right from the beginning
To maximize your ROI on your next property investment in Des Plaines, Illinois, it's essential to plan and monitor your performance metrics right from the start. Our comprehensive tool is designed to help you do just that.
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Our spreadsheet provides crucial metrics such as NOI, LTV, cap rate, and net yield, offering precise and accurate calculations. Each input and indicator is clearly explained, making it easy to understand and use, eliminating the need for complex calculations and confusing spreadsheets.
You can run various scenarios by adjusting parameters like interest rates, rental income, and operational costs, allowing you to see how these changes impact your investment. This feature helps you identify hidden risks and opportunities, ensuring you make well-informed decisions.
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Our tool covers everything: NOI, COC, Cap Rate, Gross Yield, Net Yield, LTV, ROI, and numerous other metrics and charts.
