Is Illinois a good state for rental property investors in 2026?

Not on monthly cash flow. At a 7.03% mortgage rate with 25% down, none of the four Illinois markets we underwrote (Chicago, Peoria, Rockford, Springfield) produced positive cash flow after a property manager, vacancy, and a 1.5% maintenance reserve. Losses ranged from about $720 a month in Peoria to $1,559 in Chicago, so Illinois works only as an appreciation hold.

Why did Peoria go from positive cash flow to a loss?

Our July pass showed Peoria at +$58 a month using a $148,000 price and 6.55% rate. Redfin's August 2026 median is $187,876, the mortgage rate is 7.03%, the county tax rate is 2.62%, insurance is about $253 a month, and we now include a 1.5% maintenance reserve. Those changes add up to roughly a $778 monthly swing.

How high are Illinois property taxes for rental properties?

Very high. Ownwell puts the median effective rate at 2.14% in Cook County, 2.62% in Peoria County, and 2.49% in Winnebago County (Rockford is 2.61%). On a $426,255 Chicago-area purchase, a 2.20% rate is about $781 a month before insurance or the mortgage.

How much rent would a Chicago rental need to break even?

At a $426,255 price, 25% down, and 7.03%, rent would need to reach about $4,464 a month to cover the mortgage, tax, insurance, a property manager, vacancy, and maintenance. Zumper's September 2026 median for a Chicago house is $2,600, so rent would need to rise about 72%.

Illinois Rentals Lose $720 to $1,559 a Month at 7.03%

In July, Peoria was the one Illinois market that made money. Our second pass put it at +$58 a month, a rounding error of a profit but a profit. Today it loses about $720 a month. Nothing broke in Peoria: prices rose 7.4% to $187,876 (Redfin, August 2026), rents held near $1,337, and the city still sells homes in 13 days. The math changed underneath it, and if you own or are eyeing a rental in Illinois, the same change is hitting your spreadsheet. Here's the full picture at Freddie Mac's 7.03% benchmark rate (September 24, 2026), with 25% down, an 8% management fee, one month of vacancy a year, and a 1.5% maintenance reserve. All four Illinois markets we checked lose money every month, from about $720 in Peoria to about $1,559 in Chicago. Infographic showing Peoria Illinois rental cash flow at a 7.03 percent mortgage rate, with a net monthly loss of about 720 dollars

Rockford is the hottest market in America and still loses $1,095 a month

Rock River Current reported in September that Rockford ranked as the nation's hottest housing market in August 2026, based on views per property and sales velocity. The three-month rolling average sale price hit $255,283, the second-highest on record, with 382 homes sold and 18 days on market (Rock River Current, September 2026). Inventory doubled from 215 to 423 homes year over year, which is the first crack in the tight-supply story. Rents are catching up fast: Zumper's September 2026 data shows Rockford's median rent up 20% year over year, with houses at $1,550. That's real momentum. It still isn't enough. On a $255,283 purchase, the loan is $191,462, principal and interest run $1,278, tax at Rockford's 2.61% rate adds $555, and insurance adds $240. Add the manager, vacancy, and reserve, and you lose about $1,095 a month. Break-even rent is about $2,859, which is 84% above today's $1,550. The lesson for your decision: a hot market and a good rental are different things. Speed of sale tells you what buyers will pay. It says nothing about whether tenants can cover what the buyer paid.

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Peoria: a $778 swing in three months

Peoria makes the cleanest before-and-after case because every input is documented. In our July 20 pass the model used a $148,000 price, $1,350 rent, a 2.24% tax rate, low insurance, and 6.55%. Re-running it one variable at a time shows where the money went.

What changed since July (Peoria, monthly)	Effect on cash flow
Price rose from $148,000 to $187,876	-$264
Maintenance reserve added (1.5% of price a year)	-$235
Insurance re-priced at $253 a month (MoneyGeek, 2026)	-$163
County tax rate moved from 2.24% to 2.62% (Ownwell)	-$59
Mortgage rate rose from 6.55% to 7.03%	-$45
Rent slipped from $1,350 to $1,337	-$11
Total swing from +$58 to about -$720	-$778

The surprise is the ranking. The interest rate, which dominates every headline, explains only $45 of the $778. Price and the reserve explain nearly two-thirds. If you're modeling a rental off last spring's rate sensitivity, you're watching the wrong dial. One caution on insurance: MoneyGeek's Illinois figures use a standard $250,000 dwelling profile, which overstates coverage on a $188,000 home. A cheaper policy would trim the loss, though even removing the entire $163 insurance change leaves Peoria about $557 negative. If you're underwriting anything in Illinois, rebuild your sheet with a maintenance line and a current insurance quote first, because those two items moved more than the rate did.

Chicago: 9.3% price growth and a $1,559 monthly loss

Chicago's Redfin median hit $426,255 in August 2026, up 9.3% year over year, with 49.3% of homes selling above list and 49 days on market. S&P Cotality Case-Shiller separately showed Chicago leading every tracked metro at 6.9% in July (S&P Cotality, September 29, 2026). The appreciation is real. The rental math is the problem. At a 2.20% tax rate, the tax alone is $781 a month. The loan is $319,691, principal and interest run $2,133, and insurance adds $287 (MoneyGeek's Chicago figure of $3,445 a year). Against Zumper's $2,600 median for houses, DSCR (rent divided by the mortgage, tax, and insurance payment) is 0.81, and net cash flow after the manager, vacancy, and reserve is about -$1,559. Break-even rent is about $4,464. There's an honest sensitivity here. Ownwell lists Chicago proper at a 1.66% effective rate versus 2.14% for Cook County overall. At 1.66%, tax drops to about $590 a month and the loss improves to about $1,367. Better, still deeply negative. Cook County's own numbers show why you shouldn't count on relief: local governments requested $743.8 million more for 2025 taxes, a 3.9% increase that outran 3.1% inflation, with the north and northwest suburbs up 6.4% (Cook County Treasurer, 2026). If you're eyeing Chicago for its appreciation, price the tax at your actual district's rate and treat any successful appeal as upside, never as a base case.

Springfield and the four-market comparison

Springfield's numbers come with a mismatch. The $203,878 median is a January to June figure (Capitol City Now, August 2026), up 7.2%, while the others are August readings. Rent is $1,250 for a three-bedroom (Zumper, September 2026), and the 2.41% Sangamon County rate carries forward from July. Result: about -$894 a month.

Market	Price	Rent	DSCR	Net cash flow	Break-even rent
Chicago	$426,255	$2,600	0.81	-$1,559	$4,464
Rockford	$255,283	$1,550	0.75	-$1,095	$2,859
Springfield	$203,878	$1,250	0.74	-$894	$2,318
Peoria	$187,876	$1,337	0.83	-$720	$2,197

The cheapest market loses the least in dollars, but no Illinois market comes close to break-even. Rents would need to rise 64% in Peoria, 72% in Chicago, 84% in Rockford, and 85% in Springfield to cover every line item. If you're choosing among these four, the useful question is which one you can afford to hold at a loss, not which one earns a profit.

The tax and insurance trap behind Illinois' numbers

Illinois' effective property tax rate is 2.07% statewide, the second highest in the country (Tax Foundation, 2026), and three of our four markets sit between 2.4% and 2.6%. Insurance is moving the same direction. Illinois premiums rose 14.1% in 2025, the fourth-largest increase nationally, and are up 68% since 2020, with 2026 already at a record 161 confirmed tornadoes (CBS Chicago, 2026). MoneyGeek's 2026 city figures run from $2,874 a year in Rockford to $3,445 in Chicago. Tax and insurance together consume $663 of Peoria's $1,337 monthly rent, about half, before you've made a single mortgage payment. In Chicago the same two lines take $1,068 of a $2,600 rent, or 41%. Those percentages are why a lower price or a slightly lower rate can't fix the model on its own: the two biggest recurring costs are set by county levies and insurers, not by your lender. Ask for both numbers on the actual address before you fall in love with a price.

What this means for you

If you're weighing an Illinois rental, underwrite it as an appreciation hold and budget for a monthly loss of roughly $720 to $1,559 at today's rate. Peoria and Springfield lose the least in dollars, so if you're determined to buy here, start with them and bring a rent comparable that supports at least $2,200 to $2,300, which nobody is currently getting. If you already own in Illinois, protest your assessment every cycle and shop your insurance every renewal, since those two lines moved more than the mortgage rate did. Before you make any offer, pull the seller's actual tax bill, get a written insurance quote on the specific address, and price the reserve at 1.5% of the purchase price. Those three steps take a weekend and would have caught every number in this article. If your plan depends on Chicago's 9.3% appreciation continuing, run the numbers on holding cost: at a $1,559 monthly loss you'd burn about $18,700 a year in negative cash flow, which means the property has to appreciate roughly 4.4% just to cover its own carrying loss, before any return. Rates could fall, and if they do the loss narrows, but not by much. Dropping the mortgage rate from 7.03% to 6.00% would recover only about $95 a month in Peoria and about $217 in Chicago. Even a 4% mortgage would recover about $607 a month in Chicago, which still leaves the deal about $950 a month negative.