Downtown Chicago, IL. Richard Cavalleri/Shutterstock “Real Estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” – Franklin D. Roosevelt, US President.

That is quite the statement. I believe, as do many Americans, that real estate is one of the best investment vehicles to preserve and grow wealth. I am a commercial real estate broker and have worked in Chicago Land for 10 years, representing many buyers and tenants. However, now more than ever, buyers must keep a close eye on the rising real estate taxes. While according to FDR “real estate cannot be lost or stolen, nor can it be carried away” Cook County, through tax increases, could significantly erode equity for many property owners.

The second installment of property tax bills have recently come out in Cook County. Since real estate taxes are paid in arrears, the bills being paid in 2016 are the taxes from 2015. Cook County has had serious budget issues and, along with Chicago, is running out of money and accruing bills it can’t pay. These challenges, combined with Illinois’s budget crisis, have created a perfect storm for property owners and tenants across Cook County.

While the county attempted to warn the citizens that there would be an increase of possibly 10-12% in their real estate tax bills, owners were not prepared for the harsh reality when they opened the envelopes. A client of mine purchased a property for $900,000 in 2015 and put down $100,000. He just received his new tax bill and his taxes increased 70% from last year. His real estate taxes went from $42,000 per year to $72,000 per year. How? Why? Where does the county think everyone is going to get the money? Can owners afford to pay more? Can tenants afford to have this expense passed on to them?

In my client’s example, that additional $30,000 in new annual tax expense could cover $600,000 per year in debt service. This increase in taxes is equivalent to the bank tacking on another $600,000 to the mortgage.

Let’s look at the ratio of his old monthly payment versus the new:

Old Monthly Expenses (excluding insurance and maintenance)

$800,000 mortgage at 4.5% on a 20 year amortization: $3,333.33 per month

$42,000 tax bill: $3,500.00 per month

Total Monthly Payment: $6,833.33 per month

Mortgage Payment (debt service) 49% of payment

Real Estate Taxes 51% of payment

New Monthly Expense (excluding insurance and maintenance)

$800,000 mortgage at 4.5% on a 20 year amortization: $3,333.33 per month

$72,000 tax bill: $6,000.00 per month

Total Monthly Payment: $9,333.33 per month

Mortgage Payment (debt service) 36% of payment

Real Estate Taxes 64% of payment

Nearly two-thirds of my client’s monthly cost of occupancy is real estate taxes.

Let’s say, for example, that instead of my client using this warehouse for his business, he leased it to a tenant as an investment on a gross basis. Let’s say, with his debt service and real estate taxes at $6,833.33 per month, he leased it to the tenant for $8,500.00 per month gross, leaving roughly $1,667.00 per month in net income. That equates to a $20,000.00 net profit per year. Not too bad for only putting down $100,000.00 in cash, eh?

Now the new taxes come out. The tenant’s rent doesn’t change. He has a lease for 5 years. My client would go from making $1,667.00 per month to losing $833.33 per month. He would go from making $20,000.00 per year to losing $10,000.00 per year.

Rahm Emanuel, the mayor of Chicago. Kevin Lamarque/Reuters

Did that property become more valuable or less valuable? I think we can all confidently say that the property is now less valuable. There is an increased cost of occupancy with no corresponding increase to utility or amenity. The free market will discount the property accordingly. In this particular case, the discount would likely be significant.

Think about that. Let that sink in. In addition to a $100,000 down payment and losing $10,000 per year in negative cash flow, the overall value of the asset has decreased, and possibly to the point where there is negative equity!

Some may not feel too much sympathy for my client in the above example, being a successful business owner who had $100,000 in cash to begin with. Maybe he will just have to take a few less vacations and trade his Porsche in for a Honda.

Wait a minute; let’s change the narrative. What if instead of a successful business owner, this was an elderly couple that owned an apartment building. In addition to their fixed income, they counted on that $20,000 per year net profit to supplement their retirement. Now they go from having their fixed income plus $20,000 per year to having their fixed income minus $10,000 per year. What if that couple was your parents? Grandparents?

THAT is what Cook County is doing to its citizens. Believe me, this narrative will become all too common and many people who worked their entire lives to build equity and live the “American Dream” will be faced with tragic loss of income and equity. For what? Bloated government salaries? Waste? Corruption?

We as citizens need to hold our elected officials accountable. Government spending cannot go on unchecked and unquestioned.

The government, after having spent all the money we have given them, cannot come back and take more out of our wallets when we aren’t looking. Call it what you like, but these tax increases are just that.

Business Insider has reviewed the property tax bill that is discussed in this article.