I once received a consultation from someone who wanted to prepare rental housing in Arlington Heights for retirement. It's a popular area for Korean families even in the suburbs of Chicago, so the purchase price is quite high. If the goal is to create a steady cash flow after retirement, it's important to look at the cash-on-cash return before the total return.

According to RentCafe, the average rent in Arlington Heights as of June 2026 is $1,980 per month, and the average home value according to the Zillow Home Value Index is about $401,290. Dividing the annual rental income of $23,760 by the purchase price gives a total return of about 5.9 percent.

The effective property tax rate in Cook County is noticeably higher than in other areas, reported to be around 1.9 percent. For a $401,290 home, the property tax alone could be around $7,625 annually. Adding insurance, management fees, maintenance costs, and vacancy losses, applying the 50 percent rule would reduce the net operating income to $11,880, which is half of the rental income, and the cap rate would drop to about 3 percent. If the goal is to have a fixed income after retirement, this cap rate is a number to consider alongside the actual property tax burden.

If purchased with cash without a loan, the cap rate would equal the return, but the situation changes if a loan is utilized. If $120,000 is invested for the down payment and closing costs, and after paying the mortgage principal and interest, if there is an annual pre-tax cash flow of $3,600 left, the cash-on-cash return would be 3 percent. If the goal is to have actual cash coming in monthly after retirement, this cash-on-cash return is closer to a tangible number.

• Total Return = Annual Rental Income ÷ Purchase Price x 100
• Cap Rate = Annual NOI ÷ Purchase Price x 100, reflecting Cook County property taxes
• Cash-on-Cash Return = Annual Pre-Tax Cash Flow ÷ Actual Cash Invested x 100

According to the 1 percent rule, a $401,290 home should rent for $4,013 per month, but the average rent in Arlington Heights of $1,980 falls short of that. However, this area has a high GreatSchools rating due to its preferred school districts for Korean families, and the risk of vacancy is relatively low, but school district boundaries change frequently, so it's advisable to check the assigned school before purchasing. If planning to retire and move from another state, it's important to factor in that the property tax burden in Cook County may be significantly higher than in the previous residence.

In retirement planning, it's necessary to consider not only cash-on-cash returns but also total returns. When factoring in the asset increase from monthly principal repayments, tax benefits from depreciation, and potential capital gains from long-term ownership, the net worth at retirement could be much larger than the cash-on-cash return of 3 percent. However, since property taxes are reassessed annually, it's safer to simulate whether fixed income after retirement can cover the increase in property taxes. Arlington Heights is also worth considering for its proximity to Chicago O'Hare Airport, which broadens the rental demand. The longer the time until retirement, the more time there is for principal repayment and capital gains to accumulate, so there's no need to give up on properties based solely on the current cash-on-cash return number. I advised the person who consulted with me to consider the remaining time until retirement and the loan repayment completion date, and to work backward to see if it's possible to be debt-free at retirement. After the loan is paid off, the cap rate itself becomes the effective return, so re-evaluating the numbers based on the retirement date can provide a much more reassuring picture.

When planning cash flow after retirement, it's more realistic to base it on cap rates and cash-on-cash returns rather than total returns. In areas like Cook County where property taxes are high, this burden should be factored in from the start. This article is not investment or legal advice, and it's recommended to consult with a professional before making any actual contracts.