Mistake I made and now I don’t know what to do

[Luisa Morejon]

I bought an investment  home in Goose Creek, SC in April 2024. After analyzing all the numbers it looked like I would make about $400 in cash flow every month which I did till April 2025. My home was re-evaluated by Berkeley County and it went from an assessed value of $13,600 to $226,600.00 in 1 year!. My taxes went from $900/year to $3495.00. My new mortgage payment went up $300. Leaving me with only $100 cash flow and that’s without accounting for Cap-Ex, Vacancies, and Repairs. I am lost for words and don’t know what I should do now. I can’t increase the rent because the tenant just signed a year lease starting July 1st. I guess my only option is to sell the house next April. I keep hearing that an investment property should be held for 5 years in order to recoup your initial investment. Is this still true? How do I calculate if I would be at a loss if I sell early? Is there a calculator I can use run numbers?  Thank you in advance

[Greg M.]

Mistake #1 was figuring cash flow without accounting for CapEx and vacancies. You never were at $400 cash flow. You just closed your eyes to expenses and pretended they didn't exist.

Mistake #2 was not paying attention to your escrow documents. Every one I've ever received has listed the estimated taxes based on the purchase price. 

Are you sure the $3495 is the annual bill? Perhaps it includes a supplemental tax bill covering the time from sale to end of tax year? I recently closed on a unit and just got at $14K+ supplemental tax bill. If my taxes were escrowed like your, it's likely the bank would adjust payments to cover this supplemental bill in one year plus the higher annual amount going forward. Also, the bill is 1.5% of likely assessed value, which seems extremely high for an area that bills itself as having low property taxes. That makes me wonder if this bill is more than just standard one year property taxes.

Your appeal is probably a waste of time. If you paid $226K, then I assume they assessed the place at $226K. Pretty fair to say that is its value if you paid that. If they assessed higher than $226K, you have a case, but I doubt that it would be so much higher to make a big difference in the overall taxes. 

What you should do now is come up with realistic numbers for everything. Figure out a percentage for CapEx (many say 5%-10% of rent while others say 1% of home value). Come up with a cost to your down payment. If you put $50K down and you could be making 5% interest on it, your cost is $2500 per year. Based on the area, you can come up with an idea of how long tenants stay and how long it takes to re-rent the place, for a vacancy cost. Confirm your annual taxes and insurance. Factor in your (increasing) principal reduction. Factor in conservative property appreciation. Factor in realistic rent increases. Only after you've done this can you start to make a decision on what to do.