Property Taxes Tripple?

Question

When I bought my primary residence, the property taxes went from $1,200 to $3,600 a year. The sellers were elderly and had owned it for twenty or thirty years. I wasn’t prepared and it was quite a shock. I’m looking to buy my first rental property which coincidentally has been owned by the same folks for twenty or thirty years and is also about $1,200 a year in property taxes.

I called the Champaign County Assessor’s office to inquire about a possible change and the clerk who answered said that there were no exemptions in place that would discount the tax amount and that it shouldn’t change. She seemed annoyed and I’m not sure if it was because I was asking such a dumb question or that crabby is just her everyday thing. Regardless, I feel some doubt and am looking for someone to share their experience.

So how worried do I need to be?

Connie Bhimireddy · Answer

Sorry to hear this, however,  it's very common for them to go up if there hasn't been a recent sale and your county/city office doesn't do regular assessments/updates. Some towns/cities I've lived/owned in you can appeal, some it's just based on sale price and there is no appeal process. Keep calling to ask someone else, or better yet: put on your working class outfit (not you investor/know it all clothes!) and go VISIT the office to try to appeal to their better angels.

This sort of thing does happen though. Believe it or not, here in Morgantown proper if you rent the home, it's even reclassified and Doubles(!) to discourage rentals/investors (there's even owner-occupied deed restrictions here...talk about doing your due diligence!).

Anyway, Very sorry to hear it TRIPLED. But I've got my fingers crossed for you...Keep us posted, ok!?

Mike Huang · Answer

I'm curious, how much is the property assessment as per the county versus the market value? Often times the county uses a sale as a reason to increase the property tax because they don't want to be undervaluing a property for tax purposes.

Jerry Ellis · Answer

Thanks @Shawn Q. and everyone for all the advice. If I can get off work early enough, I'm going to swing by the assessor's office. I'll report back what I learn.

In the meantime, if anyone has anything to add I'm all ears.

Thanks!

Jeff B. · Answer

It's VERY common that rentals have no exemptions and the sale of a residence then placed into rental service invokes a new tax assessment and the current rates at the time of the sale.

In California, the property tax rate is composed  of three types of levies: general tax levy, voter approved bond  indebtedness repayment, and special district assessments. The general  tax levy was frozen by Proposition 13 at 1 percent of assessed property value (which is always the sales price).

Joel Owens · Answer

You can talk to a local property tax attorney over the phone and they generally appeal many cases. They might have a good feel for what might occur based on how past cases went locally where the property was located.

Masroor Ahmed · Answer

Hey Jerry, I'm not an expert on how this is calculated, but that bottom right market valuation of $35K is what Champaign County has your assessed market value at.  If you buy it at anywhere near the list price, it seems there would be a true up much like you experienced before. I actually own an apartment building in Champaign county and experienced the reverse.  The person before me had overpaid years before and that market value/assessment was $100K over my purchase price.  I contested right after I bought my place and taxes & assessed value decreased and reflected my purchase price. Hope that helps.

Adam Christopher Zaleski · Answer

Every county is going to have an appeal process. However, you need a good reason why you want it lowered. If it's a one time thing to get them lowered, you could hire a lawyer.

I'm originally from a very high property tax area north of Chicago. Lawyers get a lot of business fighting county property taxes.

Jerry Ellis · Answer

It's possible that I was given correct information by the Assessor's office in that it shouldn't go up. I feel like now I have to widen the margins for my property selection(s) though. That is to say that I feel like I now need a rental that cash flows exceptionally well in order to cover the tax increase possibility.

I've read statements from some who among other things shoot for $100 a door. It's not too hard to find those but it might be a while to find one that pays $150 or $200. Or, am I wrong?

Property Taxes Tripple?

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