Property taxes after you purchase

11 Replies

I believe that's a jurisdictional issue. Here in Texas, the sell price of properties doesn't get reported or filed with the title transfer. Because they aren't reported (officially...sometimes realtors will submit the sell price to the MLS, but it's unofficial and optional), it makes it a bit more subjective, when calculating comps, but it means your property isn't going to be revalued just because of the sale.

In our county the property gets a revaluation for the new owner. And it does not matter what you pay, they assign a market value that they think is fair. And if I think it's too high, I go talk to them and they ask what the property rents for and then they will calculate a value based on the monthly rent. Therefore I don't agrue too much because if they know the rent it usually means a higher valuation.

I would say in most places the answer is no.  In Baltimore City for example, 1/3 of the city is reassessed every 3 years. So even if you buy for double what it is assessed you taxes may not be affected for up to three years, and maybe not even then. 

If you are trying to evaluate properties based on their tax assessed value, you are doing it wrong. Tax assessments are not a reliable indicator of true market value.

@Roger R. What state is the property in?  This is a state-by-state issue and there are several different methods.  Some states re-assess on purchase, others do not (and when I say "states" I'm not implying that the state is the taxing authority--it's typically the county--but the state typically sets the tax code, with some exceptions).  

Some states don't reassess at all--they just have a starting assessed value and grow it by varying percentages every year (like Arizona and Nevada).  Some reassess only on resale (California for example).  While others reassess every year no matter whether there is a purchase or not (like Texas and many others).  And some have a periodic reassessment--for example they reassess every four years or something similar.

Bottom line is you have to research the rules no matter where you invest.  I fondly remember my hours spent reading over a hundred pages of the Florida tax code to figure out their system...that's the depth of knowledge you'll need in order to even attempt to accurately forecast future property taxes.  And in many cases getting an accurate forecast is very difficult or even impossible to do.

The good news is that you are actually thinking about this.  I'll bet that puts you ahead of 75% of the other investors out there that don't put much thought at all into post-acquisition property taxes and how that effects income.  

Use the tax rate in your calculations. I assume that all my properties will at some point in the future have the taxes raised to correspond to the market value.  

@Jim Cummings that's possible, but not all sold amounts get reported through to what is visible to those of us without realtor access. So, it doesn't really matter than someone has to input it. And, the fact that the sold price isn't attached to the deed isn't affected by what may or may not be contained in the MLS.

@Hattie Dizmond . I was clarifying your statement "officially...sometimes realtors will submit the sell price to the MLS, but it's unofficial and optional),"

Agree - the MLS Sold Data is not transported to any sites without REALTOR access, and does not attach to the deed. But all MLS I've ever belonged to requre you to submit SOLD data and will penalize you (monetarily & could suspend access) if you do not submit the Sold Data

As everyone has already said it depends but you should always be prepared to protest. There are plenty of companies who will do it for you but you can always do it yourself. If they go up the year after you buy for more than you paid you can easily protest yourself, show them the closing docs as well as any pictures of the property (the worse the better) and they will usually lower it to the price you paid since that is the true market value. Not that it always works but most of the time it should. It is free since you do it yourself. 

 When I am doing my estimating I always use the purchase price for year 2 as a way of conservatively estimating. If they don't go up, great, more cash flow. If you turn it over to a company they will automatically protest each year and you pay a percentage of the amount they save you. Just like a lawyer on contingency. Since they represent many clients, the county review boards work with them and are more likely to agree with their valuations. 

One thing that a lot of times gets missed is that the Smith's have lived in this home for 10 years and pay $1000 per year of property taxes.  

Once you buy it and put a renter in it, you might flip out because you won't get the Smith's  home-owner/primary-residence discount and your property taxes can pop up 2x, 3x or some other amount depending on where you buy. 

Roger Roth for this to be a somewhat productive thread you need to post what state the property is in. Tax property laws and processes vary by state and even down to the county and city level for how they assess. So talking in generalities where every area is different doesn't make much sense.

There is an association of attorney property tax professionals. They typically contest taxes all the time for property owners so tend to have some good info on what to expect.