Like Texas, Florida 

You get bigger returns when analyzing two deals with same cap rate with one in FL the other in NY? 

Right? 

You will find in TX that they have much higher property taxes, around 1.86% vs national avg of 1.19%. Everyone complains about CA I come tax (myself included) but property taxes are low at an avg .79%. 

I’ve found ALL other factors have to be equal for the taxes to be the deciding factor. Hope that is helpful!

@Ethan Smith It depends on where you live. If you live in NJ and invest in Florida, you will pay NJ state income tax on all income.

Where you live is more important than where you invest.

Dont make investment decisions based on income tax, base them on income

This is one factor.   For most investors even in NY, they donot pay tax after deductions    

I bet state tax for capital gain varies a lot. 

As an investor, you could live in a low tax state to save tax. 

@Ethan Smith Obviously if you pay income tax, and I don't, I get to keep more of my money! That doesn't necessarily mean I make "bigger returns" on my rental properties though. Also, if you live in New York, it does not matter whether you buy property in NY or FL, all of your income will be taxed by NY even if you own property in FL. If you moved to Florida, you would not pay state income tax on your Florida OR New York properties. (Now you know why a lot of investors move to states without income tax.)

I like using examples:

Let's assume you are single and your state has a 5% income tax rate with a $10,000 exemption. You make $10,000 a year from your rental properties (with a 8% cap rate). You owe $0 in income tax to your state.

Now let's assume you have a job, or are self employed and you make $20,000 a year (taxable). You still make another $10,000 a year from your rental properties (with 8% cap rate). You now owe $1,000 in income tax to your state.

Now you move to Florida, you get married, and you and your wife make $100,000 (taxable). You still make another $10,000 a year from your rental properties (with 8% cap rate). You now owe $0 in income tax to the state of Florida.

Same rental properties, same cap rate, same person, different life situations. Your cap rate is still 8%. Nothing has changed with your investment.

I hope that makes sense...

Originally posted by @Steve Hall :

@Ethan Smith Obviously if you pay income tax, and I don't, I get to keep more of my money! That doesn't necessarily mean I make "bigger returns" on my rental properties though. Also, if you live in New York, it does not matter whether you buy property in NY or FL, all of your income will be taxed by NY even if you own property in FL. If you moved to Florida, you would not pay state income tax on your Florida OR New York properties. (Now you know why a lot of investors live in Florida! We weren't born here...)

I like using examples:

Let's assume you are single and your state has a 5% income tax rate with a $10,000 exemption. You make $10,000 a year from your rental properties (with a 8% cap rate). You owe $0 in income tax to your state.

Now let's assume you have a job, or are self employed and you make $20,000 a year (taxable). You still make another $10,000 a year from your rental properties (with 8% cap rate). You now owe $1,000 in income tax to your state.

Now you move to Florida, you get married, and you and your wife make $100,000 (taxable). You still make another $10,000 a year from your rental properties (with 8% cap rate). You now owe $0 in income tax to the state of Florida.

Same rental properties, same cap rate, same person, different life situations. Your cap rate is still 8%. Nothing has changed with your investment.

I hope that makes sense...

Sounds like I am moving to Florida!

I am not ready to move to tx/fl for now. 

PA is the choice , DUE TO lower tax and cost than nj/ny , but still close to NYC. 

@Kyle Longacre where in CA are the property taxes that low? 0.79%, I’ve never seen that or anything close to it.

Here in Oakland, it’s 1.36% PLUS special assessments (bonds and measures that have passed over the last 20 years) so my average is around 1.8%. In SF it’s around 1.14% plus assessments.

You said average is .79% so that means in some cities it’s lower than that. Where? You’re in the OC, I don’t think any city down there would purposely charge less than 1%, which is what Prop 13 instituted.

0.79% on an$800k property is still a higher tax than 1.86% on an equivalent property in Texas because that place might only cost $300k, so not sure that property taxes in CA are really lower.

For property tax, Nj is the highest.  Income/ sales tax higher than most states.  

And rent is just average nationwide.   And average 2-family sells for $500k.  

Go compare with other states. 

@Ethan Smith

Washington State as doesn't have its own tax.

Originally posted by Account Closed:

@Kyle Longacre where in CA are the property taxes that low? 0.79%, I’ve never seen that or anything close to it.

Here in Oakland, it’s 1.36% PLUS special assessments (bonds and measures that have passed over the last 20 years) so my average is around 1.8%. In SF it’s around 1.14% plus assessments.

You said average is .79% so that means in some cities it’s lower than that. Where? You’re in the OC, I don’t think any city down there would purposely charge less than 1%, which is what Prop 13 instituted.

 Happy to be corrected or shown my data is dated but from what I understand prop 13 limits prop taxes in CA to 1% and annual increases not to exceed 2%, not including assessments as you mentioned or Mello-Roos etc. Prop 13 didn’t mandate that 1% is a minimum. 

On the county level, Butte, Colusa, Glenn, Humboldt and several others all fall below .75% before any additional local taxes and assessments. Here I live in OC the tax rate is .69% and after assessments I am sitting at 1.04%. CA is ranked +- 36th out of all states for the lowest prop taxes. 

Originally posted by @Kyle Longacre :

Originally posted by @Saj Shah:

@Kyle Longacre where in CA are the property taxes that low? 0.79%, I’ve never seen that or anything close to it.

Here in Oakland, it’s 1.36% PLUS special assessments (bonds and measures that have passed over the last 20 years) so my average is around 1.8%. In SF it’s around 1.14% plus assessments.

You said average is .79% so that means in some cities it’s lower than that. Where? You’re in the OC, I don’t think any city down there would purposely charge less than 1%, which is what Prop 13 instituted.

 Happy to be corrected or shown my data is dated but from what I understand prop 13 limits prop taxes in CA to 1% and annual increases not to exceed 2%, not including assessments as you mentioned or Mello-Roos etc. Prop 13 didn’t mandate that 1% is a minimum. 

On the county level, Butte, Colusa, Glenn, Humboldt and several others all fall below .75% before any additional local taxes and assessments. Here I live in OC the tax rate is .69% and after assessments I am sitting at 1.04%. CA is ranked +- 36th out of all states for the lowest prop taxes. 

 Totally agree with everything you said - I didn’t think there was a 1% minimum but thought most counties would charge that rate since they were capped at the 2% annual increase. Never thought that tax crazy CA would charge less than they could legally be allowed to, but the counties you listed all lean to the right so I could see the reasoning. 

Up here in the communist republic of the Bay Area, they tax tax tax and find more ways to stick it to ya every year. In Oakland it’s 1% to Alameda County and another .36% to Oakland. Plus another $2000/year in special assessments for SFRs, $2500 for 4plexes, and another $250/unit or so for bigger properties. One special assessment that narrowly failed last year (measure AA) would’ve added another $150/unit/year, for the next 30 years. 

Nevada has no state income tax, low property taxes, landlord friendly, and important and often overlooked no weather related expenses. 

Every property tax bill I've ever seen in California DOES charge the 1% rate. However it's 1% of an assessment that's often well below market value. Prices in California have risen a lot faster than 2% a year, meaning that the prop 13 assessment usually lags far below market value, making the EFFECTIVE tax rate lower than 1%. However, the RATE is still 1%. Regardless of what the gentleman above said, the "basic levy rate" in Orange County is 1%.

Every property tax bill I've ever seen in California DOES charge the 1% rate. However it's 1% of an assessment that's often well below market value. Prices in California have risen a lot faster than 2% a year, meaning that the prop 13 assessment usually lags far below market value, making the EFFECTIVE tax rate lower than 1%. However, the RATE is still 1%. Regardless of what the gentleman above said, the "basic levy rate" in Orange County is 1%.

How is the cap rate and per unit price ?  


Lots of people move to nv? 


Originally posted by @Bill Brandt :

Nevada has no state income tax, low property taxes, landlord friendly, and important and often overlooked no weather related expenses. 

NV leads nation in rent increases, population growth, job growth, price appreciation and personal income. 

(Population and job growth are helped by being a small state and price appreciation is helped by just now reaching 2008 prices, but they’re still real percent increases.)

You’re probably lucky to get 1/2% of purchase price to rent ratio at today’s prices, but units fill very fast are mostly less than 10 years old, have stucco siding, tile roofs and lack grass. 

I lived in Ca for 30 years-13% state income tax-moved to Wa in 2017 0% state income tax. I could have bought a nice house in Wa with the capital gains tax I paid in Ca. Fortunately some were in a 1031x that I rolled into Wa properties with no tax! 

In Ca if you held properties for a long time your property taxes became low compared to property values due to appreciation. 

I thought my happiest day was when I moved to Ca-wrong; second happiest. Happiest was when I left in 2017. It was a wonderful place to live and raise a family, but also a great place to leave! LOL

I am with Saj here.  I am in Novato / San Rafael.  Property taxes are about 2% or so.  I have never heard of less than 1% in this area.  Property taxes in the part of CA that I am in are sky high.  

@Andrew Angerer

Sounds like I am moving to Florida!

 Why you'd move from Ohio - rental income (sch.E) and any small business (sch.C) has no state tax. 

Pretty good place to do business 

@Jason D. I bet you can form an llc in Florida that would pay Florida income tax. The 0% we have here😃. Side note, I’m moving to the Tampa st Pete area in 4 months for college. Any areas I should look at for housing or avoid? I’ve only been once so I don’t know the area well.

Before everybody packs their stuff and start the ride to Florida, let me give you an example of things that are extremely expensive down here:
1. Health insurance is very expensive here. More expensive than most states.

2. Car Insurance is the #2 most expensive in the country, just right after New York.

3. Property insurance is very expensive here. We have hurricanes and tornados right ?

@Ryan Bianchi I dont know if that would work, because an LLC is a pass through entity for tax purposes.

I'm not terribly familiar with Tampa, but as far as St. Pete goes, theres really only a small pocket that would shy away from. Great for investing, but a little ro8gh around the edges

@Ryan Bianchi If you're going to USF, the area around University Mall as well as parts of Temple Terrace can be a bit sketchy. Other than that, most of the area around USF is fine.