Property Taxes Can Make or Break a Deal

[William Thompson]

One of the biggest things investors overlook when evaluating a property is property taxes.

That’s a mistake.

Property taxes can have a major impact on your cash flow, and in some cases, they can be the difference between a good deal and a bad one.

When I look at a property, I do not just want to know what the taxes are today. I want to know whether the property was recently reassessed, whether it is likely to be reassessed after the sale, and what those taxes could look like going forward.

Because if you underwrite the deal using the current tax bill and that number jumps later, your numbers can fall apart fast.

A lot of investors focus on rent, interest rate, and repairs, but property taxes deserve just as much attention.

Curious how many investors here have seen a deal look good at first, then completely change once the property tax picture became clear?

[Jay Hinrichs]

Quote from @Steve Garthe:

I completely agree. One area I see investors overlook is not just current property taxes, but what happens after a major renovation, new construction project, or subdivision.

Many investors build their projections using today's tax bill without considering a future reassessment based on the property's improved value. That can materially impact cash flow, debt service coverage, and overall returns.

I've also seen taxes become a bigger issue in development projects where timelines extend longer than expected and carrying costs continue to accumulate.

Property taxes may not be the most exciting line item in an underwriting model, but they can definitely have a meaningful impact on the final outcome of a deal.

Have you found certain states or counties where reassessment catches investors by surprise more often than others?

the other one is when out of area investors buy in states that have owner occ exemption they check tax rolls run their numbers based on current tax only to find out when its non owner occ taxs go up double or triple . and of course sellers dont generally educate buyers on this fact.