Does it make sense to pay off LID early? (Vegas area)

Question

Has anyone ever done an analysis to determine if it is financially beneficial to pay off an LID (Local Improvement District) assessment early?  Or does anyone know how to find out the interest rate I'm paying on the LID?  I know LIDs probably aren't common in all areas of the country, but they are in the Vegas area and I don't find it easy to get information.

For the record....I always factored this cost into my calculations and still liked the "big picture" as far as cash flow.   But if I'm paying 8.5% interest or something, I'd like to know.  It may be sensible to retire this debt prior to paying off our HELOC.  Another concern is, it also seems impossible to get a straight answer on whether LIDs are deductible for rental properties; it is clear you cannot deduct them as a property tax if it's a primary residence, not sure about on an investment.

Dan Mumm · Answer

Hi @Jim David, this is a very good question I have also wondered myself. I live, invest, and work in LV as a Realtor and I wasn't clear on if they were deductible or not, but from the opinions I've gathered from local CPA's, it seems they are NOT tax deductible. That's the determining factor for me to get rid of them, personally. It depends on how skinny your capital/reserves are though.

Jay Hinrichs · Answer

OK I have only done them in CA.. and in that state they are on the tax statement..   good luck with it..

I wonder though if you don't pay for it and they foreclose I wonder if they are super liens and come ahead of the bank or junior.. in CA they are ahead of the bank.

Jim D. · Answer

@Jay Hinrichs

Very interesting background, thanks!  However I will add that the LIDs are no longer in the tax bill nor attached to any tax bill, at least not in this location in Henderson.  This is what adds to the inconvenience of this thing - it's all outsourced to some LID collections group with a terrible web page.  So it's just another bill you have to look out for and remember to pay...doesn't come with the taxes, easy-to-overlook generic envelope, no autopay options, etc.

So it's more like a debt to me and it was good to find out (and have confirmation) that we can pay it off....which is sounding better and better as I type....

Jay Hinrichs · Answer

as one who has created a few LID's in the past as a developer.. we did those through different types of Bonds which are then attached to your tax bill .. in CA they are mello Roos  1915 act.. etc etc.. these have to do with selling in the secondary market and if the county backs them or not if the owner does not pay.

Any way way back in the day these bonds were written at 8 to 12% interest.. yield for the note investors..  these are muni bonds you can by from your stock broker.. some of them are double tax free although that does not matter in NV with no state income tax but in CA they can be a hot commodity. for investors.

But yes U can pay them off if you wish.. not many do since its in their tax bill .

Bill B. · Answer

Yup. I hate owing money and love cash flow. I paid off our cars even though paying extra towards the mortgages would have been a SLIGHTLY better option. Gave us an extra $700/mo.

Jim D. · Answer

@Bill Brandt

Thank you for your response.  I was finally able to dig out an old bill (they only send 'em twice a year) and get the website where I can see payoff amount ($9k) and how long these semi-annual payments last.  Initial analysis inclines me to pay it off, but I'll sleep on it and run numbers again. In general, my wife and I are at a point cash flow is more important to us, so as you pointed out that's a consideration too.  Not to mention general simplification....that LID just feels like another debt when I could just knock it out and just have the HELOC.  Or I suppose I could pay it off with the HELOC and consolidate...if the numbers work of course.

Bill B. · Answer

@Jim David

Hey Jim, my only experience lids was a short sale I bought in Aliante. It had a $10k lid/Sid  so I checked the box on the purchase agreement that said seller will pay any sids/lids. AND THE BANK PAID IT OFF!

Anyway, you should be able to get a current payoff amount and then use an amortization app to determine the effective interest rate.

Yes you can write them off on rentals so you’re really paying a 10-20% less interest but it’s a cashflow item as well.

Does it make sense to pay off LID early? (Vegas area)

Most Popular Reply