What are property taxes?

Question

I've been hearing the phrase "property taxes" a lot ever since I started learning about real estate, and how it's important to account for property taxes when calculating monthly expenses for a property.

But what are property taxes? Why do they exist? How do you calculate property taxes? And how often do you have to pay property taxes?

Theresa Harris · Answer

Property taxes are critical to account for.  As Joe mentioned they are based on the assessed value of the property.  Where I am they can be as much as 1% of the value of the property.  They are what the city uses to keep things running-schools, roads, etc.  They vary depending on where you live.  For some of my places in one province they are about 1% of the assessed value of the home and in another they are closer to 0.5%.  I don't have mine included in the mortgages as once the bank paid the wrong amount, so each June I pay them.  They range from $1300-$3300.

Joe Splitrock · Answer

Property taxes are paid locally based on property value. Property taxes are based on city, count or state assessment of property value. Every state has different taxes. If you get a mortgage on a property, usually the mortgage company pays your taxes and insurance. In that case your monthly payment has four parts:

Principal

Interest

Taxes

Insurance