Property taxes - the Cash Flow Killer

[Eleena de Lisser]

When buying real estate, how much of a percentage cushion, if any, do you put in your estimates for property taxes? Yes, I know an investor looks at the current property tax rate for a locality, but I'm wondering if experienced investors add, for example, X% extra to cover increases in inflation, new county/city wide assessments, etc.

I live in Philly which last year did a reassessment of entire city. The property taxes on my personal residence jumped 35% this year. I shudder to think what an increase like that would do to rental property cash flow.

Would love to hear from seasoned real estate investors in the Northeast and other high property tax markets about how they deal with/budget for property tax spikes. Thank you.

[Account Closed]

Did you challenge your assessments? On every property I have, each time it gets assessed I challenge them.

Then you have this knowledge, if your taxes went up, so did all the properties around there meaning all rents would have to follow typically. So you can raise your rent to cover it. If it impacts you, it should, in theory, impact every other property.

But again, always ALWAYS challenge your assessments.