Did I overlook this - tax assessment?
Hi All,
I bought a SHR in Philly from a rehabber a few months back for 70,000$. After PITI, PM fee, capex & vacancy reserve, it cash flows around $300 monthly. The property before the rehab was very likely a foreclosure, or run down.
I was thinking today that the tax figure I used in my projections, which is around $750 per year (around 63 a month) (an estimate I pulled from zillow as an estimate, and what I actually ended up paying for the 2015 year when I closed) is based on the old value of the property before it was rehabbed. Now that its rehabbed, the philly city site shows the new purchase price of 70,000$ when you look up the property.
Did i use too conservative of an estimate for the property tax in my projections? Now that the city has recognized a sale, I should be expecting a new tax assessment to reflect the latest sale price of 70,000$ correct? I know the city re-assesses certain neighborhoods once every three years or so, but I think since permits were pulled for my rehab, they will come after the taxes even quicker since they know work was done. Even if permits were not pulled, I would still be expecting a higher tax assessment due to the increased purchase price recorded from the sale correct? So regardless of whether permits were pulled, the sale price would trigger an increased tax assessment, but might have just delayed it a year or two?
I researched what some comps in the area are paying for a comparable house worth 70,000, and the yearly taxes were around 1,000$, nearly a 30-40% increase!! a 30-40% increase wouldn't be so terrible that it eats up all my cash flow, but it does decrease the returns a bit, but the property would still be performing.
If all this is true, this is a pretty well learned lesson!