Hi fellow BPers,
I'm new to real estate investing, and am looking into SFHs as rental properties in the Dallas area. I'm trying to improve my methods for estimating expenses when analyzing deals, and I had a few questions related to property tax.
For example, when I look at a property on Zillow, I might see figures like this:
Why does Zillow show the property tax as the same each of the past 3 years, if the assessment value has risen?
In the MLS listing for this same property, it lists "Unexempt Taxes" as $3,173.
From the county website, I know tax in this area is 2.82%. For this property I see an appraisal value of 148k, so the estimated 2017 tax is listed as $4174.
In general what is the method that you find the most reliable for estimating property tax? I assume it would be the county website, but sometimes I can't find a recent appraisal value to use, so knowing the tax rate doesn't help. In other cases I can see past years tax filings, but the owners sometimes have exemptions that won't apply for me, so I'm not sure how to factor that in.
Appreciate any advice you have to offer!
"In general what is the method that you find the most reliable for estimating property tax?""
[tax rate] x [purchase price], then [/12] for monthly number.
Then call the county and ask how often and how much property taxes are increased. In my county, it's +2%/year.
I believe the changing number your looking at is the tax basis, by which depreciation numbers are determined.
Hi @Eric Lee ,
I can't speak to Texas (I'll leave that to a local), but here the county tax site lists "True" taxes. Which are before any exemptions. So if the taxes were $2055 (Maybe on an outhouse in a field). That would be before STAR exemptions, military exemptions etc. So you would use that number (As an investor odds are you are getting almost no exemptions).
The reason you are seeing the value remain the same is that they do not adjust your taxes every year. Also they change the way they charge taxes which is a real pain. For instance they tax on 100% of value at 2.5% so your taxes are $2500 on a 100K house. Great... I got it.... but wait, next year they passed a change where they only tax on 60% of value..... Excellent... But wait, now they charge 4.1% tax so your effective bill is .... wait for it... yeah 2500. So long story short, I would use the county website here because it is what an investor will be paying.
No need to estimate the property taxes in Texas as most counties have the tax information online. For Dallas county go here
Zillow is also a horrible place to view/evaluate properties in Texas as agents as well as some MLS systems can opt out. Realtor.com is a much better source
Thanks @Greg H. I've also been using the Zillow rent estimator to get ballpark figures for rent, but based on what you said I'm guessing this is also not very reliable in Texas.. Do you have suggestions on the best way to estimate rent? I understand the best method is probably to ask an agent for comps, but I'd still like to know if there's a good way to estimate when reviewing properties on my own, without having to ask an agent about each one.
Hey Eric, for rents, I go to Craigslist or to the Greensheet and look at going rents in my area. Sometimes the MLS can also show you rentals. another way, is to find another house for rent (Zillow has those) to get a quick comp.
For taxes, if your purchase price is less than the current appraisal, you can appeal your taxes and the county will usually lower it to purchase price is you take your HUD 1 form to them
I would suggest that you start your screening process on zillow, for Value and Rent. This gives you a ball park to work with. When you get numbers that look good then get firmer value and rent numbers from the MLS.
You could also try:
- I used to use Lifestyles quest which is pretty good but it is only available to members, Discover is open to all with a trial period, but I have not used it.
- I have not used it but is supposed pulls from the MLS
- I used back in 2009 before Lifestyles quest. It was a bit slow back then and I am unsure how much additional development went into it.
I would use the county tax sites for tax values. Dallas county was really aggressive this year in raising values, Tarrant county was very aggressive last year. I estimate at 2.8% of ARV. I think it is the safest way to estimate taxes. In the past it the tax assessment would stay the same for a few years. Nowadays it seems the appraisal districts are upping assessments every year. The zillow values are usually quite a bit behind the curve. That example you gave is probably a senior exemption. That disappears as soon as you purchase the house.
Assessed value is generally not market value. Never use assessed value for depreciation calculations, instead use the actual cost of the property to determine your depreciation basis.
In my home state/county, I may see a change in the millage rate from year to year while the assessed value of the property only changes once every five years. Even though the assessed value did not change from year to year, the change in millage rates is the reason the property tax amount changes.
Thanks everyone for all the info!
Here's a site I use as well for TX properties. You can also input other zip codes
For that matter, this one projects closing costs in the area
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