Real estate taxes as a percentage of rental income

[Greg Wilkins]

My rental property is located in Cherry Hill, NJ. It currently rents for $1695/month. The real estate taxes are a shade under 34% of the monthly rent. I feel that this is large percentage. I am curious if anyone else would be willing to share the same information about some of your rental properties. My working theory is that property taxes this high make buy and hold with a decent cash flow difficult unless you find incredible deals and/or minimize leverage. Thank you in advance for any input that you may have.

[James Masotti]

Property taxes in NJ are among the highest in the country, so the percentage of property taxes will be much higher than in other areas. The house next to me was rented for $1400 and the property taxes on it are $4600 a year...so that's also right at 27%. In Camden County though property taxes are higher than here in Gloucester County, and the rents aren't necessarily that much greater.

Cash flow in South Jersey is really hard unless you're making significant down payments to reduce the mortgage payment as a result of the higher property taxes. In NJ I'd say rentals are truly a long term play...you wont cash flow for years...but once you pay things off...you'll have a nice cashflow due to the higher rents.  Of course this doesn't apply nearly as much in places like Camden, Gloucester City, and Trenton, where you can cashflow...but you get all sorts of other headaches.