Calculating property taxes

3 Replies

Have been going throught TIMI for a few properties. Is there an accurate way to know what property taxes will be if there will be a substantial increase in property value at purchase price? Is it safe to use comparable priced properties that recently sold or do you need to go back a few years? Is the current property tax safe to use during due diligence / multifamily deal analysis. 

Your local tax office will give you the formula that they use. It varies from place to place. Yes, if you pay more than the current tax assessment value for a property the taxes for the following year could increase. Again, if varies. Some places do assessments every year, some every other year, etc. If you pay less than the assessed value, the property taxes should decrease the following year, but not the year that you purchase the property.

When doing your analysis you should always calculate taxes based on the expected purchase price. Most taxing authorities will raise it when there is a sale. If they raise it more than what you paid for it, you should be able to protest the value and submit the required documents proving it is worth that amount only as well as comps if they are substantially lower. However most of the time they won't go lower than the sale price even if there are cheaper comps, they will just raise those in following years. 

The taxing authority will have all of the various taxes published on their website(such as county, hospital, school districts and many others), you just add them up for the ones what apply to that property and multiply it by the sale price. Then protest the value every chance you can to keep them as low as possible. New York (you) and Texas (me) both have relatively high property tax so it is not an expense that should be underestimated. Most cities around me range in the 2.5-2.8% so I just use 3% to be safe. 

One other thing is TIMI the same as PITI? I have never seen TIMI.

@Peter Moser ...its the same thing as far as I can tell, PITI is probably the correct acronym. Thanks for clarifying about the taxes.

@Anthony Dooley thanks for the tip, will look if that formula is online somewhere if not will call a real estate tax accountant. Was wondering if maybe I need to speak with a tax assesor.