As I'm gearing up for lease renewals this spring, I'm looking at current market rents and calculating the increase in property taxes. 2020 rental rates, for a SFHs, are around 7% - 11% less than current rates. Not only are rents increasing, but property taxes are sure to increase this year as well. I used the Property Tax Calculator on bernco.gov and found that based on my current estimates of my properties, my taxes will go up by as much as $1,100 - $1,200/yr. per property. It seems drastic to increase rents by $100/mo to offset the increase in taxes, however, that amount is still less than the 10% max increase allowed by landlords in NM. I have amazing tenants that I want to continue renting with me, but I will also have increased expenses. There are many different schools of thought when it comes to rent increases, which is why I'm coming here to ask you how you plan to handle this with your own tenants.
So, I have not seen any significant tax increases on my MF for the last 3 years. The one time we had a major increase on a 4-plex we were able to contest it and bring it back down.
I would wait until you get the notice of value before making any major moves on rent.
@Jens Nielsen - thank you for your response. What was your experience like when you contested?
I could be incorrect Kristen, but I was under the impression that the city can only raise your taxes by a fixed percentage each year regardless of its market value. The exception to that would be if you did something that allowed them to reassess at its current value like transferring it to an llc. If you own small multis or houses then $1000 - $1200 per property would be a double digit increase which again I don’t believe they can do. You should certainly consider contesting like @Jens Nielsen mentioned or consulting an attorney. If someone reads this and I’m incorrect about there being a cap on how much they can raise the assessment in a year let me know please.
@Patrick Torres - thank you for your reply. I believe you are correct - there is a limit on what the taxes can be capped at. Although, I'm unsure of what the limit is. Maybe 3%?
In 2017, I purchased a SFH and saw a 15.9% increase in my property taxes in 2018 on that property. I should probably have contested it, but I was new to investing.
In 2020, I purchased multiple SFH. These homes will likely be taxed at full market value since there is new ownership and therefore, a change has occurred. These are the properties I am most concerned with the increase in property taxes. I will wait to see what each of the Notice of Values say as @Jens Nielsen recommended. Unfortunately, I have one renewal coming up before the Treasurer sends them out. So for that home, I don't know what to do.
I had my PM (T&C Mgmt) contest the tax increase. They charged me 1/3 of the amount I saved in year 1.
Worth it for me.
But @Kirsten Marino I would see what the market can support in terms of the rental increase. If the market can support a $100 increase, then go for it.
@Jens Nielsen - The market can absolutely support the increase. The question is if I want to increase my current tenants' rent. Thanks for the feedback.
There are several companies in town that will offer the contesting service for 1/3 of the savings. It is a no brainer, especially when you own more property.
Don't let the tax tail wag the dog when it comes to rent increases. It is a business decision. The question I would be asking is are these good tenants? Do they pay on time? Do they take care of the property? What is the rate they would pay if they had to move?
Not an easy decision! Good luck!
Tenants expect rent increases each year so don’t disappoint them !
@Dennis Wayne - :) Thanks for the laugh!