Real Estate Broker · St. Thomas, USVI · Member since 2019 · 33 posts · 26 votes
Hello all, I'm looking at multi-family in Huntsville and having a hard time underwriting the property taxes. The appraised values are much lower than our purchase price. If appraised value is adjusted to purchase price we will see nearly a 3x increase in property taxes. Seeking any insights or a recommended tax consultant to assist with this matter as the increased taxes may kill the deal.
Your spot on. Madison is a hot spot for investors but also have exceptionally high property taxes. I use the link below to help determine the tax strategy. AL does have a homestead exemption if you live on the property. Are you willing to house hack?
Your spot on. Madison is a hot spot for investors but also have exceptionally high property taxes. I use the link below to help determine the tax strategy. AL does have a homestead exemption if you live on the property. Are you willing to house hack?
Have you been able to use the homestead exemption on multi-family property. I was under the impression it was only for single family homes. I'm house hacking a duplex in huntsville.
From the link
Homestead Exemption Policy
One can be granted a homestead exemption if the single-family residence is their primary residence on October 1 of the tax year for which the property owner is applying. Deadline to apply is December 31st.
I am by no means an SME on the topic, but it could be possible to receive an HSTE for a property considered a residential property. No, does that include duplex, triplex, or quadplex? This topic is something to as your tax professional or the Madison tax assessor office. It May not work, but it does not hurt to ask. It definitely will not work for anything not considered residential. Below is a link to the Alabama homestead exception.
@Jeff Wagner I'm interested here - so by exceptionally high what % (of property value) are you talking about. i.e. how much higher are madison county taxes vs. state avg? By all accounts I've read AL has one of the lowest property tax rates in the country.
It's all relative. Alabama is one of the lowest property tax states; however, Huntsville specifically has appreciated rapidly over the past 10 years, so assessed values are artificially low... and a re-assessment will result in huge property tax numbers vs. in-place numbers. The formula for a large part of Madison county is quite simple: Appraised value x 20% x5.8% = tax.
My challenge is that I have no idea what the "appraised value" will be. The most conservative assumption is to use purchase price as appraised value, but most other comps are lower without rhyme or reason for methodology.
@Jeff Wagner ok thanks for the clarity so that would be 1.1% but would obv. depend on their assesses value. in some places it's hard to figure out their methodology for valuations. And I get it maybe this rate is abnormally high for AL - i heard the state avg is ~.4%-.5% but it's not terrible vs. many other locales.