Does tax value effect how you bid on forclosures

Question

Wondering if when you are bidding on a property to flip what type of consideration should you give to the current tax value and how much you are willing to pay? I know the 70% rule and then subtract rehab costs, but have never heard anything about this aspect of doing the numbers and if it actually matters.

Christopher Spear · Answer

Absolutely. I recently offered on a property in a very highly taxed suburb of Cleveland. When I ran the numbers, I quickly realized that while the property was an excellent flip candidate, it would have made a terrible rental, because the taxes were so high. I got outbid in the end anyway, so it didn't matter!

Tanner Grindel · Answer

@Christopher Spear that's a good point. So it makes more sense to get rental properties in lower tax areas.

Christopher Spear · Answer

Hey Tanner,

Tax value is important if you are planning to keep the property as a rental, because high taxes drag down your cash flow. But for flipping, it is less important.

Tanner Grindel · Answer

@Greg Dickerson thanks for the feedback. I did not know how tax value worked and will need to do a little more homework to understand it. I will not worry about it though when looking at properties.

Greg Dickerson · Answer

Short answer is no. I do not look at tax value on any deal. I use recent comps. Tax values really depend on the municipality and the market. Some areas tax values are close others they are way off and do not or can not take into consideration condition, improvements, special and unique aspects of a property that can drive or reduce values. They uses averages of comps kind of like Zillow.