Explaining assessments for Omaha property taxes

13 Replies

Hey all, I'm from San Francisco and interested in Omaha because of it's strong economy, good school system, relatively low vacancy rate, etc. I also visited the area a few years back and met the nicest people  :)

I've noticed that property taxes are quite high in Douglas county and was wondering if someone could explain some numbers I came across on the Treasury's website.
After looking at a property I saw on Zillow selling for $135k, I looked up the property taxes on the Treasury's website to find that they amount to $3,289.78 for 2018 (see red rectangle in the screenshot). That seems quite high for a $135k home.

Looking at the Assessor's Valuation Page, I saw that the assessed value for the home is $153k (see green rectangle in the screenshot).

I have two questions:

  1. Why is the property listed at 135k assessed at a value of 153k?
  2. What could explain the jump in land value from $5.8 - 18k from 2016 to 2017?

Here are the links if you want to check it out:

https://payments.dctreasurer.org/taxinfo.xhtml?par...

http://douglascone.wgxtreme.com/java/wgx_douglasne...

Hope everyone's week is going well!

Welcome to Omaha, where the property taxes are crazy high. Figure it as a cost of doing business.  Trade it for a stable market, seems fair to me. 

In specific answer to your question, the assessor does not assess each property annually. So every so often, they go through and do a big update to everyone's assessment. As to why it's selling below assessed price, you'd have a better idea than we would. Needs repairs? Usually the assessed values is way lower than FMV.

Actual value and assessed value can be way apart.  How would the assessor know if there is a meth lab inside a house or not if they haven't been inside?  A house assessed last year could catch on fire and have extensive damage, the inside could have leaky pipes and mold, be super dated, etc.

Assessed value is simply a guideline based on the average value of comparable homes in the neighborhood.  It's like Zillow - sometimes it's right on, sometimes it isn't even close.

Nebraska property taxes are some of the highest in the country, unfortunately.

Generally speaking, the property tax assessment should be no more than 80-90% of actually FMV in Douglas County. You can contest the valuation of your property through the county. If you were to purchase the property at $135k and prove that it was at FMV, you'd have a fairly strong case that the assessed value should be adjusted.

As for the large jump, the county did a huge reassessment in 2017 that caused a big stir in the community. Many of the assessments were correctly lowered due to the huge number of contested valuations - it felt like they shot really high knowing that valued needed increased, met people in the middle, and still got the large bump the wanted in the end. Here's an article: https://www.omaha.com/news/metro/property-tax-valu...

You can find 1% in a lot of places around town if you stay below about $120K, in general, for SFR. The closer to $200K and above you get, the yield decreases. I feel you hit a point of diminishing returns at about $120K (strictly cashflow, ignoring appreciation). Of course, you can find 2% if you are feeling adventurous... ;)

Multifamily, yes, most class C multifamily (where I invest) will operate in excess of 1%.

@Owen Dashner Yea I'd like to stay away from 2% neighborhoods in general, not enough experience yet to be too adventurous :D

Thanks for the info though!

When you say multifamily, are you investing in 1-4 units or 5+ ?

Alexis, your property taxes in CA are held artificially low due to CA Proposition 13.   I think a lot of your rates work out to about 0.8% of assessed value annually whereas Omaha area runs 2-3% annually depending on the location.  New homes in SIDs tend to run around 3%.  On the flip side, properties are far cheaper in Omaha.  Omaha rates are not horrible compared to much of the central USA.   NE also has personal income tax but a moderate sales tax. 

You will find Omaha has consistent property value growth regardless of how the rest of the country is doing due to an economy that is somewhat diverse: hi-tech, insurance, railroads, and agribusiness. Omaha was consistently in the top 5 cities for economic growth during the recession.

Originally posted by @Alexis Schreier :

@Brynn Jacobs @Owen Dashner @Blake Berke Thank you all for clarifying!

The trade off of high taxes for a stable market seems fair to me too. Blake, thanks for the article, crazy story.

Are you guys able to exceed the 1% rule on SFH or residential MF rentals with this extra cost?

I agree with what's been said as far as 1% rule is concerned. My most recent SFH purchase is at exactly 1% (1,400/mo Rent on $142k value) but would say that's about as high as we've gotten prior to diminishing of 1%. In our case, it is in a highly demanded school district that helps keep rents up.

It is interesting how the 1% rule affects peoples perceptions about a property.  I build for investors in TN and in the area I build our tax rate is only 0.6% which is insanely low.  A couple of miles away in the next county it is 1.5-1.8% and makes a huge difference on appraisals and cash flow.  We build a 1300 foot home that sells for 140k and rents for 1200.  Compared to Omaha the property tax alone saves around 175 per month which when added to the rent almost makes it 1% on new construction.  A lot of the Memphis turnkey home providers sell remodeled homes at that 1% price point.  

@David Neese Interesting perspective. It's good to remember that the 1% rule is not a rule but a rule of thumb. And factors like high property taxes can skew the numbers. Thanks for the reminder!