Hi BP family,
I am a new rental property investor from overseas. I have a question regarding the property tax and it may sound very basic.
Let’s say the flipper bought the property a year ago for 100k and paying a low tax under 2k annually.
If I bought it for 250k after the total rehab, would I be paying tax 2.5 times compared with the flipper paid? Or is there anyway that I could keep the tax as low as possible?
Thanks in advance
Hi @Clarence Gong,
The property tax that you are going to pay is not directly related to the value you paid in your property.
It is related to the assessed value of the property by the County where the property is.
Generally, the County has a commission that put together a few data to find the assessed value of all properties and, upon that value, applies a mileage rate (a percentage). For ex. if the assessed value is 200k and the mileage rate is 1 it means you going to pay 2000 in taxes.
I just gave a general idea, the property tax has more details. If you go to the county tax assessor website you probably going to find the values for 2019 and explanations of how it is calculated.
In my experience in Cleveland they do frequently set the assessed value to the purchase price, at least initially. Cleveland appraises all properties every three years and resets the assessed value so you have to watch out for this. They just did this in the fall of 2018 so it will be another three years before they do it again.
Also for the record it's millage not mileage in the above post.
Thanks very much gentlemen for your helpful information and appreciate it!
So if I understood correctly, Eric. I will not have to worry about the tax issues in Cleveland at least for 3 years. Is that right?
Further more, do I need to find some professional to help 3 years later to keep the tax low? How do I look for them?
I don't know if I'd say you don't have to worry about it but the big changes occur every three years in my experience. You can get professional help but they may or may not be able to help you. You can get an appraiser and if the appraisal comes in below the assessed value you can file with the county. You will get a hearing and they will decide whether or not to lower the taxes. Doesn't mean that they will lower them.
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