Updated over 7 years ago on . Most recent reply
NWI investors and landlords
Hey Everyone, please tell me if I'm crazy or reasonable. I completed my first rental (duplex) deal and have it rented as of March 3. It cash flows at $650 a month and yes that is with 25% set aside for cap-ex, repair, and vacancy. Taxes, insurance and mortgage. So It's doing better than I thought, so I'm on the hunt for my second deal. I've been analysing deals and alot of then just don't make sense. Here is where you tell me crazy or reasonable: I'm trying to cash flow at least $200 door. Now I always run the numbers at current rent and then what I think can get them too. Even with raised rents its hard to do $200 a door.
Now the problem is really focused on Hammond properties. For the people that are unaware: Hammond has two voter approved referendums for the new property taxes. 44 cents per $100 of assessed value which will last 7 years and 35.98 cents of $100 of assessed value until hammond pays it bonds off. So this is a cash flow killer for a long time!!!! A property I ran the numbers on that was assessed at $90k has a $3026 tax bill, CRAZY!!! So it only takes one more voter approved referendum to killer the rest of the cash flow, even at $200 a door.
So I feel in some towns, $200 a door is good but others it needs to be higher. What's your opinion?
Most Popular Reply
Here's a great resource page for the Hammond tax situation. In particular, take a look at the item labeled "Property tax impact table for 2018, 2019, 2020." There's a lot of information there, but if you read closely I believe it shows that those 3 years (2018-2020) will have varying tax rates as certain referendum issues take effect and also as an old tax drops off. By the year 2020, taxes will settle to an overall rate which will be LOWER than what we've been paying in Hammond in the recent past. Until then, they will be higher.
Of course, the taxes we pay are based on the appraised value of the property, so if the appraisal goes up, then our taxes go too. That's a different issue from the tax rate, though. And, yes, if there are additional referendums in the future then the tax rate can go up again, but that's a fundamental risk of real estate investing in any community.