I have a question regarding property taxes. When calculating a BRRRR deal, I usually use the current year's property tax information as the annual tax amount. However, I'm wondering if the annual tax amount should actually be based on the projected ARV since that is what the county/city will be assessing when determining future property taxes.
I recently purchased a property (non-brrrr) where I used the previous year's tax amounts while analyzing, and then the the county reassessed the property taxes based on the new purchase price. This resulted in the annual taxes increasing dramatically and the deal not making sense anymore. Trying to avoid this type of surprise going forward so just want to know how everyone else is doing their analysis. Thanks in advance :)
Samir, it seems you may have answered your own question. If they county/city will use the ARV to determine taxes, you should likely use that. We recently ran into this on a deal we were underwriting and the tax increased caused the deal not to make sense (among some other items).
Use the tax rate against the ARV and you won't get a surprise tax hit.
Makes sense. Thanks for confirming!
I know in some areas you can appeal the tax increase but it doesn't make much sense if they have recently sold comps to justify the increased amount. This is what I figure, but of course I may be entirely wrong about that. Do you guys have any experience with the appeal process?