Most of us underestimate property taxes (I did too). We take the seller’s current tax bill, drop it into the spreadsheet, and call it analysis. Then the city reassesses, taxes jump, and the cash-flowing deal turns into break-even or negative. It’s a slow trap.

Property taxes are not fixed. Cities reassess. Mill rates change. School and city bond measures pass quietly. If your underwriting is based on what the seller is paying today, you’re not analyzing the deal. You’re guessing.

The fix is simple. You only need two things: the property’s actual market value (what you paid) and the local tax rate. Some counties don’t tax based on full market value. They tax based on a percentage called the assessment ratio.

Example: Market Value: $300,000. Assessment Ratio: 85%. Assessed Value = $300,000 x 0.85 = $255,000. Then apply the tax rate to the assessed value. If you don’t know the assessment ratio, call the assessor. This one number changes everything.

If assessment ratio is not used, the formula is straightforward: Estimated Taxes = Market Value x Tax Rate. If you see a mill rate, convert it:
Mill Rate ÷ 1000 = Tax Rate. Example: $350,000 property. 23 mill rate = 0.023 tax rate. $350,000 x 0.023 = $8,050 per year (~$671/month)

If you underwrote the deal assuming $200/month because that’s what the seller pays, your deal was never viable to begin with.

Never rely on the seller’s tax bill. Many municipalities reassess at sale. If the seller has held the property for a while, assume your taxes will reset closer to full market value.

To sanity-check your assumptions, look at recently sold comps. Pull three. Look up their actual tax bills. If properties selling for $400k are paying ~$9k annually, you will be too. That is your baseline.

Build a cushion into your numbers: (1) If the area reassesses on sale: use purchase price x tax rate, (2) If the area reassesses in cycles: assume a 15-25%  jump at the next reassessment. (3) If the school district constantly passes new funding measures, add another 10% buffer.

And yes, pay attention to local ballot measures. School bonds and neighborhood improvements sound nice, but they show up on your tax bill directly.

Run your tax projections based on where taxes are going, not where they are today. That’s how you keep your margins and avoid surprises.