The SC Property Tax Problem
A few years ago, the South Carolina Legislature "reformed" property taxes. They ended up putting everyone but owner-occupants at a disadvantage. I recently did an analysis of property taxes in downtown Columbia SC. It turns out that owner-occupants pay only 27% of the property tax that non-resident owners pay. The result is that landlords have to charge higher rents to cover their property tax expenses, and renters pay higher rents due to the "renter penalty" imposed by the state.
Take for example a residence appraised at $250,000. For an owner-occupant, the tax in downtown Columbia SC is $1880.00 per year. For the non-resident owner, the rate is a whopping $6753.50, or $411 per month more than the owner occupant. If, for example, the property rented for $1800 per month, almost 23% of the rent would go to pay the rental penalty!
Who could blame the owner-occupants in South Carolina from walking around with a collective grin on their faces? All the renters are subsidizing their property tax bills!
Comments (2)
I have not monitored the market recently. And it probably varies due to local tax levies. However, I would definitely advise that you find out what the property tax for non occupant owners would be before investing. If you buy from an owner occupant, their tax bill will not be a good indicator of what you will experience as an investor.
Thomas Morris, over 9 years ago
Hi Thomas,
How have you seen the rental market in Columbia SC develop since this post (which is very helpful)? Do you think the market has adapted and an investor can find healthy cash flow? Or, do you think it's better to look some place else? We are thinking of coming up from Jacksonville and investing in Lexington 1, but are working hard to make sure it's a viable option with this odd tax policy in place.
Best,
Patrick
Patrick Capriola, over 9 years ago