Estimating Taxes on an Investment Property

build-to-rent income & expenses market research real estate taxes Nov 15, 2021

Topics Discussed:

  • Looking at county records/comparable properties
  • Utilizing
  • Working with a title company and county assessor

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This one's a stinker. What about taxes? How do we drill down on taxes? Because this is a new property we're talking about. So it's not on the tax rules yet.

Sherida Zenger: So we've usually gone to and they've been pretty good. I mean, they, we kind of had John being conservative, so we'll maybe jump up the price and we're basing what we put into Smart Asset on what we think the value is going to be once it's completed or the sales price.

Again, this is going to be an assessed value in most of the states that we're in. So we don't know what this number is going to be. Not being the same as what you paid for it. You know, they're not going to tell you the secret formula that they have hidden away in some vault.

SmartAsset's been great. Also, another thing is to go to the surrounding areas and try to find a similar property can kind of give you a good idea.

You want to stick with something that's similar. Um, although that doesn't necessarily always matter, just the newer you can find and something that's more of a like-kind again, we err on being conservative. So we always put that a little bit higher.

Chase Leavitt: If you have something that's similar or a good comp and you can see where those taxes if it's been around for one, two-plus years, you can see where those taxes are at.

Just look at the county records. If it's a new area, that's where it gets a little bit tricky and there are not good comps at all. Then you can probably get in touch with the county assessor. I think we've chatted with one in salt lake at one point that was very helpful. Try to chat with some down in Arizona, which was hard.

They have a really, really tricky formula and I can't figure that one out. Um, smart assets. Good. It's a website you go into like you talked about, you just put in the city and it'll populate a kind of an average of what that tax rate generally. It's pretty liable. It's pretty close.

Sherida Zenger: Title companies can help to. Some title companies don't want to help. I know Arizona, they refuse to give any kind of information. The title company we use in Utah is usually pretty helpful. A lender can help to kind of tell you, Hey, this is what we're going to base property taxes off of and give

you an idea.

Those are, that depends on the loan and those, I found those are they're being high a lot of times.

Steve Olson: Well, it's funny you say that. Cause I was going to do another quick poll who is more useless on property tax information, title companies, or the county assessor.

Sherida Zenger: I'm going to back up. I'm gonna say, county assessor. Cause I don't think the county, his sister wants to give you any information.

Because they don't want it to be held against them where the title company can say, Hey, this is past closings. They have a little more data at their fingertips that they're willing to say, this is what closed on another property that we did recently.

Steve Olson: Because you just said that a private entity is more useless than a government entity.

And I don't know when that would ever be the case.

Chase Leavitt: I think either one, just depending on who you're talking to and how much time you want to put into it in helping you.

Steve Olson: Well, when I have these conversations with them, you can coax a formula out of them or the title company can look up rates, but what, where you are going to get nowhere is what is the assessed value going to be?

Cause you know, the formula to apply against the assessed value, but what is it? And that's where we've really found the smart asset resource or looking at comparables in the area I've even pulled up CoStar to see, okay, what are they charging taxes per door, on that complex over there, take it and apply it to the one I'm analyzing.

Maybe bump it up a little bit. So I know, and you're going to look at three or four of them, right? Come up with an average rate, then you're not going to get burned because this is one that's not going away. Right. But property taxes or something, it's a blood sport. And you, you got to decide where you want to appeal.

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