REDUCING YOUR INCOME PROPERTIES TAXES IN FIVE SIMPLE STEPS

December 23, 2024

by admin

So far in the history of real estate investing, property taxes is one of the most frustrating expenses for homeowners and investors investing in income properties. This frustration builds yearly, as the taxes increases. Unfortunately, property taxes are an unavoidable aspect of owning a home whether for residential or investment purposes. And, just so you know, you’ll still be responsible for them once you clear off your mortgage. The amount you have to pay depends on some factors, however, you can learn how to reduce your taxes on your income properties.

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While property taxes are necessary expenses, investors and homeowners shouldn’t be overpaying whenever they are going to. However, before you can succeed in reducing your property taxes to the barest minimum, you must understand how property taxes are calculated. Read on, and learn the basic things you need to know about property taxes on your income properties.

What Are Property Taxes?

Property taxes are a yearly cost paid for by individuals, businesses, or other legal organizations who own properties/houses. Property taxes are an ad valorem tax, which means that the amount required depends on the asset’s value. Unfortunately, property taxes can also be considered by many investors and homeowners as a regressive tax because they are not dependent on the income of the individual, business, or organization. WalletHub estimated that an average household pays about $2,375 annually as their property tax.

Property tax rates will vary based on the location of your income properties. This is because this type of tax is set on a state and local level. And unfortunately, in some states and local areas, your personal properties such as yacht and cars can be considered under your property taxes. And in some areas, it might even include any other landed property you own, whether it has a structure or not. This is more reason why smart investor spends quality time researching about an areas property tax laws before acquiring income properties for their investment portfolio.

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Simple Steps To Reduce Taxes On Your Income Properties

Are you about to acquire some income properties, and you are scared high property taxes might be a limitation to your profit generation? Or are you thinking your profit taxes might have been inflated, causing you to lose big on your income properties? Are you ready to try something out to see if you’re not being cheated of your income properties? Here are five simple steps that can help you become a tax ninja for your real estate properties:

Get Your Property Tax Card

Do you know that you can actually request for your property tax card as a homeowner/investor? It is the first step to evaluating your property tax. This card will have sufficient information about the size of the lot, square footage and room sizes, and the type of fixtures the income properties have. The property tax card will also typically include a record of any major renovations or upgrades. As an investor or homeowner, you can ask for this record if you suspect there are any discrepancies. This is the first step to correcting any mistake that could have happened with your property tax.

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Compare With Neighbors & Similar Homes

Just as you can request your property tax information, you can also request other property assessments in your area. Shocked right? In most neighbourhoods and counties like Pinellas, this information is easily accessible at the town hall. If you are curious to know how the properties around yours are being valued, go ahead and request for this information to get a better assessment. In this process, you’ll understand how your property is valued against that of your neighbour. This information can guide you in correcting any mistake in your property’s amenities and total evaluation.

Appeal If Your Assessment Is Wrong

If you believe your property assessment is wrong, then let them know it is wrong. Do not be afraid to appeal your assessment if you strongly believe that income properties are paying off an overestimated property tax. You can begin your appeal on a county level and go to the state if necessary. In most scenarios, the assessor will be asked to carry out a new assessment of your property, which you might want to accompany them on. Walking them through it will surely give you a better idea of what is being accessed and anything that should have been duly or well-considered.

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Check If You Qualify For Discounts or Tax Relief

Don’t be surprised that with any type of tax policy, there are certain exemptions available for those who qualify. When it comes to property taxes, many states will offer discounts to seniors, veterans, or people with disabilities. Check out your state and local tax laws to determine if your income properties qualify for one of these exemptions. For example, if your property is in Pinellas, Fl. your discounts and exemptions may be different from someone with properties in Hernando. And fortunately, your income properties might qualify for some lower tax bill if they’re being used for agricultural purposes or for a primary residence.

Appeal Your Tax Bill

For those unlucky to receive a new property assessment in time, there is one more method that can be explored to avoid paying overestimated property taxes. This involves appealing your tax bill with the help of an attorney. This method requires you paying some legal fees with no guarantee of success though. However, if your re-assessment is getting delayed and unbearable, appealing might be the way forward. Essentially, you will need to provide the court with pictures, tax information, and necessary information about your income properties. This will be reviewed by a board, who will then determine whether or not to lower the assessment on your income properties. If you strike success, your tax bill will be reduced and adjusted.

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How To Evaluate Real Estate Investment Deals In Tampa (Resources)

We talk with lots of people looking to buy real estate investment properties in Tampa and surrounding areas. Some of them know what they’re doing… and some of them are still in the learning process.

But, since our entire business is finding great deals… and often passing those deals onto real estate investors like you at huge discounts… I thought it would be a great idea to share with you some resources on how to effectively evaluate a real estate investment deal. This works in any market… Tampa, surrounding areas, Florida, any other states across the country.

When you really boil it down… evaluating a real estate deal is a pretty simple process. If you’re looking to buy real estate as an investment, wholesale properties, hold them for rent… whatever, one of the most important parts is buying it right (i.e. – not overpaying).

So lets dive in.

How To Evaluate A Real Estate Deal – (For Single Family Houses)

There are just a few main elements when you’re evaluating a deal.
Cost of repairs needed to get it backup to good condition
The after repair market value of the property (what it’s worth and can sell for today once it’s fixed up)
If you’re going to buy and hold for a rental… you need to know what you can rent it out for and what your “debt service” (mortgage payment) will be. Knowing this makes sure you’re buying so the property cash-flows each month

There are other things you can (and should) look at too… but those 3 are the main important things to look at first.
Cost of Repairs

One of the things you should do when you are looking at a property is find out how much it’ll cost you to fix it up to a point where it’s in great shape. In other words, the cost of repairs. This could be a new roof if it needs it, carpet, paint, a new kitchen, yard, maybe even more.

To find a good estimate of cost of repairs, the best advice we have is to get to know a contractor or two in your area and have them walk through the properties with you the first few times… have them quote out the repair cost… and build that into your offer.
After Repair Market Value

This is simple, but many investors get stuck on this part. This is essentially what you could sell the property for today… after you repaired it and brought it up to a great condition. This is found by finding out what other similar houses in the same area are actually selling for. NOTE: Don’t look at the “Listing” price… look at what houses similar to yours have actually sold for in the past 3 months. This helps you determine how much you could actually sell that house for if you had to… right now. You never want to over pay to a point where you can’t sell it for a profit in the next 3 months.

How do you find this? There are services out there that can help you with this… but often times the best way to find out the true value of a house is to talk to a Realtor that you know… or an appraiser. Heck, if you don’t know one… call up a few today… tell them you have a property that you’re potentially going to sell in the near future… and ask them what they think it should sell for.
Buy And Hold For Rental

So, you’re going to buy and hold for rental? Great! You don’t need to worry about what it’ll sell for right away. What you need to know is if it’ll pencil out on a month to month basis. You know… cash flow.

So, talk to a mortgage broker (or a private lender) and find out what the monthly mortgage payment will be for that specific property.

Then find out what you can rent the place out for on a monthly basis.

Then, you work backwards… and find out at what purchase price your mortgage payment will be low enough so you can make the monthly cash flow you need to make on the property. Be sure to figure in other expenses too like property taxes, maintenance expenses, property management fees, and keeping money in reserves for future repairs.

So, your offer price here should be:

Monthly Mortgage – Monthly Rents – Operating Expenses – Taxes & Insurance – Monthly Cash Flow = Offer

Simple enough right?
The cool thing is, the more you’re bringing into the deal in cash… the lower your mortgage is.

Making An Offer

We’ve been talking about how to look at the numbers and analyze a real estate deal.

From there, just make an offer. Many times the properties we let you know about will already be so deeply discounted that we get multiple offers… often above our asking price.

So, if you really want a property… find out what is the bare max you could buy the property at… and offer that. Otherwise you may lose the deal because someone else is likely making an offer too.

With that said, the golden rule in real estate is to never over pay for a property. That’s why our own deal analyzing criteria is so darn strict… and why our buyers (like you) get such great deals.

I hope this little tutorial has helped you sharpen up your real estate deal analyzing skills… and we really look forward to working with you in the near future.

If you have any questions at all… don’t hesitate to contact us anytime for anything.

Happy investing!