Stop Overpaying: Verify Property Taxes via County Records
Most investors miscalculate property taxes and it can be extremely expensive Here’s how to do it right: Property taxes are usually re-assessed at sale. This means that you don’t underwrite the same property taxes the seller had They’re public info. So you're going to ignore what the broker says. Instead, go directly to the source (the gov) You want to follow a simple 3 step process 1. Look up the property tax bill 2. Go to the county website 3. Call the assessor Look up the Property Tax Bill 1. First you're going to go on the county website (go on google and search "xx county property taxes"). From there, you input the property address and the tax bill should come up The tax bill should show you the exact calculation. You then recalculate the property taxes based on the new purchase price Generally it's assessed value * the mill rate (ex if you buy for $1MM and the mill rate is 25, your taxes would be $1MM*25/1000 = $25k). Sometimes it's appraised value * x% to get the assessed value, then assessed value * the mill rate. Most of the time, the assessed/appraised value is the purchase price, but not every time, especially in non-disclosure states. Some counties also recalculate property taxes every year, while other counties only do so every 5 years. Some states only recalculate at sale. Almost every county calculates the property tax formula slightly differently, so the exact formula isn't important. What is important is that you follow the formula for that specific county to the "T". Go to the County Website 2. You're going to go on the general county website and make sure the formula on their general website matches the formula on the tax bill (some counties have a public calculation, others don’t) Using this property tax calculation formula on their site, you'll calculate the new property taxes based on the new purchase price Call up the Assessor 3. You're going to call up the county (assessor) and ask them directly how property taxes are calculated in the county. Once again, use the formula you’re given to calculate the new property taxes based on the new purchase price. All of these 3 methods should get you the same exact new property tax bill. If any of these 3 calculations result in a different tax bill, call up the assessor again to clear up any confusion. Additional Questions to ask the County Additional questions you should be asking the county include: - How are property taxes calculated? - How is the assessed value calculated? -How often are property values assessed? - Are they reassessed automatically on a sale? - How is the mill rate calculated? - How often does the mill rate change? - Can you send me a sheet of the historical mill rate changes? - What’s the most the mill rate has ever changed in one year? - Is there a cap on how much the mill rate can increase? - Have any events happened recently that would lead you to believe that the mill rate will increase significantly moving forward? That’s really it. Property taxes are simple - they shouldn’t be a “surprise”. Cover all your bases, go directly to the source (the government) and ignore everything the broker/seller says and you should be fine
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