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How to Reduce Your Income Property Taxes


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Property taxes, along with mortgage and landlord insurance expenses, likely represent the largest ongoing property costs you will have to deal with when engaging in rental property investing.  The property mortgage and insurance costs are relatively easy to address, as you can shop around for a new lender and insurance company.  But if you want to try and lower your rental property tax expense, it’s a little more difficult. 

That said, it is definitely possible to appeal a property’s assessed value in order to obtain a property tax adjustment from the local municipality. And you probably will want to at least look into this, as it is estimated that up to 60% of all US property is over-assessed compared to its true value.  The reason has to do with the real estate market crash, which has reduced property values faster than local municipalities can keep up.    

The first thing you will want to do is get your facts in order by gathering the property’s assessed value, the value of the most recent real estate appraisal you had done on the property, and some relevant comps (which represent the prices / values of similar properties that were recently sold in the area…your rental property agent can help here).

The comps in particular will be critical because they will provide the best benchmark you will find to determine true value.  Try and find 3-5 comps of properties sold in your market over the past 6 months.  Make sure the comps are as close to your property as possible in terms of number of units, square footage, lot size, amenities, number of bedrooms, etc. 

Then take some photos of the comps as well as your own income property.  In terms of your own property, take note of any defects that might negatively impact value so these can be pointed out to the assessor.  If possible, take pictures of them as well.

Finally, with all this information in hand, do a quick analysis and calculate what you think a fair assessed value might be.  Then stop by your local municipality and fill out the property tax appeal form.  Your municipality will then respond by either granting the adjustment or refusing it.  If it is refused, you will usually have the option of settling the dispute in the municipality’s legal system.



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