How can property taxes go up by 164%?

Question

I am very new to this, so I was floored when I found a property that had a tax increase of 165% in one year.

https://www.zillow.com/homes/3800-36th-St-E,-Minneapolis,-MN...

Is this normal? Can anyone explain why this happens? If this is normal, how could anyone safetly invest in property?

Tim Swierczek · Answer

This particular property has special circumstances. The property is being charged $8,137.29 in special assessments. The charges are mainly due to it being a vacant building. That will drive up the taxes on any property.  The tax increase was 14.75%

The 2023 tax without the special assessment was $4,054.04The 2024 tax without the special assessment was $4,274.83Here's the breakdown from the County's website:

Values established by the assessor as of January 2, 2023

Estimated market value:$334,000Taxable market value:$326,820Total improvement amount:

Total net tax:$4,274.83 Total special assessments:$8,137.29

Special assessment details:

010272316GST IMPRV RESURFACING$247.350109602023VACANT BUILDING REG$7,703.710125121T052021 TREE REMOVAL-5$186.23

James Hamling · Answer

I can't believe the automatic reply of ALL, not just @Tim Swierczek, would be to check the tax record for a why vs jumping down a rabbit-hole of weird assumption.

New Construction; this happens literally to EVRY new construction unit. Why? Because yr 1 is on unimproved land basis.

Any existing property with a BIG property tax increase SCREAMS "Special Assessment". Any calling themself any kind of "Pro" or "experienced" buyer of any ilk really worries me if they don't know this, it's that standard.

Could be unpaid utilities, unpaid tax's, or maybe a mainline city replaced, a roadway project, and all the similar possibilities.

Don't assume, CONFIRM.

@Todd Anderson there is NO SUCH THING as a "landlord friendly/unfriendly" state. CA is the closest thing I have found on planet Earth as Landlord "unfriendly state" and EVEN THEN there is part's of Ca VERY landlord friendly.     Because real estate get's greatest governance and impact at LOCAL level, not state.

And no, it's literally NEVER happened in Hennepin county where they raised property tax's 100%+ because "they needed money".

Florida, I remind you, CRUSHED many STR operators. FL has hands down the WORST cost's and process's for roof replacements I have every experienced. FL ain't all rainbow's and puppy-kisses for a landlord my friend.

Jason Wray · Answer

You see this more often due to a few things for one COVID shocked the real estate market and caused some states to see a huge spike in real estate.  You also will see it when a home has not had many sales in 20-30 years and since it was purchased for $65,600.00 back in 1990 it took a huge increase in sale price of $275K based on 2024 sale price.  I would not rely on Zillow to heavily I would get a tax cert and see what exemptions you qualify for but that’s a big jump.

You can always ask for a tax recert and challenge the assessment file a petition to the VAB value adjustment board and dispute assessment.

If all of that fails start looking at investment properties in states like TN, LA, AL, GA, FL, these states in the South East can offer super low annual property taxes.  Some places like in and out of Knoxville, TN have great homes 3-4 bed 2-3 bath homes 2500-3500 sqft on a 2-3 acres with annual taxes below $650.00 year!

Adam Tafel · Answer

@Molly Jones it's best practice to check the assessed value while analyzing a deal. There is typically a 10-20% margin between assessed values and market values with 1-4 unit properties in the Twin Cities - but if the property you're offering on has a larger than normal gap between the two values, plan on some increases in the following few years. I have a handful of rentals in Ramsey County - after a property is updated and sold the assessed value can jump up dramatically, but then the future increases are much slower and more predictable in the following years.

Alecia Loveless · Answer

@Molly Jones It’s not just Minnesota. My family reports as high as 80% tax increases in the DFW metro area every year for the past 3 years.

All of these properties fought their taxes and got very little relief. One went all the way to the state level and only got about a 3% reduction. This particular property is a SFH that is now assessed at $1.1MM and if it were to be sold could only sell for about $700K given the market and comps.

Buyer beware I guess.

Todd Anderson · Answer

Well Molly, that is Hennepin County for you.  It is not normal to see that high in one year but it does happen too often when they need money.  Ramsey Co was just as bad last year.  This is only one of the issues in Minnesota.  I spent 30 years dealing with Minnesota's unfriendly landlord laws.  In today's world, unless you are looking for a job to manage the investment, there is no reason not to look to a state that is more landlord friendly.  Good point Jason.  The investors that I have worked with have found it easy to invest with a turn key process In Florida.

Molly Jones · Answer

Wow thanks for letting me know! As a first time investor I am quite wary of going out of state. Many of the connections I've made are here in Minnesota and I just feel a bit more comfortable starting here.

How can property taxes go up by 164%?

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