Property Taxes on a Flip?

[Cyrus Sidhwa]

Let's say an investor buys a property with a HML, fixes it up, and flips it 3 months after the purchase. Does the investor pay a portion of the property taxes? Would you have to pay those taxes when you close on your sale to the end buyer? Please note, not looking for info on the income taxes, strictly the property taxes.

Thanks for the help with such a total neewb question - I tell ya, it's humbling to have to ask some of these things....

[Justin B.]

You pay the taxes for every day you own it. Let's look through a simplified example:

Let's say the previous owner paid all of 2013's taxes before you purchased. Let's say those taxes are $365/year (for easy math).

You purchase it on March 1st, 2013. You'll actually pay him $306 during closing (March 1st - Dec 31st taxes). I say "pay" but it's just a credit to him on the closing (HUD) statement.

You sell it on June 1st, 2013. On the HUD statement, the buyer will pay (or credit) you $214 (because he's paying June 1st - Dec 31st).

Now, that's overly simplified. Normally it's not that straightforward. Maybe they haven't paid taxes at all yet for 2013 (You would get $59 credit in my example if that's the case). Maybe they paid only half of 2013. Maybe they are late on the taxes. Either way in your case it would be taken care of on the HUD most likely. If you hold it for a long time, obviously you would have to pay the taxes when due as well straight to the tax assessor.

I hope that simplifies it for you.

And I'm sure there are exceptions somewhere but on all 5 of my properties so far that is where it was handled.