Taxes in SC are killing us - investing in GA or NC?

Question

We currently have 2 properties in SC and the non-resident taxes are definitely cutting into our ROI. Was thinking today, since we are out of state anyway, maybe we should be looking in NC or GA. I have searched both states and they seem to be a viable option. I thought I would put the question to the BP Community since I value the input so much. Anyone have any insight into doing buy and holds in NC or in GA? I would like to stay to the Eastern side of GA, Augusta perhaps? Thanks in advance!

Tony Kohnle · Answer

I’m an appraiser for an assessors office in S.C. So can probably answer some basic questions if you have them. By state law properties are assessed at 6% of market value unless you apply for and receive the exemption for an owner occupied house. Those properties are assessed at 4% ( a 33% reduction) and are exempt from paying school operating cost (about another 1/3 in savings. Don’t blame the Assessor, the politicians wrote the law and apparently tilted it towards people eligible to vote for them. Go figure. Generally, All properties are reassessed every 5 years with the value staying the same unless there is a physical change (construction/demolition/lot split) or an ownership change. If you own a property through a reassessment period your taxable value is capped at a 15% increase at each an every 5 year reassessment (not counting physical type changes). That is why there is a separate reassessment if the property sells, to bring it back to market value. There is another exception for rental properties though. If you buy a 6% property and keep it a 6% property you can apply for an exemption of up to 25%. It just can’t go below the prior years appraised value. Say you buy small apartment complex for $1M and apply for the exemption. If it was on the roll for 650k, your new taxable value would be 750k ( 1M-25%). If it was on the rolls for 800k, your taxable value would be 800k(Somewhat less than a 25% reduction). Be very aware however that even simple tax laws can become complex because different ones apply in different circumstances. For instance. The 25% exemption noted above is designed for relief from market appreciation not capital expenditures. If that $1M property was a dump and you $200k of renovation before the end of the year, that is going to effect both the market value and the exempted value. Call your assessor and ask. The are typically glad to walk you through your situation before had rather than deal with appeals later.

Tony Kohnle · Answer

@Eric.S It’s generally known as the 25% exemption around here but I guess each county could call it something different. Are you talking to a Commercial appraiser in a South Carolina Assessors office? It’s only applicable to non owner occupied properties so I can see a residential appraiser being unfamiliar with it.

Chris Sellers · Answer

Kim,I own several in NC. Property taxes usually run around $1,300 annually per $100k assessed property in bigger cities like Charlotte, $700 for smaller counties. Bigger cities more aggressive on making higher assessments, then not reducing for investors like they might owner occupants. I don't see it as a big problem in NC. Good Luck!

Shannon Jackson · Answer

@Kim Puckett do you buy in Savannah? I have a 3/1 in the historic district on Pounder ST for 60k.

Shannon Jackson · Answer

@Stacey Paulin do you buy in Savannah? I have a 3/1 in the historic district on Pounder ST for 60k.

Stacey Paulin · Answer

Taxes are the main reason I've not crossed over into SC. There are still some deals to be found here in GA.

Account Closed · Answer

Sir, Do you know the name of this exception? Looks like it may apply to my current purchase but assessor does not know what it is. Thank you

Raul R. · Answer

@Kim PuckettRemind me how much are the non-resident taxes in SC?My Real Estate Agent and Closing Attorney informed me of the non-resident tax in SC, this is one of the reason I stayed away from SC..Im in CLT & RDU markets in NC, both cities are super competitive. I've been told Atlanta is very competitive as well.. I suspect SC may not be as competitive due to this tax maybe you can confirm?? It deters Out of State investors as myself..Im from NYC so everything is relative, even though both cities are very competitive I still find them manageable compare to my local market..

Dennis Adler · Answer

I'm bullish on Augusta, GA. If I can help you out, let me know. @Kim Puckett What ROI are you used to getting?