RE Taxes in Indy are bad for business!

[Sean McCluskey]

Hey BP,

I'm finishing up my first BRRRR deal in Indianapolis, and I have a great team in place. BUT, I'm thinking about moving to a different market.

Indianapolis has a special real estate tax equal to 2% of appraised value for non owner occupied homes. Owner occupied is 1% of appraisal.

This 2% of appraisal can make the RE tax on a B-Class, $140k ARV 1% rule home equal 2 full months of rent ($2800)! Then you add on 1 month for PM leasing fee, the PM's % of rents on other months, repairs, mortgage, etc. and the cash flow is greatly reduced as a result.

My question for you all: why not invest in a market with lower real estate taxes? Like certain markets in Alabama and Louisiana where RE taxes are closer to 0.50% of appraised value.

For the same $140k ARV, 1% rule home, that would mean real estate taxes of $700, a $2100 savings! Even 1% would be a $1,400 savings, all of which would end up as cash flow on the bottom line.

Multiply that by a portfolio of 30-40 rental properties and you're talking about an extra $42,000-56,000 of cash flow per year!

Convince me not to change markets!

[Lionel Li]

Indianapolis property taxes are calculated by the One-Two-Three Tax Cap Rule. The only one we're talking about is the 2% cap calculation without homestead exemption. The 2% cap is saying that a non-owner occupant should pay no more than 2% of the tax assessed value in property taxes annually (not appraised value) less special assessments. If the Indy tax assessors are somehow as accurate as appraisers, please let me know and I'll create a new automated real estate appraisal company and kill the Zillow Zestimate once and for all.