Property Taxes Increase after Purchase?

Question

Hello BP community,

I have been receiving conflicting information on how to estimate the property taxes during my number analysis.  My concern is if a property has significant appreciation since the last time is was assessed for property taxes, then when I purchase the property, a red flag pops up for the city since it was purchased at a higher price than last time then they reassess, and then the property taxes increase significantly.  For example, a fourplex worth $200K in my area had a 2018 tax record of around $2,200 (not sure when it was reassessed, but it was purchased 10 years ago for around $110K).  At a purchase price of $200K, using the mill rate for property tax calculation, the new property taxes would be around $3,400.  I've had trusted professional sources tell me that after paying $200K for it, that the taxes will likely raise to around the $3,400 range.  I've also had trusted professional sources tell me that the property taxes won't actually raise that much from the 2018 $2,200 range.  Which side should I listen to?  As you can guess, this large difference significantly impacts the property's monthly cash flow, and sometimes causes a good deal to fall into the not-so-good deal range when I use the more cautionary amount of $3,400.  I don't want to be shooting myself in the foot estimating too high of property taxes and end up missing an actually good deal! Thank you for any input in advance!

-Lucas Duce

Mike McCarthy · Answer

it depends on your city/state. Some reassess when a property is sold. But most/many are on a 5/10 year cycle. And some are far behind that cycle which means big increases when it does happen.

But remember, just because you buy it at $200K, doesn’t mean that’s the tax appraisal of it.

Tom Parris · Answer

Hi @Lucas Duce,

Safe to go with the higher number. Typically, county websites will give you a property tax estimator. I would use that tool to figure out an accurate figure. A sale triggers a reassessment of taxes at the county, so I would believe it would be the current millage rate by the sale price of the property purchased. You won't truly know until the bill comes out.

My guess is that person who says your bill won't go up this year is right. The re-assessment won't happen till after this year's property taxes are assessed. So you'll pay roughly the same the current owner paid last year, but will definitely go up next year to be assessed at the purchase price.

Good luck!

Theresa Harris · Answer

@Lucas Duce  It depends on the area.  I had a condo that I bought many years ago and sold a few years back.  The new owner's property taxes went up quite a bit.  In another area the situation was reversed as I bought an older home from the original owner.  In that case my taxes didn't go up that much.

Property Taxes Increase after Purchase?

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