Saginaw / Midland, MI Investing

[Tommy R.]

I'm an out of state investor (NJ) interested in the Midland and Saginaw markets. I'd love to get some recommendations on local realtors and PM's that service the areas. I'm looking to buy n hold and probably start with SFH's as a good starting point in a market I'm not so familiar with just yet. I'm also curious about how property taxes work. I noticed some areas divide costs by season eg - summer, winter. Is that a standard for Michigan or vary by city?

[Drew Sygit]

What is the appeal of those specific cities?

MI TAXES

Michigan has some of the most complicated property taxes in the US.

First, Michigan uses the State Equalized Value (SEV) to determine INITIAL Taxable Value. The SEV is supposed to be 50% of the market value. Many people mistakenly believe the SEV is 50% of the purchase price, but it is supposed to be the market value.

Most cities have an Assessor that determines how much values have changed each year. Since they can't do each property individually, they use comparables to make broad generalizations to determine percent changes. Then these are applied to all properties in that city. Property owners get an annual update with their winter property tax bill.

Most Michigan properties receive TWO annual tax bills - one from the city and one from the county. Many banks handling tax escrow accounts for mortgages have mistakenly thought there was one tax due twice/year or totally missed one of the taxes.

Okay, so once you have your SEV, you then have to research your Taxable Value. Back in 1994(?) Michigan passed the Hedleed Amendment (http://www.legislature.mi.gov/...) that capped increases to the SEV annually to the lower of 5% or the state's Cost of Libving increase. This was done to protect senior citizens on fixed incomes from being forced to sell their homes due to unaffordable property tax increases.

So now, the city assessor tracks the SEV, but homeowners are taxed based upon the Taxable Value. These two numbers diverge over time as market values increase, but tax increases are capped. The Taxable Value is uncapped and equated to the SEV upon a sale or other transfer of property ownership, with limited exceptions.

Once you know the Taxable Value, you can look up the property tax millage rates, which each city & county sets separately (with voter approval).

It is very possible for property taxes listed in the sale ad to double or triple upon purchase, if the seller has owned the property for quite some time.