Property Tax Bills: Are You Prepared With Reserve Funds?

[John Thedford]

It is that time again (in FL) that owners receive their property tax bills. I just wrote checks for tens of thousands of dollars. New landlords beware: RE investing is just not as easy as "buy it now" and you are done. Got a mortgage? Will your unit have turnovers? Will you need to do maintenance on a turnover? How about property taxes? All of these are reasons why you need RESERVE funds. In the past year, I purchased two new roofs, one new A/C, did two remodels, etc. These costs are expensive. Just when you think you are caught up--bam: you get hit with property tax bills. This is an easy concept to grasp: you will owe them. However, if you fail to save for them, and get pummeled with large tax bills, are you prepared? If you fail to pay, you may find yourself having a tax lien filed for past due taxes. Tax liens, if not paid within two years (in FL), can result in your property being sold at auction. Investors can suddenly find themselves scrambling, borrowing money, etc to cover this debt before it gets to that point. Investors should at least have the discipline to put back 1/12 of their expected property tax bills each month. Taking no other expenses into account, at least the tax man can be kept satisfied with a check once a year. If you REALLY want to be prepared, you need to start a savings account and deposit funds monthly to cover the unexpected expenses that arise, as well as your property tax bills. This will make paying the bills easier (not less money-but less stress). Life is easier when you can write a check rather than scrambling to pay the bills, or having to borrow money to pay the bills. Keep it simple...and start a reserve fund if you have not done so. Sure, I wasn't happy writing almost 50K in property tax bill checks, but the money was set aside for that purpose. The tax man will ALWAYS get his--even if he has to sell YOUR property to do so!