Real estate investing in South Carolina: Worth it at 6% property tax?

Tax, SDIRAs & Cost Segregation
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Real estate investing in South Carolina: Worth it at 6% property tax?

Eli Fazzo
NY (long island) · Member since 2019 · 16 posts · 8 votes

Hey Bp family,

I’m looking to move to Lexington, South Carolina area within the next year or so. I would like to start investing in real estate once I get situated down there. My plan is to sell my primary home in New York and purchase a house to live in South Carolina. I also have three other investment properties in New York. I would like to 1031 exchange these properties into investment properties in South Carolina. From the research I’ve done so far, it seems that South Carolina taxes investment properties at 6% which makes a tax bill quite high compared to a primary home. This worries me a little. The high tax eats away a lot at the cash flow. Is it still worth to invest in the area?

Also if anyone has any contacts in the area and would like to share, I would greatly appreciate it. I don’t have any In the area at this point. Tax accountants, investor friendly agents, 1031 exhange experts etc. Thankful for any response or input.

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Sean GrahamBusiness Member
Investor , CPA · Detroit, MI · Member since 2016 · 587 posts · 249 votes
1y
Quote from @Eli Fazzo:

Hey Bp family,

I’m looking to move to Lexington, South Carolina area within the next year or so. I would like to start investing in real estate once I get situated down there. My plan is to sell my primary home in New York and purchase a house to live in South Carolina. I also have three other investment properties in New York. I would like to 1031 exchange these properties into investment properties in South Carolina. From the research I’ve done so far, it seems that South Carolina taxes investment properties at 6% which makes a tax bill quite high compared to a primary home. This worries me a little. The high tax eats away a lot at the cash flow. Is it still worth to invest in the area?

Also if anyone has any contacts in the area and would like to share, I would greatly appreciate it. I don’t have any In the area at this point. Tax accountants, investor friendly agents, 1031 exhange experts etc. Thankful for any response or input.

@Dave Foster might be able to help plan with 1031

@Jackson Hanssen is also a good 1031 resource

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  • Sean GrahamBusiness Member
    Investor , CPA · Detroit, MI · Member since 2016 · 587 posts · 249 votes
    1y
    Quote from @Eli Fazzo:

    Hey Bp family,

    I’m looking to move to Lexington, South Carolina area within the next year or so. I would like to start investing in real estate once I get situated down there. My plan is to sell my primary home in New York and purchase a house to live in South Carolina. I also have three other investment properties in New York. I would like to 1031 exchange these properties into investment properties in South Carolina. From the research I’ve done so far, it seems that South Carolina taxes investment properties at 6% which makes a tax bill quite high compared to a primary home. This worries me a little. The high tax eats away a lot at the cash flow. Is it still worth to invest in the area?

    Also if anyone has any contacts in the area and would like to share, I would greatly appreciate it. I don’t have any In the area at this point. Tax accountants, investor friendly agents, 1031 exhange experts etc. Thankful for any response or input.

    @Dave Foster might be able to help plan with 1031

    @Jackson Hanssen is also a good 1031 resource

    Maven Cost Segregation Tax Advisors553 Reviews
    WebsiteView Page
    2Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Sean Graham

    Thank you!

    0Reply
  • Austin Grant McDowellBusiness Member
    Realtor · Greenville, SC · Member since 2015 · 88 posts · 43 votes
    1y

    Hey Eli, 

    Great question on the 6% and it does play a factor into the cash flow. We always advise our investors on verifying with the lender or us reaching out to the tax assessor's office to get a good idea of what the taxes are. My long term rentals are located in SC, also in a city, and they play a big role in the numbers. Be sure to team up with an agent that knows the area and also the investment strategies that are best for that area. The 6% is a downside to investing in SC but the appreciation over time in the right areas makes it worth it all.  

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    • Chris Hill
      Charlotte, NC · Member since 2017 · 1 post · 0 votes
      1y
      Quote from @Austin Grant McDowell:

      Hey Eli, 

      Great question on the 6% and it does play a factor into the cash flow. We always advise our investors on verifying with the lender or us reaching out to the tax assessor's office to get a good idea of what the taxes are. My long term rentals are located in SC, also in a city, and they play a big role in the numbers. Be sure to team up with an agent that knows the area and also the investment strategies that are best for that area. The 6% is a downside to investing in SC but the appreciation over time in the right areas makes it worth it all.  


       Hi Austin I'd love to pick your brain.

      0Reply
  • Myrtle Mike ThompsonBusiness Member
    Realtor · Myrtle Beach, SC · Member since 2016 · 352 posts · 204 votes
    1y

    @Eli Fazzo I'm an investor-friendly agent for the greater Myrtle Beach and Conway areas.  Not sure which markets you're considering, but if you set your sights on the coast I can help with local lenders, attorneys, tax pros, etc.  I've brokered a number of 1031 transactions and can help with that as well.  Keep in mind the 6% tax rate for second home/investment properties is based on a taxable value and then a local millage rate.  Here in Horry County, you can expect to pay around $3350/year for a property valued at $250,000.  Still much less than you'd pay in many states up north.  As someone else had mentioned, the prospect for appreciation should be a strong consideration.  South Carolina is well-poised for continued growth.  Feel free to reach out if I can help with anything.

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  • Jackson Hanssen
    Member since 2024 · 39 posts · 36 votes
    1y

    @Eli Fazzo

    Happy to jump on a call with you and walk through the 1031 process. Since the properties are in New York you have a few extra steps you need to do to keep all of your funds out of NYs hands at closing.

    Here's an interesting BP thread on the South Carolina property tax issue you mentioned. https://www.biggerpockets.com/forums/725/topics/604427-south.... Would you consider investing outside of your local area? If you have three NY properties you might have enough equity to get into something commercial outside of SC.

    0Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Myrtle Mike Thompson thank you for your response. I am leaning towards investing in the area where I will be relocating to. The Lexington/ Columbia area

    1Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Austin Grant McDowell thank you for the info!

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    1y

    Thanks for that shout out @Sean Graham.  @Eli Fazzo, Almost every location is going to have some surprises that you just have to factor in when looking at investing in real estate.  whether it's the higher than average property taxes of TX or the CA clawback.  Or in this case the additional tax on investment real estate in SC.  The nice thing is that with investment properties it all comes out in the wash of your due diligence.  

    You've got some very nice strategic moves to look at over the next year. Including thinking about moving your investing a little west into GA if the SC tax situation haunts you. 

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  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Dave Foster thank you for your response. There’s a lot to do over the next or so. I would prefer to have my investments close to where I live. At least that’s what I’m used to because I do manage the properties myself here in NY.

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    1y

    @Eli Fazzo

    just curious - i am assuming your NY rentals have debt on them.  what's the rate?  if it's low and you sell, that rate is gone forever.  just something to keep in mind

    0Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Nicholas L. The rates are in the low to mid 4’s. If I can 1031 exchange them into residential property in SC, the debt will be gone. I would have to own the new investments outright in SC if I stick to single family rentals.

    0Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Tanarat Bunchom thank you!

    0Reply
  • Chris DeTreville
    Real Estate Agent · Columbia, SC · Member since 2012 · 112 posts · 106 votes
    1y

    @Eli Fazzo connection request sent.  The taxes can make things difficult, but there are some things you can do to minimize their impact.  

    0Reply
  • Troy GandeeBusiness Member
    Real Estate Broker · Charleston, SC · Member since 2013 · 795 posts · 454 votes
    1y

    @Eli Fazzo The 6% rate is a bit of a misnomer. That's the starting rate and then there are millage rates that bring it down to the actual tax rate. The 4% and 6% rates are just the names given to differentiate commercial and owner-occupied.

    The 6% rate is obviously significantly high, but it's fairly average nationally. It would likely be comparable to what you pay in the NE.

    Just google "Lexington County tax estimator" or whatever county you're interested in and you'll usually find a web tool from the County you can use to estimate the tax bill based on the previous year's assessments.

    There is also a law called the ATI tax exemption that can potentially lower than 6% rate by 25%. Just look that up. There are conditions that must be met.

    Also, I believe the taxes are higher in Richland County than Lexington County, but I don't like there, so I don't have personal experience with that. I've just heard that from many people over the years.

    In general, SC is experiencing an economic renaissance, so it is a good time to invest here. 

    1Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Troy Gandee thanks for the info!

    0Reply
  • Alex CraigBusiness Member
    Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
    1y
    Quote from @Eli Fazzo:

    Hey Bp family,

    I’m looking to move to Lexington, South Carolina area within the next year or so. I would like to start investing in real estate once I get situated down there. My plan is to sell my primary home in New York and purchase a house to live in South Carolina. I also have three other investment properties in New York. I would like to 1031 exchange these properties into investment properties in South Carolina. From the research I’ve done so far, it seems that South Carolina taxes investment properties at 6% which makes a tax bill quite high compared to a primary home. This worries me a little. The high tax eats away a lot at the cash flow. Is it still worth to invest in the area?

    Also if anyone has any contacts in the area and would like to share, I would greatly appreciate it. I don’t have any In the area at this point. Tax accountants, investor friendly agents, 1031 exhange experts etc. Thankful for any response or input.


     Just go a tad to the NW. Tennessee has 0% tax. There are great big and smaller cities to invest (Not Nashville -- to expensive)

    901-848-9028
    0Reply
  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    1y
    Quote from @Eli Fazzo:

    Hey Bp family,

    I’m looking to move to Lexington, South Carolina area within the next year or so. I would like to start investing in real estate once I get situated down there. My plan is to sell my primary home in New York and purchase a house to live in South Carolina. I also have three other investment properties in New York. I would like to 1031 exchange these properties into investment properties in South Carolina. From the research I’ve done so far, it seems that South Carolina taxes investment properties at 6% which makes a tax bill quite high compared to a primary home. This worries me a little. The high tax eats away a lot at the cash flow. Is it still worth to invest in the area?

    Also if anyone has any contacts in the area and would like to share, I would greatly appreciate it. I don’t have any In the area at this point. Tax accountants, investor friendly agents, 1031 exhange experts etc. Thankful for any response or input.

     I own a 21 unit in Lexington County. Lexington is bad too, but not nearly as bad as Richland County. As @Troy Gandee mentioned use the tax estimator on the County website or call the assessor. Explicitly tell them what you're paying for it so you can get the exact number.

    Also, we do a 25% property tax relief in SC under the ATI bill - so if you fill out that form, you will get a reduction for 5 years.

    Info below:

    ATI Real Property Tax Exemption

    South Carolina law now allows a partial exemption from taxation of up to 25% of an “ATI fair market value” that is the result of an

    Assessable Transfer of Interest. The exemption allowed results in a “taxable value” of either 75% of the “ATI fair market value” or the final Current Fair Market Value for the tax year of sale, whichever is higher.

    0Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Will Gaston thanks for the info!

    1Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Will Gaston for how many investment properties can you use this 25% exemption?

    0Reply
  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    1y
    Quote from @Eli Fazzo:

    @Will Gaston for how many investment properties can you use this 25% exemption?


     Each investment property that you buy is eligible. If you buy 100 different properties in 2024, they are all individually able to get the ATI.

    0Reply
  • Eli Fazzo
    OP
    NY (long island) · Member since 2019 · 16 posts · 8 votes
    1y

    @Will Gaston thanks 👍🏼

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    1y
    Quote from @Alex Craig:
    Quote from @Eli Fazzo:

    Hey Bp family,

    I’m looking to move to Lexington, South Carolina area within the next year or so. I would like to start investing in real estate once I get situated down there. My plan is to sell my primary home in New York and purchase a house to live in South Carolina. I also have three other investment properties in New York. I would like to 1031 exchange these properties into investment properties in South Carolina. From the research I’ve done so far, it seems that South Carolina taxes investment properties at 6% which makes a tax bill quite high compared to a primary home. This worries me a little. The high tax eats away a lot at the cash flow. Is it still worth to invest in the area?

    Also if anyone has any contacts in the area and would like to share, I would greatly appreciate it. I don’t have any In the area at this point. Tax accountants, investor friendly agents, 1031 exhange experts etc. Thankful for any response or input.


     Just go a tad to the NW. Tennessee has 0% tax. There are great big and smaller cities to invest (Not Nashville -- to expensive)


    0 property tax..  I think the OP is talking about property tax not income tax ??
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  • Alex CraigBusiness Member
    Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
    1y

    @Jay Hinrichs you are correct and that is the difference in 41,888 post and my 1,444 post. :) 

    901-848-9028
    1Reply
  • Alex CraigBusiness Member
    Real Estate Professional · Memphis, TN · Member since 2009 · 1k+ posts · 1k+ votes
    1y

    @Jay Hinrichs which BTW, 6% is high. Certainly more areas with lower property taxes. With insurance rates going up, best to find areas with the lowest operating cost. Midwest cities with populations under 300,000 typically have cheap property taxes.

    901-848-9028
    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    1y
    Quote from @Alex Craig:

    @Jay Hinrichs you are correct and that is the difference in 41,888 post and my 1,444 post. :) 


    we just got some of those hot chicken places out here in Orygun
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