Tax Breaking Point - High Property Tax vs. Value Appreciation

[Benjamin Molnar]

Hi,

My wife and I currently own a two-family in NJ near New York City.  Due to its proximity to the city, the property value continues to increase.  The downstairs apartment generates enough rent to cover about half of our mortgage but we're also spending a lot of money on repairs and renovation as the house was built in 1900.  I've listened to some of the podcasts from people that live in the surrounding areas who invest in older (and expensive) homes but, I've never heard anyone talk about the property tax implications.

It's not quite June and I've already spent close to $7K in property taxes which, combined with the depreciation, make for a nice deduction at tax time.  We would like to look at adding additional investment property in our area but we're not sure it makes any sense because of the high property taxes and there's only so much I can write off.  Does anyone have an opinion on whether it makes any sense to maintain investment property in a high property tax area outside of value appreciation?

We're going to Fort Lauderdale this weekend and, eventually Arizona, to look at lower cost properties with a lower tax rate.  We're thinking from a cash flow perspective, we'll probably net the same amount - maybe more - from multiple smaller properties but it's unlikely we would have the same value appreciation.

Has anyone else gone through this same exercise?  All opinions would be appreciated.

Thanks!

Benjamin