why would anybody pay $15,000 on property taxes??

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why would anybody pay $15,000 on property taxes??

Alejandro Obando
New to Real Estate · Queens, NY · Member since 2019 · 16 posts · 5 votes

Greetings BP, 

My name is Alejandro, I'm a new Investor looking to House Hack in Northen NJ. (Hudson County). 
Been putting offers for the past 4 months, but nothing seems to bite. 

Just came across a 2 Family House going for $800K (6 beds 4.5 baths) 
the property in mint condition, BUT the taxes are close to $15,000

it is understood that NJ taxes are the highest. Looking to see any feedback/ insight or a different point of view as to why anybody would agree to Invest in RE in a high tax area?   

Thank you All!! 

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John Teachout
Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
5y

If the numbers work, they work, or not. It's just a matter of calculating all the expenses vs the income from the property. High taxes, insurance, property costs, or any other factors don't determine the deal on their own. 

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  • John Teachout
    Rental Property Investor · Concord, GA · Member since 2015 · 3k+ posts · 3k+ votes
    5y

    If the numbers work, they work, or not. It's just a matter of calculating all the expenses vs the income from the property. High taxes, insurance, property costs, or any other factors don't determine the deal on their own. 

    4Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    5y

    The taxes will be partially related to the cost of the house.  Run the numbers with the taxes and see if it still makes sense.  Even for a house that expensive, for my area (not NJ) $15K in taxes would be really high.

    0Reply
  • Shawn McenteerBusiness Member
    Realtor · Boonton Township, NJ · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    @Alejandro Obando high taxes and high rents in NJ if done right.   I have a property that brings in close to 2k/month with about 400k in equity purchased in 2019, taxes are 13k.  If you do it right the taxes don't matter, what matters is the value add. 

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    5y

    Thats roughly 1.8% of the properties value. While thats higher than the rate in my area, which is about 1.4% of the properties value.....it sounds pretty low by NJ standards to be honest. Bloomfield NH is 3%, East Orange 5.5% of the properties value.

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  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Alejandro Obando

    Nj is horrible with taxes. I spent most of my life in Nj, won’t ever go back. I’m 10 minutes into Pa and taxes here are nothing compared to Nj. And Pa is way more landlord friendly

    0Reply
  • Dennis Yosco
    Rental Property Investor · Bloomfield, NJ · Member since 2020 · 138 posts · 128 votes
    5y

    Its all relative, high nj taxes but we also make a higher income. Depending on where you go in jersey the taxes get cheaper. They are still some of the highest in the country but we also make great money. 

    1Reply
  • Daniel SmythPro Member
    Rental Property Investor · Rockford, IL · Member since 2019 · 471 posts · 342 votes
    5y

    @Alejandro Obando

    Taxes used to scare me.

    Not any more!

    For some reason I never put Taxes as a cost when I bought a property. I do now!

    Taxes, Like insurance, garbage, and water, are just some of the expenses needed to ascertain if a property is worth investing in.

    Plug the tax numbers into your calculations and the numbers will tell you where you stand.

    Your rent amount needs to cover ALL expenses.

    Then you add in how much you want to make OVER those expenses.

    BP has calculators that help a bunch.

    Fear not, and calculate!

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    2Reply
  • Mark J.
    Jersey City, NJ · Member since 2017 · 135 posts · 31 votes
    5y

    Agree taxes in Hudson county seem crazy high mainly because of the assessed values.  If you're looking to house hack in NJ, and be close to Manhattan, the taxes are going to be high.  But if you live in NYC close to manhattan the prices will be higher.  I was shocked to hear how low taxes are in Brooklyn, but was equally shocked at the prices and condition of those properties and the neighborhoods can be hit or a big miss.

    As others have said though if the numbers work then it may still make sense.  With a house hack you have to consider how much you would be paying to live in the same space and also think how that will decrease over time as you raise rents, which in that area should steadily go up unless everyone really does flees the area to live on the farm.  That area is also an appreciation play, which who knows what the future holds, but the past does indicate an upward curve. 

    1Reply
  • Chris Levarek
    Real Estate Syndicator · Phoenix, AZ · Member since 2018 · 903 posts · 1k+ votes
    5y

    Agree. If it works it works. Same could be said, why would anyone buy in Hawaii, when you can buy in Ohio for cheaper. Set your Criteria for success, or ROI limit, and the choice is easy. Never go under it and taxes, price won't matter much.

    Example, I need a 15% cash on cash return. Any property not meeting this, I ignore. 

    Takes the stress right out of it!

    1Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Alejandro Obando:

    Greetings BP, 

    My name is Alejandro, I'm a new Investor looking to House Hack in Northen NJ. (Hudson County). 
    Been putting offers for the past 4 months, but nothing seems to bite. 

    Just came across a 2 Family House going for $800K (6 beds 4.5 baths) 
    the property in mint condition, BUT the taxes are close to $15,000

    it is understood that NJ taxes are the highest. Looking to see any feedback/ insight or a different point of view as to why anybody would agree to Invest in RE in a high tax area?   

    Thank you All!! 

    Usually higher taxes means a nicer place. I guess NJ is the exception.....im just kidding, but seriously location, school system, up keep are typical expenses for taxes. 

    1Reply
  • Enmanuel Adames
    Rental Property Investor · Dover, NJ · Member since 2021 · 1 post · 0 votes
    5y

    @Alejandro Obando I live in Morris county, NJ and taxes are way lower here. Maybe look into buying in a different county. The last few properties I looked at, taxes were from $9,000 and below.

    0Reply
  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    5y

    @Alejandro Obando I don’t know if the taxes in NJ go based strictly on the sales price but in NH we can file an abatement to try to get them reduced.

    0Reply
  • George Waters
    Investor · Hicksville, NY · Member since 2014 · 23 posts · 8 votes
    5y

    @Alejandro Obando

    Hi Alejandro that’s why it’s so important for Biden to remove the cap that Trump put on the SALT deduction

    0Reply
  • Vaughn Smith
    Property Manager · NJ · Member since 2017 · 786 posts · 396 votes
    5y

    @Alejandro Obando Taxes in NJ can be deal killers. Always do what the numbers tell you, but if you want to invest in Northern NJ you'll want to do things. GO BIGGER: In most cases you wont make any real money on a two family and a three family is just about break even, you'll need 4 units and up to see any cashflow more times than not. AVOID CERTAIN TOWNS: Some towns are notoriously hard to see a solid return in because of taxes, property value or rental rates so you'll want to avoid them or tread very light where these towns are concerned (East & West Orange,Irvington, Montclair etc) also remember, your taxes are subject to be increased if you renovate the property (or the previous owner did recently) so always take that into account when shopping for a property.

    1Reply
  • Jonathan Soto
    Lender · Newark, NJ · Member since 2016 · 695 posts · 252 votes
    5y

    focus on numbers. you may have to get uncomfortable and see profits. maybe go to another town. be willing to drive a little more. house hack in a smaller space in the mean time. but focus on numbers. reach out if you need anything. i have house hacked multiple times.

    1Reply
  • Peter TverdovBusiness Member
    Developer · New Brunswick, NJ · Member since 2015 · 1k+ posts · 2k+ votes
    5y

    I have one rental I pay $32,000 a year in taxes. 2 family property. I think I will get a "break" starting next year and they drop to $28k, lucky me. Have a ton of equity in it though. 

    [email protected]732-289-3823
    0Reply
  • David M.
    Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes
    5y

    @Alejandro Obando

    Yeah, its funny how people think a 2fam in Hudson County with $15k in taxes is high.  That's normla for a large house when you move further west into NJ --- but you get a lot more house and some actual land.

    As stated, its about the numbers.  Also, cash flow is sometimes overrated.  We had another discussion on that.  In short, if you purchased a property for $1mil and you could break even with the rent, in 30yrs you'd have 1mil in equity.  If you were in teh midwest with those $100k proeprties and cashflowed, in 30yr you'd have a tough time having $1mil...

    It all depends on the deal and depends on your investment goals.

    Good luck.

    1Reply
  • Will GastonPro Member
    Rental Property Investor · Columbia, SC · Member since 2010 · 1k+ posts · 2k+ votes
    5y

    @Alejandro Obando I invest in high property tax area (Columbia, South Carolina) and my experience is that this is priced into the market. 

    And guess who pays for a lot of it? That's right, tenants.

    Investors typically don't buy unless they can get yield. These high property taxes are just passed on to the tenants in the form of higher rent.

    FWIW I have a six unit property assessed at 432k and the taxes are $12,700/year. 

    0Reply
  • Allen L.
    Rental Property Investor · Chicago and mainly invests in KS remotely · Member since 2018 · 360 posts · 314 votes
    5y

    In my experience, counties with high property taxes experience lower appreciation than nearby counties with lower taxes. How does your county compare? Ofc I'm just guessing and you know best, what if it is the lowest around? Then it's not so terrible. As to why NJ counties charge such high rate, in NJ it's probably mismanagement.

    1Reply
  • Austin F.
    Investor · MI · Member since 2015 · 227 posts · 478 votes
    5y

    In my neck of the woods that house would be taxed at about 21k/yr.

    But the only reason I remember how much I pay in taxes is so I can tell my liberal friends why their rent is so high.

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    5y

    @Alejandro Obando

    When I read the title, first thoughts were either Nj or Long Island.

    Crazy taxes..

    0Reply
  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    5y

    The taxes are high in NJ, but asking why someone would do that is missing the way people invest. Northern NJ is close to NYC so some people migrate out of the city for a variety of reasons, especially during the past 18 months, and are fine paying 25k in taxes to get a house that serves their needs (and 3-4x the square footage for the price) moving forward. Also, these houses with high taxes are all of the houses and our absorption rate has been under one in the hot areas for a year because the value is very high and still appreciates.

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    • Kyle D.
      Rental Property Investor · Bayonne, NJ · Member since 2019 · 9 posts · 2 votes
      5y
      Originally posted by @Jonathan Greene:

      The taxes are high in NJ, but asking why someone would do that is missing the way people invest. Northern NJ is close to NYC so some people migrate out of the city for a variety of reasons, especially during the past 18 months, and are fine paying 25k in taxes to get a house that serves their needs (and 3-4x the square footage for the price) moving forward. Also, these houses with high taxes are all of the houses and our absorption rate has been under one in the hot areas for a year because the value is very high and still appreciates.

      Nothing crazy for North Jersey. I'm living in a house hacked 3 unit in Hudson County paying $14k/year in Taxes, and I still CF ~$500/mo while occupying. For reference, once I move out, it will be cashflowing ~$2k/month.

      Don't focus on taxes if you're investing in this area- focus on the deal as a whole.

      0Reply
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