Estimating Future Property Taxes

[Michael Watford]

Hey BP,

I am looking at purchasing a home in Warren, MI. The numbers all make sense but when I call the city/county they are estimating the taxes to be $4200 next year on a 117k sale price.

If that turns out to be true the cash flow goes negative.

Looking at the area I can see other homes that sold in 2021 for 150k+ that only paid 1-2k in taxes in 2022.

I can't find any homes in the area paying 4k+ taxes.

I am very confused on how to properly estimate property taxes.

Has anyone else ran into something similar? Got any advice

Thanks in advance!

[David Chappell]

Quote from @Michael Watford:

Quote from @David Chappell:

I would check and make sure you arent comparing property taxes for owner occupied properties vs investment properties. For example, in Alabama where I invest, non-homestead properties are sometimes double what owner occupied ones pay. Using the rates from the link below, it estimated non owner occupied taxes to be $3352...so $4200 is a little high but not too far off. I estimated the taxes incorrectly on my first property, I ran the number as an owner occupied but when I lost that exemption, the taxes went up 2x and wiped out a majority of my cashflow but rents are slowly rising and Im catching back up.

https://www.roomsrealty.com/mi...

 These are great points & really appreciate the advice here.

I actually found a place that sold for 160k in 2020 and their taxes were just under 5k last year.

Yikes! Not giving me a good feeling for my future if I go through with this deal.

I hope you get back into the + on your investment here soon!

 Thanks! Its tougher to find cashflowing deals in today's market...if a few thousand +/- on the tax bill puts you into the negative then the margins may be a little too tight for it to make sense.