All Forum Posts by: Luke Hoffman

 Have both of the homes been rentals the entire time you owned them or was one of the homes your primary residence at some point? 

I have a SFH rental in an Indianapolis suburb and my property taxes went 17% and 13% in 2023 and 2022 (as rentals). I used to live in that house before I moved back to California. My property taxes doubled all at once because I lost the homestead (homeowner) exemption and the other exemptions since it became a rental property. My property tax rate is 2.72%. If it was still my primary I'd be closer to 1% range. If one of your homes wasn't a primary that became a rental that sounds strange that your property tax went up that much.

 I don't know very much about the Jasper area. If you think that the appreciation will be more than your tax increases or your reduced cash flow, maybe lean towards keeping the properties especially the one with the 3.865% rate. 

As far as 1031, Indianapolis has a lot of development with businesses moving there  so that could be a consideration, not sure how far you are from Indy. The suburbs do well with appreciation and being in high demand because of good schools. 

You have $100k in appreciation in two years, which dwarfs the increase in property taxes.

Whether to hold or sell is based on future estimated IRR of what you own vs estimated IRR of other opportunities

Fees will vary by realtor. Last I checked Redfin was charging 4% commission total to be split between buyer and seller agents before other fees. Maybe ballpark the cost to sell at 8% of total sale price. You'll also have to pay some depreciation recapture unless you do a 1031 exchange.

So take that number and subtract what you owe on each of your mortgages and you'll be left with a net figure. Then ask yourself what you could invest that net figure into and what returns you're likely to get. Also factor in whatever tax benefits there may be in the new investment vs what you have now.

As another poster suggested, are your tenants currently paying market rents? If not, raise them when you're able to.

How much are the property taxes? Have you tried appealing the tax increase?  Doubling seems excessive unless they went from $500 to $1000.  If they went from $3000 to $6000, I'd be on the phone with the city finding out why. I've had houses double in price, but the taxes haven't gone up at the same rate.

Renos can cost a lot, but if in the long term, you can rent the house for more and have less turnover, you will recoup some of that money.  Talk to realtors in your area to find out what they charge.  It can vary.  Used to be 7% on the first 100K and then 3-3.5% on the rest.  You also have closing costs as well as capital gains.