Quote from @Ryan Broschard:
Hey everyone,
Quick backstory. I purchased a townhome in Fort Mill, SC (Lancaster County) in July 2023. This is an investment property. The first year my property taxes were $1,619. I have just received an escrow analysis statement, and it indicates that's my property taxes for the year will now be $6,839. This is making my mortgage payment go from $2,293 to $3,308 per month.
A few questions for those who have experience with this:
1. Does this kind of increase seem reasonable?
2. Have the property taxes increased because this is an investment property and not a primary residence?
3. Is there any way I can lower the property taxes to the original amount?
Any insights or advice would be greatly appreciated. Thanks in advance!
I have attached a photo of my original property taxes along with the new projected property taxes.
![](https://bpimg.biggerpockets.com/no_overlay/uploads/uploaded_images/1737610607-mortgage.jpg?twic=v1/output=image/quality=55/contain=800x800)
@Ryan Broschard
Hi Ryan,
You have hit a common issue many new investors fail to anticipate. It comes down to how each county handles property tax valuation.
To put it in generic terms - a title company & lender will base your initial mortgage payment on the property taxes of the previous owner. In short, you ride the 'coattails' of the previous owner's taxes for the first year. Usually in the year following your purchase, the property appraiser will reevaluate the house based on the new sales price. In addition, if this was originally an owner occupied house, there are often homestead exemptions where the first $XX,XXX. of the value of the home aren't taxed. In Florida where I live that amount is the first $50,000 for a married couple are exempt.
So to put all that into action, let's say the previous owner paid $100,000 for the property 20 years ago and lived in the property. You came along last year and bought the property for $300,000 as an investment property.
So in year one, your taxes were based off the previous owner's purchase price of the $100,000 plus any annual tax increases since they owned it. In addition, in Florida there is a cap on property tax increases each year of about 3.5% increase... but big caveat... UNTIL YOU SELL THE PROPERTY... then the cap goes away and you are taxed on the fair market value of the house which is usually the new sales price less maybe 15%. I don't know if South Carolina has those or not... but the rest of this explanation should still be valid.
So back to the example... So if you paid 3x the price of the previous owner, and lost the homestead exemption due to using it as an investment property, it is entirely feasible for taxes to double or triple. It's really not that they double o tripled them, it's just that you paid way more for the property, and so now you are paying the taxes on that higher amount - where the previous owner was paying taxes based on a much lower amount. But if you aren't expecting that, it can be a shock when you first see it. It's a beginner's oversight. One that you will only make once. lol! If you go to the property appraiser's website, you can probably look at the year over year change in the taxable value of the property. Everything you describe though is just the normal process of how taxes are reassessed when a property is sold. So you didn't do anything wrong, you just didn't know.
As for alternatives, most counties have an appeals process... but you will likely lose if you go that way. Why? Because counties usually set the fair market value of properties about 15% below the actual sales value. So for you to lower your taxes, you have to show where similarly valued houses that are selling at the same time you purchased your house sold for MORE than 15% below what you paid. In other words, you have to argue that you over-paid for the house you bought by a significant amount. So if you found examples of houses that sold for 20% below what you paid, they might lower your taxable value by 5% after taking that 15% cushion they give you into account. You can likely see where a 5% reduction in your taxes isn't going to do much to reduce your bill.
Hopefully it helps to understand what happened and why.
All the best!
Randy