Are your Property Taxes too High?

are your property taxes higher than they were last year or the year before that chances are they are in fact they're higher for almost all of us so I want to talk about property tax today some things you should be careful of also a couple ways that you might be able to save on your property tax and then we're going to include a little bit about short-term rental tax as well stay tuned welcome to short-term rental riches we'll discuss investing in real estate but with a

specific focus on short-term rentals quick actionable items to acquire manage and scale your portfolio I'm your host Tim Hubbard welcome back to the short terminal riches podcast we're talking about taxes today one of those things that we all just have to pay and you know what happens if we don't well then the city can take our property from us we don't have the ability to sell our property so taxes are just one of those things that we have to pay now with short-term rentals we have

some different taxes that aren't normally associated with an investment with a property investment those are transient occupancy taxes so I want to talk about those real quickly then we're going to jump into property tax and how they're just on the rise all over the place and then we'll finish up with a couple ways you might be able to save on your property tax so so let's just get right into it transient occupancy taxes these are things that we should be paying with our short term rentals

in fact Airbnb actually pays for this on our behalf in a lot of cities and most the bigger cities I found they will collect it and they will remit it to the city uh VRBO also does this for some of the the larger cities but you got to be careful this is something you need to look into if you already have a short-term rental if you're planning on purchasing one we need to know what these transient occupancy tax rates are transient occupancy tax very often referred

to just as tot tax then sometimes you have some other ones mixed in there sometimes there's a tourism tax you have to pay sometimes there's a guess per night tax that you have to pay back to the city or back to your county sometimes you have to pay both your city and your county so you really want to be careful with this make sure you know what these taxes are of course these are taxes that can change and they can increase and that's exactly what's happened

to property taxes pretty much across the board so we're going to get into that in just one second but before we finish up with short-term rental taxes I like to talk about the positive side to us paying our short-term rental taxes I know that doesn't sound great right but the reality is we should be doing it it is Fair the hotels are doing it and the other side to it too is that these cities that are receiving it they need that tax income and they like

that tax income so some cities are receiving millions and millions of dollars from short-terminal taxes that's being remitted to them automatically and this is technically found money for these cities right they didn't have to go out and create a department to collect it of course the bigger the city and the more they want to enforce that they're collecting it then they often come out with their own Department to handle it but when these things are just starting out this has really just found money so it

is a positive case for short-term rentals for cities to not want to ban them or restrict them so I always like to look at that side of things now along with our short terminal taxes if it's not being remitted for us automatically which in a lot of places it still is not then you have to remit it yourself there are some companies that have popped up up to help facilitate this one that comes to mind is alvara or it used to be referred to as my

Lodge tax so check that out we'll put in the show notes but they will facilitate all of your tax payments for you they charge per property they actually handle the licensing and permit process as well so if that is bogging you down you don't like the process or it's just really difficult with your particular City some cities it's much more difficult than others then check out alvara or my Lodge tax and they can assist with that I remember when I was first getting started with short

terminals back in 2015 oh my gosh can't believe it's been that long but in Sacramento where I started I used to have to physically write checks out and remit them into the city mail them in and I know there are still places that are asking for this so just make sure you know your rules and your tax regulations in the city where you have a short terminal or where you're planning on getting a short term rental now this brings us to the next piece of taxes

that is our property tax every property has property tax but the rates the property tax rates are all across the board so we need to know what those rates are especially if we're planning on investing in a new market and purchasing a new property because what's happening is the values of properties are much much higher although I think they're going down and they're probably going to be going down for quite a while of course all markets are different but right now prices of these properties are

much higher than they were a year two years three years ago we've basically been in a bull market for real estate for about a decade really since the end of 2010 a really long time so what's happening is people are buying properties the city's coming along and reassessing the value of these properties and once the value is reassessed at a much higher rate well then your taxes are going way up so that's something that's caught a lot of people off guard but it's also something something

that's different in each City and the rates really vary so I've got some good stats here I want to break down for you some I'm just going to go ahead and read them off but we've got some of the highest effective property tax rates this was in 2022 in New Jersey we have Illinois we have Connecticut those are anywhere from uh one and a half percent to 1.8 and then some of the lowest effective tax rates in Hawaii 0.3 although properties in Hawaii are very expensive

right we have Alabama down there 0.37 Arizona 0.39 Colorado 0.4 Tennessee 0.4 but the thing is these rates can change so if we look at Texas for example Texas has some of the highest increased property tax rates in our nation according to atom Data Solutions in 2016 Texans were paying on average a little more than three thousand dollars annually for their property taxes and then in 2021 so this isn't even current numbers it had increased 32 percent and some of the stats that I saw aside

from this are high it's like 50 percent increases over the last five six years in Dallas and so we really got to be careful with that so we need to make sure we know what our tax rate's going to be after we purchase a property let's say we're buying a property that's five hundred thousand dollars and the last time it was assessed it was two hundred and fifty thousand dollars it's very common in a lot of markets and maybe this was only a couple years ago

well your tax rate is going to double once they reassess your property now we need to know our specific Market every Market's different right because the way that those property taxes are actually assessed is different and varies by market varies by City varies by County so it's just something that we want to make sure we know and it's something that's easy to find out too before you purchase your property just make sure you check your county and your city and your state tax regulations on property

tax so you know what you're getting into before you pull the trigger so I know this has made it difficult for a lot of people that just bought properties recently maybe it caught you off guard there is light at the end of the tunnel though well I should say for some of us and sadly probably not the majority but there are our services out there that go to bat for you to help lower your property taxes so I know in Memphis where I have a lot

of properties I work with an attorney that this is specifically what they do so every year they reach out to me and they say what are your annual revenue numbers everyone's gonna each company's gonna do this a little differently but this is what they ask for me and they go to bat for me and they appeal the assessed values for my properties and what they do the way they earn their money is they take this this particular company is taking 50 percent which yeah is quite

a lot but it's also something that I wasn't in there doing and going to the appeal process and doing all that so for me it's kind of a win-win but I know there are other properties out there actually just came across another one called homesteadyapp.com they're only taking 25 now I don't know how effective their service is but this is worth Googling this is worth checking out to see if you're just paying extra property tax really for for no reason so I know a lot of

us are just paying our property tax out of an escrow account so it goes out with our mortgage payment uh and it might not be top of mind for you but I encourage you to take a look because those things can be adjusted you'll notice if you've bought a property recently uh sometimes you're paying more to your escrow account that's escrow account is a count that's paying your taxes your insurance and your mortgage and so sometimes you get a check back at the end of the

year that's always nice but sometimes they raise that amount and so your mortgage payment with your escrow combined actually goes up so take a look at your property taxes see if there's a way that you can sort of shave that down a little bit make sure you know your short-term rental tax regulations too and if you're having trouble remitting them or you want a little bit of help you can check out that company mylodge Tax or Alvera so at the end of the day taxes are

just one of those things that we have to pay but it's something that's easy to to figure out it's easy to calculate and don't let it catch you off guard if you're in the process of buying a property right now make sure you know roughly what your property is going to be assessed at and until next time I hope that helped a little bit hope you have a fabulous week and we'll talk to you soon want to get on the fast track to Financial Freedom through

short-term rentals well it all starts with the properties you acquire but you want to make sure that you acquire the right properties I want to give you my ebook that will show you how to do just that there is no charge it's my gift to you for being one of our subscribers just go to restmethods.com that's r-e-s-t-methods.com