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Real estate deal analysis:
A lesson learned: single-family home investing
Will this property still cash flow?
Short thread
A lesson learned: single-family home investing
Will this property still cash flow?
Short thread
As investors, we have the ability to run financial projections on deals quite easily.
Spreadsheet models, online calculators, or on paper - within 15-10 minutes you'll have a set of returns in front of you.
Spreadsheet models, online calculators, or on paper - within 15-10 minutes you'll have a set of returns in front of you.
I want to talk about property taxes in this thread.
They are generally misunderstood and I notice a lot of investors lack the discipline to really dig into them.
I was hit with an increase of 30.89% on my property tax bill.
Will I cash flow? Did I account for this increase?
They are generally misunderstood and I notice a lot of investors lack the discipline to really dig into them.
I was hit with an increase of 30.89% on my property tax bill.
Will I cash flow? Did I account for this increase?
How are property taxes calculated?
In my area, PT's are calculated using the current value assessment of a property determined by an assessment corporation.
The CV is then multiplied by the municipal and education tax rates which are applicable to my class of property.
In my area, PT's are calculated using the current value assessment of a property determined by an assessment corporation.
The CV is then multiplied by the municipal and education tax rates which are applicable to my class of property.
Why is this important?
You need to take into consideration that your property will eventually be reassessed.
Your property taxes will change every X amount of years as an assessment period will take place.
You need to take into consideration that your property will eventually be reassessed.
Your property taxes will change every X amount of years as an assessment period will take place.
If you don't account for an increase in property taxes (usually they're going up), you could be caught off guard when you get the reassessment notice.
Mine went up 31%!
Mine went up 31%!
Now, I still cash flow on the property and my returns didn't really change.
Why?
I took into consideration that it was a reassessment year and I know property values have been skyrocketing here.
So, I was proactive vs. reactive - I made sure my models reflected a 25% increase
Why?
I took into consideration that it was a reassessment year and I know property values have been skyrocketing here.
So, I was proactive vs. reactive - I made sure my models reflected a 25% increase
I was slightly off on the reassessment value but nonetheless, I knew going into the deal property taxes would increase significantly.
As investors, we need to pay attention to these aspects of the game.
Understand that your returns are dynamic and can easily be skewed.
As investors, we need to pay attention to these aspects of the game.
Understand that your returns are dynamic and can easily be skewed.
Take control within your ability and be prepared for the things you cant control.
Lesson learned?
Always make conservative projections.
Never adjust your estimates to make the deal work.
Your cash flow could take a hit overnight.
Lesson learned?
Always make conservative projections.
Never adjust your estimates to make the deal work.
Your cash flow could take a hit overnight.