5 Property Tax Factors That Can Help You Create More Profit
There are two kinds of real estate investors. The majority who bury their heads in the sand and avoid any mention of taxes of any type. Then those who take taxes head on, and use them to create more value and profits that others overlook.
Here are five ways to turn property tax related challenges into incredible opportunities for real estate investors…
Negotiating Past Due Property Tax Bills
When a homeowner wants to sell their home, the local taxing authorities are going to demand any past due property taxes are paid off by closing. This can mean sellers are asking way too much, thinking they have to pay off this giant bill. Or their Realtors try to put the entire bill on the new buyer. Often times these liens, as well as second mortgages, mechanics liens and code violations can all be negotiated out for a fraction of the initial ask. It’s any easy way to add tens of thousands of dollars to the equity.
Property Tax Auctions Create Urgency
Not all homeowners will appreciate the gravity of the situation. Yet, local authorities can foreclose on and auction of homes for less than $10 in back property taxes or related fees. When owners are facing the pending loss of everything it creates a lot of urgency. Buying tax liens is one potential avenue to taking over these assets, but simply stepping in to wholesale these properties can often work even better.
You Can Appeal Annual Property Tax Bills
Property owners have the right to appeal and challenge their property tax assessments and annual tax bills. In some areas like NY, as many as 50% of all bills are believed to be flawed and over inflated each year. This is free money for them if they aren’t challenged. Appeal, and you could save thousands per year. That can make these properties far more appealing, affordable and profitable for your end buyers. They can get more cash flow, even if you ask for a higher sales price.
There Are Lots Of Exemptions Available
Exemptions can provide huge savings each year. Some provide $25,000 in protection from taxes each year. Others can result in paying just 25% of the previous bill. These exemptions include homestead, veterans, seniors, disability, agricultural and other exemptions. If you don’t take them you are throwing away money.
IRS Tax Liens
IRS tax liens sound scary but don’t have to be. Often they come from faulty reporting to the IRS, including the sale of previous property. If the IRS thinks someone is behind on taxes they can lien other property they own, even above the value of the property. This can be a big shock to owners, and creates a lot of stress and panic. Yet, even these liens can be released for a variety of reasons or negotiated. It can be your secret hack for getting deals done that others pass up on.
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