Understanding property tax costs is vital to any real estate investor’s bottom line. Property taxes are one of the major components that have to be plugged in when figuring out how much a property is going to cash flow. Property taxes by state can however vary widely as this report from the National Association of Home Builders demonstrates. Some states, such as New Jersey and New York have very high effective property tax rates, while other states like Alabama and Wyoming are much lower.
Investors also need to understand however that property taxes potentially only make up a portion of your total tax burden. Many states will also tax income. Others, like Tennessee where I live, will also tax entities such as LLC’s that are used to hold property. Plus, some properties are going to be taxed differently.
Thus, while the attached report is interesting and informative, it only tells part of the total tax story. Smarterlandlords are wise to research and uncover the entire tax story and burden wherever they plan to invest.
