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How to Accurately Calculate Property Taxes

Businessperson Calculating Property Taxes on CalculatorAs a Lynbrook rental property investor, you should learn how to accurately calculate property taxes on real estate. One of the biggest reasons for this is that the amount of property tax you will need to pay on any property must be part of your initial calculations when determining whether to buy it or not. But property taxes will continue to play an important role in your cash flows and budget for as long as you own the property. Learning to accurately calculate property taxes is a valuable skill all rental property owners should develop.

Key Numbers to Know

To calculate the property tax for residential real estate, you must first understand a few important figures:

  • Fair Market Value. First, you’ll need to know the property’s fair market value (FMV). This is the price that an informed seller would be willing to pay for the property.
  • Assessed Value. Then, you’ll need to determine the property’s assessed value. This is most likely not the same as the fair market value of the property. The assessed value of the property is estimated on the basic features, most recent purchase price, and comparable properties. Usually, the property’s assessed value will be nearly 80% to 90% of the fair market value.
  • Mill Levy. Finally, you’ll need to know the tax assessment rate, or mill levy, for real estate in your district. The local tax rate is normally open to the public on the local tax assessor’s website.

With this information in hand, you can then calculate your property tax.

How to Calculate Property Tax

Property taxes are calculated by acquiring the mill levy (tax assessment rate) and multiplying it by the property’s assessed value. To give an instance, if the assessed value of a property is $200,000 and the mill levy for your area is 4%, the total amount of property tax you must pay yearly would be $8,000.

Alternative Methods

Another approach for determining a property tax amount without going through the preceding approach is to do some research on your local tax assessor or municipality website. Property taxes are deemed a matter of public record, and it is frequently the case that you can search the most recent property tax bill for any house using the address.

If such information is outdated or unavailable, another alternative method is to use an online calculator to help you estimate your yearly property tax. These online tools often require you to know the property’s address and sales price, which are both easier to achieve than other figures. The main downside of this method is that it can’t provide you an exact number. However, the estimate you acquire from the calculator could be near enough to be able to crunch your numbers or build a reliable budget for your property.

Calculating property taxes is a huge part of owning profitable rental homes in Lynbrook. However, if these and other responsibilities are challenging or time-consuming, why not hire Real Property Management Innovations to do it for you? Our rental management experts offer investors like you fair market analyses and other tools to help you expand the profitability of the properties you currently own and invest more confidently in your next income property. Contact us today or give us a call at 516-570-9275 to find out more about what we have to offer.

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