As a Rehoboth Beach rental property investor, it is necessary to know how to accurately calculate property taxes on real estate. One of the main reasons for this is that the total property tax you will need to pay on any property should be part of your initial calculations when thinking about whether or not to buy it. However, property taxes will continue to play an important role in your cash flows and budget for as long as you own the property. Finding out how to accurately calculate property taxes is a valuable skill that all rental property owners should develop.
Key Numbers to Know
To calculate the property tax for residential real estate, you should initially comprehend a few critical numbers:
- Fair Market Value. Primarily, you will need to determine the property’s fair market value (FMV). This is the sum that an informed seller would be willing to pay for the property.
- Assessed Value. Afterward, you will need to identify the property’s assessed value. This is not like the fair market value of the property. A property’s assessed value is computed by its basic features, most recent purchase price, and comparable properties. The property’s assessed value will be most likely about 80% to 90% of the fair market value.
- Mill Levy. Ultimately, you’ll need to know the tax assessment rate, or mill levy, for real estate in your area. The local tax rate can often be seen on the local tax assessor’s website.
With this data in hand, you can then calculate your property tax.
How to Calculate Property Tax
Property taxes are calculated by getting the mill levy (tax assessment rate) and multiplying it by the property’s assessed value. To give an example, if the assessed value of a property is $200,000 and the mill levy for your location is 4%, the entirety of property tax you should pay annually is around $8,000.
Another alternative to know a property tax amount without going through the process demonstrated above is to conduct some research on your local tax assessor or municipality website. Property taxes are classified as a public record, and you can usually look for the most recent property tax bill for any house using the address.
If such material is outdated or unavailable, another alternative method is to use an online calculator to help you estimate your yearly property tax. These online tools commonly need you to know the property’s address and sales price, which are both uncomplicated to get a hold of compared to some other figures. The main downside of this method is that it can’t give you an exact number. Even so, the estimate delivered by the calculator may be good enough to be able to crunch your numbers or build a reliable budget for your property.
Calculating property taxes is a crucial component in owning profitable rental homes in Rehoboth Beach. However, if these and other assignments are challenging or time-consuming, why not hire Real Property Management Diamond to do the responsibilities for you? Our rental management experts offer investors like you fair market analyses and other tools to help you increase the earning potential of your current properties and invest more confidently in your next income property. Contact us today or give us a call at 302-313-7700 to find out more about what we have to offer.
We are pledged to the letter and spirit of U.S. policy for the achievement of equal housing opportunity throughout the Nation. See Equal Housing Opportunity Statement for more information.