My rich uncle would say, Even if I purchased my daughter a $1M home, she would still not be able to afford it because of the real estate tax. Unfortunately, one of the most overlooked expenses for first time home buyers is they will have to pay. With the high home prices these days, the amount you pay can be significant; and therefore be the deciding factor whether or not you can afford to purchase a home or not.
What is Real Estate Tax? Real Estate taxes, also known as Property Taxes, is the amount of tax you must pay to your county. The funds are usually used for schools, police, roads and other municipal services. How do I calculate the amount I owe? The amount you owe is based on an assessed value of your property. The county then factors in some calculated formula to establish your property tax amount. Each state can vary. To get a quick ballpark figure, you multiply your home purchase price by 1.2%. For example, if you purchased your home for $100,000, then expect to pay approximately $1,200 per year in property taxes.
You can also use a Real Estate Tax Calculator. Be forewarned however, that the property must be recorded with the new assessed value before you can use the Real Estate Tax Calculator. How do I pay my property taxes? You can write a check to your county tax collector. You can pay in two installments, December and April, or the entire tax bill in December. Another way to pay your property taxes is through an impound account. Before you close on your loan, ask your loan agent if the mortgage company offers an impound service. If your loan is already closed, call your mortgage company to see if they can set one up for you.
Your monthly mortgage payments will be higher to include your property tax obligations. With an impound account, you are virtually paying your property taxes monthly (the mortgage company collects the extra payments and pays them for you at the end of the tax year). This is a great option if you cannot afford to pay a large lump sum.
As mentioned, the property tax can be the determining factor as to whether or not you are going to buy a house. Make sure to ask the loan agent if the estimated monthly mortgage includes the real estate taxes or not. If it doesn't, and you aren't aware that it doesn't, you might be in for a surprise when they are due.
Buying Real Estate Taxes - How can I be able to make money investing in tax property?
If you have ever heard of the term "buying real estate taxes," then just know it's generally referring to buying tax deeds or tax liens. Tax property is undoubtedly a big money-maker in today’s economy, but you do not have be purchasing real estate taxes in the form of deeds or liens in order for you to make a truckload of cash. There are two particularly easy ways to make cash with tax property, and one does not even involve property title or rather ownership.
1. Always invest in tax property outside the auction – Purchasing real estate taxes is simply done by bidding on the taxes. It is the highest bidder who always wins. This is actually a sub-par way to get this property. You will realize that bidding creates a lot of competition and actually inflates the price of the property related to the taxes. You cannot be able to inspect the property you are buying real estate taxes from, and again, you have to develop your own bid in cash, right there and then.
The best time to get tax property is right after the property has been sold at tax sale. It is still legally possible for the owner to sell during the redemption period, and for sure your competition has stepped on to the next tax sale. If you wait until towards the end of the redemption period and get in touch with the owners directly, you will be purchasing at the most desperate time for all the sellers and you can possibly get deeds for under 1000 dollars at this point.
2. Make sure you go after the tax sale overage – Normally when bidders bid on the real estate taxes, they mostly bid much more than what was actually owed. The owners are normally due the excess cash, but they time and again move on, not knowing that they can collect the difference. Then all that money sits, and ultimately is seized by the government.
By simply locating these owners, you can turn out to be the middleman for the claim and even charge a fee of up to 50% of the amount owed. By working on eventuality, like an attorney, you do not charge an upfront fee, but actually charge more in the long run. Unlike a lawsuit, though, the work needed to release the funds does not really cost much, if anything.
As a tax expert, I’m sure that with the huge number of foreclosures creating millions of dollars in excess funds, this is a perfect way to make truckloads of cash from tax property without necessarily owning one.
Try either of the above alternatives to purchasing real estate taxes, and you will have your business going in right no time. If you work extra hard, then your first year could turn out to be a six-figure year!
Visit us today and I can help you kick start you journey to becoming a six figure earner today! As a tax professional, I will highlight to you every single detail that will help you make fortunes from investing in tax property.
ERNIE BUSTAMANTE