When you first bought a home, for yourself or an investment, you were likely shocked by all the different fees and taxes not included in the list price. One of those surprise fees for new homeowners is property taxes.
When you're investing in a new property, you want to minimize costs and maximize profits. That means investing in states with the lowest property taxes, or at least not in the most expensive states.
To learn more about property taxes and where they're cheapest, read below.
What Are Property Taxes?
Property taxes are state or local taxes that pay for a city's resources to maintain that piece of land. Your property tax covers the cost for things like law enforcement, public schools, governmental community resources, and road work.
Neighborhoods and cities with more resources (public libraries, city pools, community projects) will have higher property taxes.
How Are Property Taxes Rates Decided?
As we discussed above, part of your property taxes depends on the resources in your community. But in general, your property taxes are ad-Valorem, meaning that you'll pay more if your home or investment property is worth more.
Clearly, as someone investing in real estate, you want to minimize the fees and taxes you'll pay on a property. You can't avoid property taxes entirely, but you can invest in states with lower tax rates to save money.
The States with the Lowest Property Taxes
The South (the Southeastern United States) is one of the best places to invest for low property taxes. Out of the top ten list from this census source, seven states are in the South. Eight if you consider Kentucky the South.
Alabama Property Taxes: The Cheapest in the Nation
If you're looking to invest somewhere that has solid family values (a great sign you'll find renters), good property value, and cheap property taxes, look no further than Alabama. Sweet Home Alabama is the cheapest state in the US regarding property taxes.
The Second Cheapest State: West Virginia
If you're looking to invest in a state that's a little bit farther up the coast, head to West Virginia. They are the second cheapest on the list of states with the lowest property taxes, coming in at a median of $899 a year.
That's over a hundred dollars a year more than the median cost of Alabama property taxes ($720), according to the same source.
Honorable Mention: Georgia
Let's say you want to invest in a state that has it all: beaches, agriculture, city life, the biggest airport in the world, and multiple well-renowned colleges. If that sounds like somewhere you want to invest, Georgia is the state for you.
It's not on the top ten cheapest property tax list, but it comes in more affordable than half of all other states. Not too bad!
Finding the Lowest Property Taxes: A Delicate Balance
While no landlord or real estate investor wants to pay more than they have to for maintaining a property, there are some necessary evils. Property taxes pay for resources your property and your renters need access to, so they're worth the investment you make each year.
If you're interested in investing in one of the states with the lowest property taxes above, give us a call. We're a one-stop-shop for real estate investors, from finding tenants to dealing with fees and state taxes.
To learn more about how we can help, click here.
