3 Ways Assessors Value Properties
Ever wondered how your property value is assessed by the county? Assessors, which are different but very similar to appraisers, use 3 methods to determine the value of your property. As a real estate investor, it’s important to know the value of your property because it impacts your financial planning! Once the value is determined, then the tax rate is applied, giving you your yearly property tax amount.
These methods can vary depending on the type of property, its location, and local regulations. Here are 3 common approaches:
#1 Sales Evaluation
In a sales evaluation, the assessor values the property using comparable sales in the area. Criteria includes location, the state of the property, any improvements, and overall market conditions. This involves analyzing recent sales of similar properties in the area to determine a fair market value for the property being assessed.
#2 Cost Method
When using the cost method, the assessor determines your property value based on how much it would cost to replace it. This method estimates the cost of replacing the property with a similar one, taking into account depreciation. It considers the value of the land and the cost to replace the improvements (buildings, structures, etc.) on the land.
#3 Income Method
The income method is based on how much income you could make from the property if it were rented. Primarily used for commercial properties and rental properties, this method determines value based on the income the property generates. The assessor estimates the property's potential income, subtracts any operating expenses, and then applies a capitalization rate to determine its value.
Remember, assessors determine the value of your property NOT the tax rate!
Your property value is very likely to go up once you’ve purchased, so it’s very important to remember to calculate your new property taxes into your numbers prior to purchasing the property! A huge hike in property tax could be a total deal killer!
If you’re looking to take control of your investment properties and learn how to manage them on your own, then you’ll want to check our new book, The Self-Managing Landlord! Click here for the chance to win a free copy and a free 60-minute coaching call with WIIRE co-founders, Amelia & Grace.
Understanding how your property value is assessed is essential for real estate investors. The methods used by assessors, such as sales evaluation, cost method, and income method, can vary depending on property type, location, and local regulations. By taking control of your investments today, you’ll be able to make better decisions for your financial future. Happy investing :)
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