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How to Accurately Calculate Property Taxes

Businessperson Calculating Property Taxes on CalculatorAs a Fort Collins rental property investor, it is vital to know how to accurately calculate property taxes on real estate. One of the important factors for this is that the sum of property tax you will have to pay on any property should be part of your initial calculations when considering whether or not to purchase it. But property taxes will play an important role in your cash flows and budget until you own the property. Learning 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 first understand a few crucial numbers:

  • Fair Market Value. First, you will need to determine the property’s fair market value (FMV). This is the amount that an informed seller would be willing to pay for the property.
  • Assessed Value. Next, you’ll have to determine the property’s assessed value. This is usually different from the fair market value of the property. A property’s assessed value is calculated by its basic features, most recent purchase price, and comparable properties. Most likely, the property’s assessed value will be about 80% to 90% of the fair market value.
  • Mill Levy. At last, you’ll need to know the tax assessment rate, or mill levy, for real estate in your region. The local tax rate can normally available 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 getting the mill levy (tax assessment rate) and multiplying it by the property’s assessed value. For instance, if the assessed value of a property is $200,000 and the mill levy for your zone is 4%, the amount of property tax you will need to pay every year is around $8,000.

Alternative Methods

Another option to determine a property tax amount without going through the method indicated above is to conduct some research on your local tax assessor or municipality website. Property taxes are considered a public record, and it is often the case that you can search the most recent property tax bill for any house using the address.

If that information is outdated or unavailable, another alternative method is to use an online calculator to help you estimate your yearly property tax.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 need you to know the property’s address and sales price, which are both easier to get compared to other figures. The main downside of this method is that it cannot give you an exact number. Still, the estimate given by the calculator may be near enough to be able to crunch your numbers or build a reliable budget for your property.

Calculating property taxes is a big factor in owning profitable rental homes in Fort Collins. However, if these and other chores are challenging or time-consuming, why not hire Real Property Management of the Rockies to do the tasks for you? Our rental management experts offer investors like you fair market analyses and other tools to help you enhance the earning of your present properties and invest more confidently in your next income property. Contact us today or give us a call at 970-658-0410 to find out more about what we have to offer.

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