Real estate investment is very much a game of numbers. Rental property investors have multiple influences on cash flow and return on investment. First, calculating the true market value of a rental property before buying is crucial; then you want to buy at a discount.

1. When it Comes to Taxes, Investors Do Have
Recourse
Real estate investment is very much a game of numbers. Rental property investors
have multiple influences on cash flow and return on investment. First, calculating the
true market value of a rental property before buying is crucial; then you want to buy at
a discount.
After you figure out what you’re willing to pay, you must do a local rental market
analysis to determine the demand for rental property as well as prevailing rents for
comparable homes. If these first two calculations are acceptable, then it’s the big one,
calculating your costs of ownership and management.
There are a number of costs, from repairs to insurance, and they’re all important.
Getting this right is important, as you’ll need to hold this property for several years to
get your investment out of it. You want your cash flow to remain positive throughout
that time. One cost factor that we all have to deal with is real estate taxes, and pretty
much we have no control over what the local government does in raising valuations or
tax rates. Well, maybe.
Some reports tell us that as many as 60% of homes in this country are over-valued for
tax assessment purposes. This is largely due to the tax jurisdictions doing little in the
way of re-assessment and re-valuations after the market crash. Sure, you may have

2. bought a rental after the crash, but it is likely that it was still valued at pre-crash levels.
Even if it was revalued at the time you purchased it, the local taxing authority can raise
their valuation in future tax years.
Some reports are that the cash-strapped situation for municipalities is resulting in re-
valuations and increases. In many areas there are caps on how much rates can rise, or
increases must be approved by voters. This leaves only increasing the home’s value as
a tool to increase revenues. Raising the value without increasing the rate can still be a
significant drag on cash flow and ROI.
We are not totally at their mercy however. You can dispute an increase in valuation, or
even dispute the current value if you bought after the crash and the home wasn’t re-
assessed at that time. Let’s look at some of the factors you can use to prove your case
and get those property taxes reduced:
 Lower home value since last tax valuation – Let’s say that you bought
post-crash, but the pre-crash value is still on the books. You can get data for
home values pre-crash in the area and do a current market analysis to prove the
lower value.
 Value is arbitrarily raised based on a formula – Some jurisdictions have
few assessors, and it isn’t possible to go out and look at every property. They
use an arbitrary calculation based on some published value appreciation numbers
to raise the taxable value. Get a thoroughly calculated value, perhaps from a
local appraiser or real estate professional to refute their arbitrary increase.
 They simply do not have the right property characteristics – Check the
square footage on the tax rolls and lot size. They can be inaccurate. One
example is a drive-by valuation that thinks you have a finished second story
when you merely have dormer windows into an unfinished space.
 Changes in the neighborhood – Real estate is all about location. Have there
been zoning changes or other developments in the area that make your home
less valuable or harder to sell or rent? Prove that the value has been negatively
impacted to reduce the assessment.
What you do want is for your approach and case to appear professional and objective.
You may want to hire an appraiser for your valuation, as they are state licensed, so you
can use that professional certification to your advantage. Give it a try if property taxes
are rising and hurting your ROI.