Our county taxes, that is. And the implications are huge for uptown area property — and prosperity. Essentially, uptown is eating itself.
My husband was recently floored by our mortgage bill for our two rental properties. Double check, he said. There must have been some error with the escrow.
I checked and nope, no error. Our property taxes on our two Plaza-Midwood rental homes had more than doubled. MORE THAN DOUBLED. My tax bill for 2010 was $987.57. For 2011, it was $2006.84. The county claims it is worth $166,000, but we tried to sell last year for $160,000 and didn’t get a single phone call.
“We are going to start losing money!” My husband sputtered in shock. I know the rental math well after years of being a landlord, and I can’t make it work either.
It was unthinkable. Our two rental houses, across the street from each other in Plaza-Midwood, had reliably thrown off $300 to $400 a month combined profit like clockwork for years. But that was back when you could get rent of $850 a month. Now you get more like $700 to $750. Throw in routine expenses and a tax bill that will be close to $100 a month extra on each house and there is no more profit, or so little it isn’t worth the gas to drive over there and rake the leaves. If a pipe or refrigerator goes, you are now in the red for months.
Our old profit margin was actually pretty good for rental property, where the real profit is in having renters pay it off over time, not in the money it throws off every month, as most landlords realize.
If our situation is this bad, most landlords in the uptown area would be in far worse shape than us because most operate on much thinner profit margins. And we are now praying to break even. Rents will have to go up to cover the tax hike, but there is no way renters/the rental market can tolerate close to $100 extra a month — or double that in the better areas like Dilworth and Plaza-Midwood proper. (Taxes went up after the wild Democrat led county spending spree that doubled the county debt in a decade where the population on grew by only 20 percent.)
Worse yet, it is widely known in city circles that 2012 is the year the city will wallop taxpayers with a sizable city tax hike, given that there are no city politicians on the ballot in 2012. A city tax hike would plunge our rental houses, and likely most other landlords’ in the uptown area neighborhood loop, decisively into the red (unless they are already paid for).
Let me assure you, we are not alone. Our properties were purchased strictly as investments. A lot of rental property owners in the uptown area are accidental landlords renting because they can’t sell. With thousands of new apartments and vacant condos overcrowding the uptown area as part of the light rail massive overbuilding hangover, this tax hike will be devastating to the politicians’ precious center city real estate loop. And I don’t even think they realize it.
First, watch for another wave of foreclosures to start from Midwood to Elizabeth to Dilworth. Think about it. How is the guy who just lost his job at BofA, who is living in a $500,000 Dilworth house now worth $320,000 but valued by the county at $420,000 going to manage a tax bill jump from $3000 to $5,200? He’s not. And he can’t escape by renting. Or selling.
For years, it was widely know that properties around uptown were undervalued by the county tax man. This tricked buyers and landlords into a goosed market. Now things are headed in the opposite direction as Democrat politicians pile on extra taxes and tax values are artificially inflated to pay for politicians’ spending sprees. The underlying mortgages and rental equation weren’t structured for that, but now must withstand it.
How exactly do you think this story will end in the uptown area?
