Recommendations for dealing with municipal taxes

CITY TAX CITY TAX

In some countries, municipal taxes are calculated as a percentage of the value of the property,
Those investors in the US know this closely.

In many areas of the US, investors who bought properties several years ago,
Benefited from rising prices and rents, the rise in property prices led to an increase
But this negative effect was offset by the rise in rents during the same period.

The US economy recovered from the crisis, showing imaginary unemployment figures, as 3.6%
Which explains the rise in wages, but despite the average increase in wages, this increase is not
Permeates equally to all strata of the population, the stronger population usually acquires
Residential buildings, the weaker populations, which most of the investors' assets turn to,
Less benefit from the rise in wages, and after strong increases in salary in recent years,
Some of them have reached the limit of their ability to absorb an increase in the monthly rent.

Since the rent is paid from the wage, there is a limitation as to how much the rent can be raised,
On the other hand, property prices can still continue to rise due to the ability to purchase with a larger mortgage,
In this way, a bubble of assets begins to emerge, property prices are cut off by the purchase of wages,
And continue to climb as long as the financing is available and liquid, as long as the atmosphere in the general public is that property prices are only rising ……

Here is another problem, an investor who enters the market these days, and checks whether the numbers are getting along for him,
At the current price level, he can not guess how much the property he purchased will continue to rise, and as a result
City taxes will rise, so will play the future return on investment.

Since it is not possible to estimate how much the municipality's taxes will rise, it may be advisable for the investor examining a certain asset,
Check the municipal taxes paid by the owner of the previous property before the crisis (data available on the county site),
And according to the number obtained, calculate the expected return from rent (although the rent can still go up, I am in favor of conservatism).

PS After conservative calculation of rental yield, it is worth remembering that starting from 2018, the tax exemption was abolished
For us as foreign investors in the US, so in investing primarily in a single property, we are exposed to doubling in tax payments,
Despite the existing tax treaty between the countries, tax will be paid in the United States, while in Israel, if the tax is considered,
Under the 15% reduced tax system, it will not be possible to offset the tax paid in the United States.

Since we, as investors, do not intend to live in assets purchased for the purpose of investment, no emotion was involved in determining the feasibility of the investment,

The decision will be made after such and other tests, where the bottom line is to recommend a conservative rental yield,
And performing the assessment of tax payments in the United States and Israel, the balance that will remain, this is the real amount that will remain in the investor's pocket,
This will be the final seal on the feasibility of investment!

Happy holiday to everyone

The 16 cities where Americans struggle the most to pay rent

Home prices have been rising faster than incomes, and builders aren't able to keep up with the demand for affordable housing. In Los Angeles for example, rent costs more than 100% of the typical income for the lowest-earning residents.

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