Everything You Need to Know about Property Maintenance in the U.S.

Real estate taxes

Every owner of real estate in the United States is required to pay property tax once a year, which averages 1-2% of the value of the property. This money goes to the maintenance of the local municipality: schools, kindergartens, libraries, fire and police stations, emergency departments. Also, thanks to this tax, roads, and highways are in working order, parks are well-groomed and green, recreation areas are always cleaned.

The better the infrastructure is, the higher the tax you will pay. That’s because the rates differ not only in different states but also in different cities and even regions.

When choosing in which state and city to buy real estate, start not only from the rates but also from your situation. For example, if you are moving with children, then it is better to choose a place with a higher tax, but it’s guaranteed to ensure that your child will be allowed to study in a public school.

The savings on private education will more than cover the annual tax. If you don’t have children and you don’t plan to have them in the near future, and you’re planning to spend most of the time at home (for example, you are a freelancer), you can look at the places with the lowest rates, since a very developed infrastructure is not so important for you.

The higher the tax, the more local authorities have to work to keep the area in order. Therefore, choosing places with a higher rate, you know in advance that you will move to a well-groomed, clean place with the most developed infrastructure.

Know the rates in advance, as the percentage may differ even for houses on adjacent streets, depending on how many residents and businesses in the county are paying taxes, the original cost of the unit, and other state-specific taxes.

How to calculate taxes manually

The appraiser determines the average market value of the property, which is reviewed every two to three years. But the owner has the right to annually apply for a review of this amount. At the same time, it does not matter at what price you bought a home - what matters is how much it costs on average on the market.

- For example, you bought a house for $ 450 thousand in New Jersey, its estimated value, according to the latest data, is $ 510 thousand.

- For the calculation, about a third of the assessed value is taken (in some districts, this figure varies within 10–33%). That is, the starting point is $ 170 thousand.

- Next, the equation coefficient is used, which is determined based on the price of the object. It can be 100% (in this case, the amount will not change), be lower (if the property in the area is very expensive), or higher (if the property has become cheaper). Suppose that in our case it will be like this: 170 thousand × 70/100 = $ 119 thousand.

- The following includes benefits that apply to retirees, military personnel, low-income individuals, and homestead exemptions. Suppose that the latter case is yours and the discount is $ 9 thousand. That is, after deducting the benefit, $ 110 thousand remains.

- In the last step, the amount is multiplied by the local rate. For the state of New Jersey, it is 2.35% (but in a particular county it can be higher or lower). 110 thousand × 2/100 = 2.2 thousand. Thus, the property tax that you have to pay annually is $ 2.2 thousand.

Housing payments

Housing payments also vary depending not only on the state but also on the city you live in. This is especially true for electricity rates, parking costs, and various subsidies from the state. At the same time, in each state, several companies are engaged in the supply of resources, therefore there is plenty to choose from.

The maintenance of even the most modest apartment will cost at least $ 150 per month, excluding insurance, parking, management company fees, and real estate tax (if your home is yours). In states where the minimum wage is higher than the national average (for example, California, District of Columbia, Massachusetts), this amount is higher.

How to pay. The client independently informs the company about the meter readings, after which the supplier sends an invoice. Payment is mainly online, through personal banking or the site of the management company, the last option is mail. It is almost impossible to meet a long line of pensioners wishing to pay bills at the bank. If you want to manage your annual payments more efficiently, you can use an HOA accounting service.

Renting out

Profitability and rates

The rental price depends on the state and the specific city. For example, you can easily rent a one-bedroom apartment in New York for $ 2,000 in Oklahoma City for $ 500. Accordingly, the profitability of long-term rental housing is significantly different. As a general rule, in large cities, due to the high price per square meter, rental returns are usually lower than in small ones, but the demand and liquidity of objects are higher.

Taxes

If you rent out a home, you are required to pay tax in the amount of 30% of the profits received (the rate specified in the lease). The amount can be significantly reduced - US law provides for payment only on net income, minus the cost of maintaining real estate: payments to the owner's association, depreciation of the object over the past 15 years, repair costs, mortgage interest, real estate tax, repair costs, " communal apartment ", insurance, etc.

If you rent out the main housing for a period of fewer than 14 days, you do not need to report your income to the inspectorate: you do not have to pay tax in this case.

Management companies

If you rent a second home located, for example, in another state, or spend most of your time outside the United States, it is reasonable to use the services of a management company. Competition in this market is high, and finding a reliable organization will not be difficult.

Employees of the company pay utility bills and taxes in your absence, control the timely transfer of rent by the tenant, help find tenants, fix minor problems in housing, monitor the condition of the house or apartment. The range of services can be much wider, but the fees will also be higher.

Management companies charge 10-15% of the rental rate for their services. At the conclusion of the contract, the owner also makes a one-time payment of half the monthly rent.