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My Annual Property Tax Gripe

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Complaining about property tax

Ugh! I received our annual property tax bills a few days ago. Surprisingly, they didn’t increase much this year. For 2022, our property taxes increased from $13,622 to $13,754. Oh wow, that’s a 2% increase from last year, just $132. This is much better than in recent years. Usually, we see about 4-5% increase every year.

However, I am still upset with this tax. The quality of life has gone down tremendously over the last few years. There are homeless camps all over the city. Shoplifters are running wild. Businesses are leaving downtown and Portland is no longer the vibrant city it used to be. I’m tired of paying more taxes every year when things keep getting worse. But you know what they say about death and taxes. It’s unavoidable. Today, I’ll just gripe a bit about our taxes and share how property tax works in Multnomah county.

Property Tax Rule

Our property tax rule is a bit complicated, but I’ll try to explain it simply. In 1997, the taxable value of properties was frozen and this “assessed value” can increase by only 3% every year. The property tax is based on the assessed value and most homeowners pay a little more taxes every year. The city can reassess a home when the homeowner makes major improvements such as a basement refinishing or a kitchen remodel. Reassessment usually means the AV and property tax will increase tremendously. This is why our neighbor’s property tax is more than twice what we pay.

Property tax can also increase when voters pass various bonds. We’ll take a look at our duplex as an example.

Duplex property tax

In 2018, the AV increased 3%, but the tax increased 9%. This increase was due to 2 bonds that passed in 2017. A $750 million school bond and a $250 million affordable housing bond. Voters passed these bonds and everyone will have to pay for them. Even renters will feel the effect of the property tax increase because rent will go up. Landlords can’t eat all these increases. Our property tax, insurance, and HOA fee have all increased over the last 12 months.

Note: The AV is usually much lower than the real value of a property because the increase is capped at 3% annually. I’ll ignore the “real market value” for now because I don’t want to complicate the issue further. The property is often reassessed when it is sold, but if there are no major improvements, then the AV won’t increase over 3%.

Investing elsewhere

This post was originally written in 2018. Back then we lived in a 2 bedroom condo and has 3 rental units. A duplex and a 1 bedroom condo. Since then, we sold and moved into the duplex. Now, we have just 2 property tax bills. It’s a bit simpler.

When we sold, I used the money to pay off the mortgage on the 1 bedroom condo and invest the rest in real estate crowdfunding. In hindsight, I should have invest everything in real estate crowdfunding. The annualized ROI has been excellent, about 13%. I should have refinance the 1 bedroom condo when the rate was low instead of paying it off. The rate was quite good back in 2019 and 2020.

Property Tax Charts

The chart below shows the history of the taxes on our 2 properties.

It’s nice to have a little break from the relentless march upward. The last time the property tax didn’t increase was during the 2008 financial crisis. I’m pretty glad we only have 2 properties now. The bill would be well over $20,000 if we still had 3 properties.

Real Market Value Chart

Just for fun, we’ll look at the “real market value” as well. This is the city’s guess at what our properties are really worth.

This seems pretty accurate. Our duplex is probably worth around $760,000. The 1 bedroom condo is worth around $240,000. I’m just glad we aren’t looking for a house today. Everything seems so expensive. We owe about $266,000 on the mortgage. So our equity is pretty good. If the rate ever comes down, I might take out a HELOC to remodel the duplex. We have been updating the place, but it needs a complete kitchen and bath overhaul.

Eventually, we plan to move to Santa Barbara, CA. The houses there are quite expensive. Even a small house cost over $1,2500,000. We’ll probably need to get a mortgage right before Mrs. RB40 retires. Otherwise, we might not be able to borrow much when we’re both unemployed. I guess we’ll see how it goes.

Do you get psychotic every time you see your new property tax bill? Did your property tax increase this year?

***If you want to invest in real estate, but don’t want to be a landlord, check out CrowdStreet. You can generate very nice passive income from real estate projects like apartments, offices, restaurants, and single-family homes. See how I’m doing with my real estate crowdfunding investment.

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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