Understanding Property Taxes Before Purchasing an Investment Home

Understanding Property Taxes Before Purchasing an Investment Home

  • Jenna Kazmierczak
  • 08/25/23

Finding, buying, and managing your investment property can be an exciting journey, and it could be vital to building your long-term financial security. Before starting the journey, you'll want to ensure you understand the implications of property taxes on your investment. This is especially true if you are looking at Wilmington, NC, waterfront homes for sale, as the property taxes could significantly impact your financial plans.

This blog will help you understand how investment property taxes work in North Carolina, things to consider before buying, and how a trusted real estate agent can help you maximize your investment success.

Why invest in Wilmington, NC, waterfront homes

While there are many excellent areas suitable for investment within North Carolina, it's tough to beat the opportunities in Wilmington. Between the Atlantic Ocean and the stunning Cape Fear River, Wilmington is a charming city offering the quintessential coastal lifestyle.

There is a limited supply of waterfront properties here, and demand is high, meaning they have strong appreciation potential. The rental market in Wilmington is thriving, thanks to tourism and an increasing population. Owners of waterfront properties have an excellent opportunity to make a steady rental income, enjoy long-term appreciation, or benefit from the lifestyle themselves.

Understanding investment property taxes in North Carolina

There is a lot of good news for people looking to invest in property in North Carolina. For example, the state doesn't impose different property tax rates for non-owner-occupied properties, such as those whose use is long-term rentals or short-term vacation lets. Whether you live in it or not, you'll pay the same property tax for your waterfront home.

The state does not set property tax rates in North Carolina: The city or county government assesses them. Wilmington is in New Hanover County, with an effective property tax rate of 0.61%. This doesn't mean you'll pay precisely that percentage: It's the average of what everyone in the area is paying on their property, giving you a basic guideline to work from when assessing your property-ownership costs. This tax rate is pretty average for the state, where property tax rates range from around 0.4% to 1.2%.

Property taxes reflect the market value of your home. So, if your home has a value of $250,000 in the current market, you'll pay around $1,525 in property taxes. North Carolina law requires counties to reassess these property values at least once every eight years, but New Hanover County does it twice as often. This means every four years, you'll receive a new evaluation on your property along with a new tax amount. If you think New Hanover County has unfairly appraised your property, you can appeal the property valuation via the Board of Equalization and Review.

What influences property taxes on Wilmington homes?

There are a lot of factors that can influence the property taxes on your Wilmington home, including a growing population. Wilmington raised property taxes in 2022, the first time since 2017, hiking property taxes up by 6%. However, despite the rise, property taxes are still middle-of-the-road compared to the rest of the country.

It's not just the local government that can impact your property taxes. The property's value is the most significant factor in your tax burden. Because of this, making substantial changes to your property can raise — or lower — your overall bill. You could end up increasing your tax bill by:

  • Adding to your property: Increasing the home's overall square footage almost guarantees a rise in property taxes. Be sure to weigh this against any increase in equity you might see from the addition.

  • Modernizing or adding amenities: Putting in a state-of-the-art gourmet kitchen or in-ground pool can raise the value of your property, raising your taxes.

  • Seeing an increase in local property prices: If homes in the area are in high demand, it will raise the value of your property. That's great for your equity but bad news for your tax bill.

How to manage your investment property taxes

Managing your investment property taxes will help you maximize the returns you see on your property. Prospective buyers in Wilmington, NC, can put a few strategies into action to help handle property taxes:

  • Do a comprehensive cost-benefit analysis: Not all waterfront properties in Wilmington are equal, and not all make equally excellent investment properties. Factor in all costs and benefits of property ownership, weighing the potential rental income against expenses, such as property taxes, maintenance costs, and cleaning fees. Considering all ownership costs can help you make better decisions about which property to purchase.

  • Minimize your tax obligations: There are ways to reduce your property tax bill, including appealing the county's assessment. There are also tax breaks for seniors and disabled veterans. If you fall into one of these categories, it's worth exploring your options, as these discounts on your property taxes can substantially reduce your annual bills. You can also take deductions and credits on investment properties that might reduce your tax bill.

  • Stay knowledgeable about tax regulations: Property taxes change over time. Keep informed of any updates or revisions in property taxes New Hanover County is considering. This can help you stay aware of any changes that might impact your tax burden and give you a chance to voice your opinion on proposed changes.
Most importantly, enlist the help of professionals as needed. Accountants and other tax professionals specializing in investment properties can assess your financial situation and help you minimize your tax burden. When exploring investment opportunities, you should also talk to a trusted real estate agent. A good agent can study your long-term goals, tell you the best areas to invest in, and help you find a property that suits your needs.

Partner with a trusted real estate agent when buying an investment property

Wilmington's waterfront homes for sale offer the potential for steady rental income and long-term appreciation in value. With low inventory and high demand, you need reliable information about which properties offer the best long-term financial stability so you can move quickly when the opportunity arises.

Working with a trusted real estate agent, such as Jenna Kazmierczak, can give you an essential advantage on your investment journey. Jenna's expertise in the Wilmington real estate market, knowledge about ownership costs, and understanding of potential rental incomes can help you find a property that aligns with your financial goals. Make an appointment with Jenna today to find the perfect waterfront home for sale in Wilmington and make your investment dreams a reality.

*Header photo courtesy of Shutterstock

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