Chapter 4: RE Taxes and Investments Flashcards
What are the 2 categories of Real Estate taxes?
- Ad Valorem Taxes
2. Special Assessment Taxes
Imposed by various state local governments, and based on value of property being taxes. Taxed based on its value “according to value”
Ad Valorem Taxes
ForA tax or levy customarily imposed against only those specific parcels of real estate that will benefit from a proposed public improvement, such as a street or sewer.
Special Assessment Taxes
Local tax assessors office in each community appraises all real property within jurisdiction
Assessment
This is established for sole purpose of computing real property taxes
Assessed Value
The amount of money needed by each taxing district is divided by the total assessment for all real estate located within the jurisdiction in order to arrive at that districts percentage
Tax Rate
One tenth of one cent 1/1,000 of a dollar
Mill
If Real Estate taxes go unpaid for a prescribed length of time, local taxing authority may seek court order to sell at public auction
Tax Sale
What is the right to redeem property at any time before auction by paying back taxes, interest and penalties.
Equitable Right of Redemption
This is allowed during limited period of time after a tax sale
Statutory Right of Redemption
Issued to a buyer at auction if there is redemption period extending after sale
Certificate of Sale
If property is not redeemed within the statutory time period allowed, the buyer may then apply for what?
Tax Deed
Gross income - allowable expenses/deductions
Taxable Income
Increase in worth/value of property
Appreciation
An allowable expense deduction that can be taken even if property in question increases in value. Allows investors to recover the cost of investments over period of time, and allowed on ONLY income-producing property
Depreciation
Cost of improvement / recovery period
Depreciation Formula
Use of borrowed funds to finance investment.
Leverage
Occurs when investors pays back borrowed funds and property appreciates in value over time
Equity Build Up
The gain or loss of a property is determined by deducting the propertys adjusted basis from the sale price. Properties bases starts at its purchase price (including closing costs) and will be increased by capital improvements
Cost Basis
Purchase Price + Capital Improvements - The Depreciation decutions
Adjusted Basis Formula
Profit that results from a sale of a capital asset, such as a stock, bond, or real estate, where the sale price exceeds the purchase price . The gain is the price difference
Capital Gains
