It feels like the tornado sirens are going off across the city of Jersey City. Everybody has stopped what they’re doing and perked up their heads to see what they can—while mildly panicking. It’s not a tornado this time, just property revaluations. But, in a state that already has some of the highest property taxes in the country, the effects may be just as devastating for homeowners. This spells opportunity for real estate investors to help re-stabilize their neighborhoods—and make a little money in the meantime.
Property Tax Revaluations in Jersey City
Jersey City has a history of dramatic shifts in property taxes—and ensuing financial turmoil for many homeowners. The last revaluation took place in 1988, causing steep tax increases, especially for Downtown and the Heights, and increasing the tax base from $800 million to $5.6 billion. Despite citizen protests about assessment disparities, many locals lost their homes. Regarding the current revaluation, even Mayor Steve Fulop admits that many residents could lose their homes again.
The latest state-mandated revaluation effort has already begun, with inspectors from the contractor, Appraisal Systems, knocking on doors of every house in the city. They measure and photograph a home’s exterior and then request to come inside to evaluate the interior. You are not required to let them in but, of course, officials recommend it as a way to make the valuation more accurate. When all the data is compiled, Appraisal Systems will compare your property to recent sales of comparable homes to determine its market value. The new assessments will reflect your property’s market value in October and should be available to you around Thanksgiving.
Property Tax Increases Will Hit Some Harder than Others
The effect of the revaluation on each property’s tax assessment will vary. Property values have risen significantly since the last revaluation and the average home is assessed at just 23.66% of its current market value. But, there is a lot of variation because one property’s market-to-value ratio, and subsequent tax assessment, may have been set back in 1988, while the neighboring house’s taxability may be based on its 2015 value. So, while nearly everyone will see a tax hike, it will be more dramatic for some than others when the tax bill—reflecting the new tax rate—comes in the third quarter next year.
There are two population segments in Jersey City that will be hit the hardest by the property valuations. Neighborhoods where prices have soared over the past several years—especially downtown—are likely to see a huge jump in their taxes. In addition, there’s widespread fear that the revaluation could squeeze out long-term residents whose property taxes are based on outdated market values. What will these residents do when faced with property taxes that could potentially double or even triple? Well, they may flee Jersey City—in droves.
While a mass flight of homeowners could dampen Jersey City’s current real estate boom, it would also pose an opportunity for investors. When homeowners become unable to afford an enormous property tax hike, they look for a way out. Many of these residents have been in their homes for years and may not even be able to afford to do the necessary repairs to put it on the market—if there even are buyers for the traditional real estate market. This means that there may be a glut of distressed properties coming our way to purchase at a discount and rehab to sell as the local economy evens out. Of course, the cost of holding property will become more expensive when the new tax rates become effective, but that just means you will have to move swiftly on rehabbing and selling the properties you pick up.
Tools for Making the Most of Investment Opportunities
While others would want to have an emergency kit at hand when a natural disaster strikes, you will want to have the best resources and tools when faced with the opportunity to rebuild. Most investors struggle to get leads, even when opportunities abound. But, distressed homeowners turn to the national home-buying brand they trust most: HomeVestors®, the “We Buy Ugly Houses®” people. HomeVestors® franchisees get leads because of comprehensive marketing campaigns that let homeowners know we are there for them. When it’s time to put the investment back on the market, HomeVestors® also has a variety of exit strategies to consider. If joining our team of HomeVestors® franchisees sounds like a good opportunity for you, we can weather the market and win back our city’s economic strength.
Each franchise office is independently owned and operated.
Photo Credit: Flickr CC user SachinDaluja