The most important step in buying or selling a property is to decide its real estate value. Unlike apartments, villas or bungalows are assessed in a different manner. This is because a house that sits on a land parcel of its own has to be valued at two different levels; that is, the house has to be evaluated separately from the land. This evaluation affects your property taxes and you need to get it right. Since local records are usually not up to date, you need to find the separate values yourself.
For proper tax assessment, your county assessor’s office will have the values given separately and this can provide you with the basis for depreciating the building. Use only the value of the building to determine the depreciation figure, not the land value.
Sometimes the assessor’s values are so far off from the actual value that you need to do it yourself. Use the thumb rule of 20% for land value and 80% for house value. However, it would be better to visit nearby properties too to get a better idea of these values.
The prices of properties vary from location to location and it’s next to impossible to claim an exact value for a piece of land. The home seller is usually required to include the real estate price on the deed; this would indeed make the job easier for you when calculating the depreciation value of the building for tax reduction purposes.
These recorded deeds are supposed to be available in the public domain, so you can easily check the value of the property at the time of its sale to you. But do keep in mind that the values of properties is affected by the current economy status as well as some other factors; and remember that if the sale of the property was some time ago, then definitely the value wouldn’t be the same today.
Your local county determines property values for taxation purposes and taxes are based on its current market value. As this is public information, you can use this value to get an estimate of your property’s value too. However keep in mind that county assessments usually lag behind current market values. In such a scenario, it would be great to get help from a realtor who has all the latest information on his fingertips and can supply you with authentic values. He could be your best friend as he walks you through the process from beginning to end.
As property investment is a major decision, take your time to ask questions and learn everything about the property before signing on!
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