What this Florida law means for the future of your investment properties
In place since 2008, real estate investors have been benefiting from Florida’s cap on property taxes for non-homestead properties for almost ten years. However, things might be about to change: an upcoming November 2018 vote on the future of the law has the potential to make a huge impact on the whole real estate market.
What’s the law?
Approved in 2008 as a constitutional amendment, there is currently a 10 percent cap on the increase in property taxes for non-homestead properties in Florida. A non-homestead property is any property that is not used as a primary residence. According to Florida law, rental properties, second homes and commercial properties are all classed as non-homestead properties.
Why was it put in place?
The original purpose of the law was to benefit property owners by reducing inflationary pressures in their tax assessments. It states that non-homestead property taxes cannot be increased in any year by more than 10 percent. This doesn’t apply, however, if the property is sold—if there’s a change in ownership, the county has the right to reassess the value of the property. As a result, property taxes can jump up significantly due to the reassessment and the new taxation level can be implemented immediately.
When is the vote happening?
The tax cap will be on the ballot as a permanent constitutional amendment in this coming November’s election. It will need to be passed by a supermajority (60 percent) of voters.
What will happen if it’s not approved?
If the law is not approved, the limitation on property tax increases for non-homestead assessments is scheduled to expire on January 1, 2019.
If this law goes away, every county in the state of Florida will have the right to reassess all non-homestead properties as they see fit and they won’t be restricted by any property tax caps. The resulting property tax increases could have far-reaching effects. For commercial property owners, the new expense may be passed along to retail tenants, who will ultimately pass it along to their customers. Multifamily owners may choose to increase rents to cover the added expense.
In the case of greatly increased property taxes, some apartment owners might find they are no longer able to afford to keep their properties and may be forced to sell. This could lead to a market correction in Florida, causing damage to property values around the region. One thing’s for certain: there will almost definitely be a huge increase in the number of property assessment appeals filed across the state.
Given the number of businesses, vacation rentals and secondary homes that have benefited from the 10% property tax cap over the past ten years, a strong voter turnout in support of this measure is expected.
No matter what happens in November’s coming ballot, the team at 100Units.com will have all the advice and insights that multifamily owners need. You can follow us on Facebook and LinkedIn, plus you can find our Investor Insights video series on our YouTube channel.
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