When real estate investors look for a location for their real estate investment property, they must consider all aspects that affect the success of the real estate investment and the return on investment.
Because it can affect the return on investment, real estate property tax is one of the elements to look at when trying to find a property for real estate investing. Here we recommend the top 10 states with no property tax for real estate investing. But first…
What Is a Property Tax?
For beginner real estate investors, it’s a good idea to understand exactly what a property tax is. A property tax is a tax that is set for a real estate property. It is based on the value of the investment property and varies from state to state. In general, the value for a property tax is found by multiplying the property tax rate by the value of the investment property in the real estate market.
While there are states with no property tax (essentially), other states have a relatively high property tax that affects the return on investment for a real estate investor. Because of this, property tax makes up a large amount of tax revenue collected on both the state and local level. In fact, real estate property tax makes up 31.3% of tax revenue nationwide.
The average property tax across the nation is 1.1% of the value of a home in the US real estate market.
How Does the 2018 Tax Reform Affect Property Tax?
Now more than ever, it is important for real estate investors to investigate real estate property tax and try to find states with no property tax. This is all because of one aspect of the 2018 tax reform: the cap on SALT property tax deductions. While SALT property tax deductions still apply under the 2018 tax reform, they have been capped at $10,000. For real estate investors who own an investment property in states with higher property tax, this results in them paying higher taxes overall.
Therefore, it would be a smart real estate investment strategy to find a property in states with no property tax.
Related: How the 2018 Tax Reform Affects Real Estate Investors
Do States with No Property Tax Exist?
Well, no, there are no states with no property tax. This phrase is still used throughout the real estate investing world because there are plenty of states that have such a small real estate property tax rate that it’s basically negligible. The return on investment and positive cash flow are essentially unaffected by the property tax on an investment property in such states.
The Top 2 States with No Property Tax for Real Estate Investing
1. Hawaii
- Effective property tax rate: 0.3%
- Median home value: $592,000 (the highest)
- Per capita property tax collections: $980 (17th lowest)
- Median household income: $74,511 (5th highest)
Hawaii Commercial Real Estate
The Hawaii real estate market ranks number one among the states with no property tax. Investing in real estate property for sale in Hawaii will be supported by the consistent growth of the tourism sector and the economy of the state. It’s a good idea for real estate investors to find a property in commercial real estate in Hawaii (hotel real estate, specifically). The commercial real estate market has been experiencing general positive trends for the past 8 years, and 2018 is looking no different. There is a high occupancy rate for Hawaii commercial real estate, which bodes well for steady rental income. Commercial real estate property values are on the rise as well as the rent prices in the Hawaii real estate market.
Related: Where to Look for The Best Real Estate Investments for 2018
Hawaii Residential Real Estate and Airbnb Hawaii
Residential real estate property for sale in Hawaii can also be one of the best real estate investments. For one thing, 2018 will see a shift in greater affordable residential real estate construction. Consider using a residential real estate property for Airbnb Hawaii and get a piece of the tourism occupancy rate and Airbnb rental income.
As a real estate investor can see, beyond being at the top of the list for states with no property tax, a Hawaii investment property can be one of the best real estate investments for many other reasons.
Click here to invest in the Hawaii real estate market and enjoy low property tax for a higher return on investment.
2. Alabama
- Effective property tax rate: 0.4%
- Median home value: $136,200 (7th lowest)
- Per capita property tax collections: $522 (the lowest)
- Median household income: $46,257 (5th lowest)
Invest in Birmingham Real Estate
With Alabama ranking number two among the states with no property tax, Birmingham real estate is looking better than ever for beginner real estate investors. Not only will real estate investors benefit from virtually no property tax and a higher return on investment, but there are other factors that make Birmingham real estate property for sale a good choice.
Birmingham Real Estate Market Trends
The Birmingham real estate market is described as being a stable, low-risk real estate market, especially for residential real estate. An investment property in this city in Alabama has a median house price of $110,000 (for three bedrooms!). Compared to the national median house price, it’s 41.8% lower. An affordable real estate investment is a reality in the Birmingham residential real estate market. Along with low house prices, rent prices here are higher than in some of the more expensive housing markets across the US.
Best Real Estate Investments in the City
One of the best options for beginner real estate investors in the Birmingham real estate market is a turnkey investment property. Real estate investors can purchase a positive cash flow property from a turnkey investment property company that is relatively affordable ($80,000-$100,000). This kind of investment property is also great for real estate investors who want a reliable real estate investment and steady rental income.
Click here to find an investment property in Birmingham, Alabama.
Continuing the Top 10 List for States with No Property Tax
If you’d rather find a property somewhere else in the US housing market, take a look at the rest of the states with no property tax:
3. Louisiana
- Effective property tax rate: 0.5%
- Median home value: $158,000 (16th lowest)
- Per capita property tax collections: $839 (8th lowest)
- Median household income: $45,146 (4th lowest)
4. West Virginia
- Effective property tax rate: 0.5%
- Median home value: $117,900 (2nd lowest)
- Per capita property tax collections: $852 (9th lowest)
- Median household income: $43,385 (2nd lowest)
5. Wyoming
- Effective property tax rate: 0.5%
- Median home value: $209,500 (21st highest)
- Per capita property tax collections: $2,109 (9th highest)
- Median household income: $59,882 (19th highest)
6. South Carolina
- Effective property tax rate: 0.5%
- Median home value: $153,900 (14th lowest)
- Per capita property tax collections: $1,080 (19th lowest)
- Median household income: $49,501 (10th lowest)
7. Colorado
- Effective property tax rate: 0.6%
- Median home value: $314,200 (5th highest)
- Per capita property tax collections: $1,365 (23rd highest)
- Median household income: $65,685 (12th highest)
8. Delaware
- Effective property tax rate: 0.6%
- Median home value: $243,400 (16th highest)
- Per capita property tax collections: $828 (6th lowest)
- Median household income: $61,757 (15th highest)
9. Arkansas
- Effective property tax rate: 0.6%
- Median home value: $123,300 (3rd lowest)
- Per capita property tax collections: $675 (3rd lowest)
- Median household income: $44,334 (3rd lowest)
10. Mississippi
- Effective property tax rate: 0.6%
- Median home value: $113,900 (the lowest)
- Per capita property tax collections: $916 (10th lowest)
- Median household income: $41,754 (the lowest)
Find a property in states with no property tax. Click here to start your search.
While there are no actual states with no property tax, the states on this top 10 list come extremely close to allowing real estate investors to enjoy a high return on investment, unhindered by property tax. If you want an even better return on investment, consider investing in South Carolina, Louisiana, and Wyoming for the best real estate investments. Why? Because these three states not only rank in this top 10 list for states with no property tax but also rank in the top 10 states with the lowest overall tax burden. Find an investment property quickly and easily in any of the states mentioned above by using Mashvisor today and enjoy low property taxes with real estate investing.
Related: Learn How to Do Taxes on an Investment Property
For a comprehensive list of property taxes by state, click here.
