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Hello everyone and Welcome to another
episode of Selling Greenville your
favorite real estate podcast here in
lovely Greenville South Carolina
beautiful time of year down here I'm
trying to get outside as much as
possible if you're listening from
outside of South Carolina I feel bad for
you we have perfect weather right now we
have really nice Springs around here
a very underrated
aspect of South Carolina we get a
very nice spring it's been in the high
60s low 7s my ideal temperature I'm
loving it trying to get outside as much
as possible but right now I am indoors
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I am Stan McCune realtor here in
Greenville South Carolina and all of my
contact information is in the show notes
if you need to reach me for any reason
but especially if you have real estate
needs I'm your guy let me know today
we're going to be talking about a
development that I recently became
aware of which is a push by both the
South Carolina realtors association
which we call SCAR or scr because
scar is not a very nice name reminds me
of the Lion King the the scr and
they kind of teamed up with the South
Carolina chamber foundation and the
Lincoln Institute of land policy they
all put their heads together to take a
look at and to research the way property
taxes work in the state of South
Carolina and you know what I've been
hearing over and over again from people
outside of the state of South Carolina
that it's a great state to invest in but
the biggest downside of investing in
South Carolina is that our property
taxes are disproportionately high for
the cost of real estate now that's good
in some ways that means our real estate
costs are low but it's bad from the
standpoint that our property taxes are
higher than you would expect them to
be given the cost of real estate down
here and there is a reason for that and
the reason for that is we have so we
have three levels of property taxes the
way I think about this on the
residential side and on the commercial
side it gets a little bit more complex
I'm not a commercial broker I do
dabble a little bit in the in the small
commercial space but I'm not an
expert there so I'm not going to speak
too much to that but I can speak to the
residential side because obviously
that's the side that I work in on the
residential side of things there is the
standard owner
occupancy tax rate that we have and
we call that the 4% rate okay so the 4%
rate you don't there there's no way
for you to just calculate that off the
top of your head when when you hear 4%
that's basically meaningless because we
have all sorts of other things that go
into the property taxes that that
impact how much you pay that it's not
just like okay take 4% of this number
and then you can figure out what your
property taxes are going to be-no
it's a whole lot more confusing than
that and and I'm just going to leave it
at that this is just an overview here
for people that are 65 years of age
or older on top of getting their
property tax at the 4% rate which is the
lower rate they also have a homestead
exemption now this is weird because my
understanding is in other states they
refer to to the homestead exemption as
people who are owner occupants in South
Carolina owner occupants get the 4% rate
and then retirees I think is the spirit
of of why they start this at the age of
65
retirees get now the homestead exemption
which then reduces their tax bill even
more so now they they have a very
minimal tax liability compared to
everyone else those are the people that
are paying the least amount of property
taxes of
anyone and then you've got those that
are owning commercial real estate and
those that are owning rental properties
as landlords second houses second
homes for those properties for the
second homes it goes up to 6% which my
understanding is that's also the
standard commercial rate so landlords
are getting taxed like commercial retail
businesses are commercial
spaces and so these rental properties
so you think okay 4% to 6% okay so
that's a roughly 50% increase right if
my property taxes would normally be
$2,000 as an owner occupant as a
landlord on that same property it would
be about
$3,000 right that would be a 50%
increase no no that's not how it works
if your owner
occupancy property tax rate price
that you're paying every year is
$2,000 on average that's going to go up
from the 4% to the 6% rate actually from
between 2 and a half times to three and
a half times you're talking about now
your property tax bill going from $2,000
a year to about $6,000 a year roughly
speaking and and it varies from one
location to the next and the reason is
and and what this report really focused
on really heavily this report that was
produced by the South Carolina Realtors
association this the South Carolina
chamber Foundation which is focused on
economic growth in the area and the
Lincoln Institute of land policy
their report really looked at this and
and found that South Carolina is
really really unique because What's
Happening Here is they use the property
taxes in a very heavy way to fund our
schools our public schools in the area
so what they're doing though is they are
making the owner occupants that are
paying the 4% rate so they're already
paying a lower rate again we're not
going to get into how that relates to
the total price bill but in addition to
getting a lower rate they're also
getting discounted that they don't have
to pay the fee for towards Public
Schools they're getting like an
education discount so to speak on
their property taxes and then it's the
landlords that have to foot that bill
that is the bill that gets passed on to
the landlords in addition to them
already having to pay a higher rate they
also have to fund the public schools
which is a major part of what the
property taxes are going to over half of
your property taxes by and large are
my understanding is going to fund
public
education well this inherently doesn't
make a whole lot of sense because it's
not the landlords that are benefiting
from the public schools is it I I guess
in some ways they could you know there
are some some investors that their
strategy is to buy and hold properties
that are in great public school
districts I live in Riverside School
District One of the most desirable
school districts for just you know
middle class families if not the most
desirable for middle class families in
the upstate and so some some
investors do benefit from kind of
indirectly from the public schools it
makes their rental properties more
desirable for certain people looking
that where their school districts are
important it makes perhaps their rental
properties appreciate a little bit more
in value because of those schools but at
the end of the day it's the owner
occupants are the ones that are actually
benefiting from the schools the owner
occupants are actually the ones that are
send sending their kids to these public
schools and so there is an inherent
inequity there this doesn't make sense
why are the landlords fitting the bill
for the owner
occupants additionally this report oh
and and and I mentioned that South
Carolina was an outlier South Carolina
is the only country sorry the only state
it feels like a country sometimes
it's the only state in South Carolina
that does it this way that makes
landlords pay for the schools rather
than the owner occupant so it's a major
major
outlier and the result of that we've
talked about this in the past is that
that bill that's not just a bill that's
absorbed by the landlords right that's a
bill that gets passed on to renters
that's a reason a primary reason why
rent down here is so high it's
preposterously high compared to buying a
home we talked about this in the past it
makes very little sense to rent if you
have the money to buy you need to buy
because you're getting that property tax
bill passed on to you it's three times
what it would be if you were just an
owner occupant plus there's got to be
something left over for the landlord at
the end of the day the landlord is not
you know owning rental properties as a
charity so you're paying extra if you're
renting you're paying extra property
taxes you're paying a
landlord the landlord might not also be
efficient in terms of how he or she
manages different different things
and and the way their expenses work and
all of that who knows the point is
you're paying a lot of money if you're
renting and that is directly related to
the property taxes and this needs to be
this is something I have harped on this
over and over on this podcast so I'm not
going to get into it again but it needs
to be reformed and thankfully we finally
have some people bringing this to the
Limelight and my understanding is this
report has already been looked at by
our governor by
McMaster and and he is very favorable
to some of the ideas in the report which
we'll get to here in a second it's
just it's it's going to be tricky okay
there's not a simple solution to this
again we'll get to that in a second
the other things that this report found
is that
we more than we we excessively tax
manufacturing businesses for some reason
the manufacturing assessment rate is
105% versus the commercial property rate
of 6% which is absurd why is the
manufacturing rate so much higher
manufacturers by and large you don't
make a whole lot of money and
Manufacturing has always been a major
part of the upstate's economy it is the
really the driving force of
Spartanburg is a major manufacturing Hub
in the us and and Greenville has plenty
of Manufacturers as well they're having
to pay more for their commercial
property than they should they for
some reason they're getting an extra tax
bill just because they're manufacturers
that doesn't make
sense and and then of course we've
got the issue of commercial property as
well is at 6% is at a higher rate
than than residential property in
this report They concluded that that's
fine it's fine to keep commercial
property at the higher rate that you
know businesses need to be able to to
foot the bill a little bit more that was
what that was a fight that this that
this report was not going to even get
into they didn't even get into that this
is
primarily about residential real
estate and about getting that
manufacturing rate down so the the what
the report
recommended was several things it
recommended we got to lower that
manufacturing rate to match the
commercial rate of 6% everyone needs to
be paying if it's commercial real estate
if it's not residential property they
just need to be paying
6% rather than having okay this person
pays this this person pays this this
person pays this have it be fair have it
be
Equitable make them all at the 6% rate
otherwise all that manufacturing at some
point is just going to get outsourced
we're going to lose business we're going
to we're going to have people and
companies that want to move down here
and want to move their business down
here or want to keep their business open
down here they're not going to be able
to afford it because they're paying
nearly double the property taxes of
other commercial
properties another recommendation of
this report was to reduce and this is
this is the one that I'm most excited
about because this would impact me the
most personally is to reduce residential
non-owner occupied homes from 6% the
commercial rate to match owner occupied
residences at 4% so it's recommending
hey landlords shouldn't be fitting
shouldn't be footing the bill on on
public schools on public education this
should be something that fine they can
help to contribute towards it but it
needs to be shared equally among
everyone and but the problem is that now
you've just lost a bunch of money right
we we've just lowered the property taxes
substantially substantially and so
the report recognizes this is not going
to be an easy thing to do obviously in
order to do that we'd have to reform
the schools the budgets their
operation costs their maintenance
exemption all these different things the
the it's it's more than just a simple
okay we just fix these things on
property taxes and that's it no we're
talking about a really a
holistic change to the tax code in
South Carolina and that's the part
that I alluded to earlier that's not
going to be easy not going to be easy
it's not going to happen
overnight but it's a positive that we
have people looking at this now one
thing that they add in here that I
haven't digged into a whole lot but I
think I know why they did this they also
included that the 15% assessment cap
okay so this is a rule that real estate
as the counties reassess properties in
the area Okay so every so often they
will look at properties and I believe
they're probably looking at them
annually and
increasing the fair market value of
these properties and then that increases
the tax bill well currently there is
a cap of 15% a property cannot increase
in value
15% in one year is is my
understanding unless there is what's
called an
ATI which is if I remember correctly
an accessible transfer of Interest the
long story short even though I I may
have gotten one of those words wrong or
partially wrong the long story short
of that is when you sell a home that 15%
cap no longer applies to the buyer so if
if a buyer buys a house let's say
there's a house in in you know the
west side of Greenville that the last
time it was sold it sold for $40,000 you
know what there are houses that are out
there that that is the case for someone
has owned it for 4045 5 years they
bought it for $40,000 back in the day
and now they're sitting on this property
that you know is in need of repair
usually but you know it's like 8
minutes away from downtown Greenville
it's in an area that is really On The
Rise and what happens is eventually that
person most likely gets older decides to
sell that property to someone else who
has the money that that they can
rehab it so he or she they sell it for
you know n let's say
$90,000 to someone so so they end up you
know despite it's in disrepair they end
up still making a decent bit of money
versus what they purchased it for but
then that investor that buys it they
then rehab it and now they sell it for
$350,000 because they made it really
nice they made it to match you know the
rest of the the street whatever the case
may be
the fair market value of that house has
been hovering in the 40s and 50s
probably for a really long time because
it doesn't go up a whole lot when the
last sale was 40 45 years ago and it was
for 40,000 but once it sells for 350 now
the county can look at that and the
county can raise that price pretty much
as high as they want there's not a whole
lot of checks and balances there usually
I see that they raise it to just below
what that sales price was but it's going
to be raised and I always recommend to
my clients there is a great calculator
if you Google
Greenville County property tax
calculator I believe that that is those
are the exact words if you Google that
the county has an actual a great
little tool where you can put
in the the tax map number for the
property what whether it's a tax at 4%
6% whether it has a homestead exemption
which again only for people 65 and older
and then you can put in what you
want the fair market value to be if if
you don't put anything in there if you
just hit calculate it'll tell you what
the most recent tax bill was but you can
play around with okay well what if the
assessible value the fair market value
goes up to 300,000 what's the tax bill
going to be now I always recommend to
people to to use that tool and go
ahead and assume that your fair market
value is going to be your purchase price
that's really the safest way to to do it
to ensure that you don't end up with a
massive tax liability that that you
weren't
expecting now Governor McMaster
commented
on this study and and on some of the
ideas about it and he commented very
favorably and he has said that he wants
to reform the tax code in South Carolina
it's the our property tax there's a
whole lot more to this but our property
taxes are really convoluted there's not
like there are multiple peoples that
shape it I I've talked about this
before but my property that I have out
in Pome I get all sorts of line items
on that I mean this you know Parker
Redevelopment fee it's like six or 700
like what what is that like I don't get
that on my other tax bills you know all
these crazy expenses for Waste Disposal
that is like outrageously High
compared to what it should be like all
these all sorts of different things you
can tell that there's a lot of cooks in
the kitchen with this property tax spill
people getting their little pet projects
in there and and that's a problem
that's a big problem but I I think
the biggest problem is going to be
figuring out okay so we already have a
problem with our public education
around here we already recognize that
that public education South Carolina is
not the best it's one of the biggest
complaints about the area along with
roads people want our teachers to be
paid more they want more money invested
in our schools and so there is a A Real
Fine Line here of like okay we recognize
that the tax bill the tax code when it
comes to property taxes is not Equitable
it's not fair but at the same time
what happens if we take away from
schools what happens if we if if
we're not giving them as much money as
possible and I didn't finish my thought
before but but I'll tie it in
here the report recommended repealing
that that 15% cap on being able to to
assess your fair market value during a
year when the property didn't sell so I
think that that's part of their
Solutions they're saying hey we've got a
lot of a lot of homeowners that are
living in properties that haven't really
had much of a tax increase for a while
because they've lived there forever and
they need to start paying more towards
into the system we need to to remove
that 15% cap and that will help to
alleviate some of these some of these
issues that we have and make the system
more fair but that's not going to be
enough that's not going to be enough
they're going to have to completely
completely restructure
the tax code in order to do this and
and the South Carolina governor
and people in his office indicated
that this has been something that the
governor has wanted to get to whether
whether he's just saying that or whether
he really means it he's been wanting to
get to it for a while but the general
assembly has has really been slowed down
by covid and that's a shame I feel like
that's a little bit of a cop out perhaps
but I I do know that obviously
governments have had to be careful with
Co we need to at the end of the day have
this at least looked at and so it's
positive the governor is is open to it
is interested in it but there's a lot
of work that will have to happen behind
closed doors for this to get implemented
I don't see this happening anytime soon
but I think it's a very positive
development this would for for
renters this would a great development
for landlords this would be a fabulous
development I mean you know if if
landlords saw their property taxes go
down you know to a third of what they
were before that would be really
incredible that would allow a lot of
landlords that are currently you know
they have renters and properties that
are in
disrepair hopefully in theory it would
it would give those landlords more Flex
ability to be able to to do more repairs
I bought some rental properties recently
and we're having to do tons of repairs
to them because the previous landlord
just just didn't do anything just never
ever did anything he wouldn't raise
rents because he had you know kind of a
handshake agreement with his tenants hey
you'll get these bottom of the barrel
rents if I don't have to do any
maintenance on the house but guess
what I inherited it well I didn't
inherit it I bought the properties
and I I don't agree with that I don't
agree with that way of doing it I think
people need to live in
livable
housing and obviously the rent needs to
justify that but I think that if we
are able to get a more Equitable system
with property taxes that will help
raise the game a lot in terms of renting
and maybe that allows some landlords
possibly they're they're like you know
what I'm not going to increase rents for
the next couple of years because I'm I'm
making more money now so I don't need to
worry about that or maybe they have a
tenant that's like you know I'm going to
leave if you don't address this some
this problem that hasn't been addressed
in a while and the landlord's like you
know what I've got money now I can
address it I'd rather keep you in here
so let's let's go ahead and address this
so there is a lot of of positives a lot
of things that could come out of of
the local government of the state
government taking this advice and
actually moving forward with it but
it's going to take an entire tax code
rewrite I don't know I I don't know
that I'm optimistic that that's going to
happen but I'm at least optimistic that
they're having a discussion about it
that they that this problem which a lot
of us that are investing in real estate
see as a major problem as a major issue
that is impacting local real estate
it's in their crosshairs they see it
they're aware of it they want to do
something about it and now it's just a
matter of making that work getting all
the people to the table to rework the
tax code in order to ensure that
property taxes are fair and are not
skewed against renters and skewed
against landlords and skewed against
manufacturing
businesses that's all for today if you
have any questions let me know my
contact information in the show notes
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have a good rest of the week and stay
safe out there
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