[Music] 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 for you guys recording a podcast for you guys it also helps me a little bit but I want you guys to show your appreciation if you can by hitting that subscribe button by hitting that rate and review button if you haven't already done that I would really appreciate it that gets this podcast out to more and more people and as always a reminder as well 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 subscribe if you haven't already subscribed to the show please rate and review the show love you guys hope you have a good rest of the week and stay safe out there [Music]