Postponed Property Taxes About to Kill Gary, IN?t

In my neighboring city of Gary, Indiana, tax rates are very high because of low-valued housing stock, a high percentage of abandoned homes, and a huge appetite for cash by the city government for such essential services as a “Human Relations Department” (which regularly hauls landlords before it to answer for racial discrimination).

Properties in the city already have a low value because of the quality of the neighborhood and the high taxes. In many cases, properties are just barely worth what is owed in taxes on them when they’re offered at the county tax sale.

Because of the high rents and insurance costs, rents often barely create cash flow for a landlord, even when a property is owned free and clear. For example, it’s not unusual for taxes and insurance to exceed $250 per month on a property that rents for only $450 per month. With AVERAGE operating expense for a home of 45%, this leaves a landlord owning such a property at a $2.50 per month LOSS even if the property is owned free and clear.

Delaying the Tax Sale

It should not be a surprise that with numbers like these, home values hover near zero even when a property is in rentable condition. Typical sale prices range from $4,000 – $12,000 on many homes.

And, typical starting minimum bids at Lake County’s tax sale auction for a house in Gary are $3,000 – $5,000 so there is little room for those bids to go up. Indeed, many properties are not even purchased at the initial sale for what is owed in taxes.  See my Article “Tax Sales – Essential for Every Community” to learn more about how delayed tax sales can quickly set into action a disastrous sequence of events.

When tax sales are delayed (recently, by a inept attempt to assign a market value to properties), more taxes are allowed to build up before the property is offered, rendering it absolutely worthless.

Nobody bids on the property, and a viscous circle ensues. More properties drop off the tax roll, increasing the taxes on the remaining properties further. This makes landlording or living in Gary even less attractive than it already is, and MORE properties exit the tax roll.

Rebuilding the City

Gary Indiana in the good old days

Gary, Indiana in Better Times

In Gary and other towns like it, the answer is not to raise taxes in an unlimited fashion to meet a city budget. If the city cannot operate with a reasonable tax rate of 2% or so of a property’s TRUE value (in Gary’s case, $200-$500 per year), some serious changes need to be made. With a reasonable tax rate like other cities in Indiana, Gary would attract many investors and find more and more of its properties back on the tax rolls with regular collections.

Luckily for the residents of Gary, their fellow Hoosiers have voted in a permanent 1%/2% tax cap (homeowner and landlord) of assessed  value for yearly property taxes.  With any luck, the properties won’t now be assessed for several times their true market value to make up the difference!

Gary Indiana in the good old days

Gary, Indiana in Better Times

Profit From Tax Delinquent Property NOW!

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Comments (1)

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