The seller's tax bill isn't yours: underwriting property tax reassessment and a fresh insurance quote
The property tax and insurance on a listing are the seller's, not yours. A sale can trigger a reassessment, and your landlord policy is priced today. In our engine run, reassessed taxes and a fresh insurance quote turned a $300,000 rental's $52.99 a month of cash flow into a $122.01 monthly loss. A $270,000 price restored it.
Open almost any listing and you'll find last year's property tax bill right there. It's an easy number to drop into your analysis. It's also a number you will probably NEVER pay.
That tax bill belongs to the seller. It reflects their assessed value, maybe from years ago, plus any exemptions they qualified for (a homestead exemption, for example, usually doesn't follow the house to an investor). In many places, a sale prompts the county to reassess the property at or near what you paid. Rules vary a lot by state and county, and some cap how fast assessments can rise, so check your county's rules before you assume either way.
Insurance has the same problem. The seller's premium is for their policy, often an owner-occupied one, priced years ago. Your landlord policy gets priced today.
So how much can those two lines move a deal? We ran one example through the BuyBox calculation engine to find out.
The example
| Input | Value |
|---|---|
| Purchase price | $300,000 |
| Loan | 25% down, 7%, 30 years, 3% closing costs |
| Cash to close | $84,000 |
| Rent | $2,400 a month |
| Vacancy / management / repairs / capex | 6% / 8% / 5% / 5% |
| Seller's taxes (from the listing) | $200 a month ($2,400 a year) |
| Seller's insurance | $100 a month |
For the reassessment, assume the county resets the assessment at the sale price and your effective tax rate works out to 1.2% of value. That's $3,600 a year, or $300 a month. For insurance, assume a landlord policy quote of $175 a month. Both are example numbers; YOUR county and your insurer will give you the real ones.
Line by line, what each change does
| Scenario | Monthly cash flow | DSCR | Break-even occupancy |
|---|---|---|---|
| Seller's taxes and insurance | $52.99 | 1.11 | 91.31% |
| Reassessed taxes only ($300) | −$47.01 | 1.04 | 96.39% |
| New insurance quote only ($175) | −$22.01 | 1.06 | 95.12% |
| Both | −$122.01 | 0.99 | 100.20% |
Two lines, $175 a month between them, and the deal goes from slightly positive to losing $122 every month. That's $2,100 a year of difference, on a house where nothing else changed!
Look at the last column too. Break-even occupancy is the share of the year the house has to be rented just to cover its costs. With the seller's numbers, you could afford about a month of vacancy a year. With your real numbers, you'd need the house rented more than 100% of the time. Since that's impossible, the honest read is simple and a little painful: at this price and rent, the house doesn't carry itself.
What price makes the deal work again?
Here's the useful part. If taxes reset to 1.2% of the price you pay, then a lower price lowers your tax bill as well as your loan. So we asked the engine for the highest price, in $1,000 steps, that gets cash flow back to at least the $52.99 the seller's numbers promised, with the $175 insurance quote in:
- Price: $270,000
- Taxes at 1.2%: $270 a month
- Cash flow: $57.68 a month, DSCR 1.13
- Cash to close: $75,600
That's $30,000 off the list price. Is that a realistic offer? Maybe, maybe not. But now you know what the deal is actually worth to YOU at this rent, and you can decide with real numbers instead of borrowed ones.
How to get your real numbers before you offer
- Look up how your county assesses after a sale. The assessor's website usually explains it. Some counties reassess at sale; some phase changes in or cap them. Your local agent or title company can tell you how it works there.
- Estimate the bill at your price. Apply your area's tax rate to the value you expect the county to use. Leave out exemptions you won't qualify for.
- Get a landlord insurance quote. Tell the agent it's a rental. Ask about the deductible, roof age and any coverage the area requires.
- Check for special assessments and HOA dues. They're easy to miss and they behave like taxes.
- Run the deal on your numbers, not the listing's. If it only works on the seller's tax bill, it doesn't work. Full stop!
Why this one bites so often
Taxes and insurance feel fixed, so you rarely stress-test them, and that's EXACTLY the problem. You test them less than you would rent or repairs. But they're two of the biggest expense lines on most rentals, and they're also the two most likely to be wrong in a listing. A $100 swing in rent assumptions gets argued about for hours. The same swing in taxes often goes unnoticed until the first escrow statement arrives. Don't let that be your first look at the real number.
Where BuyBox fits
In BuyBox, taxes and insurance are their own inputs, so you can run the seller's numbers and your own side by side and watch cash flow, DSCR and break-even occupancy change. Every result traces back to the lines that produced it. We built it that way because the line you didn't question is usually the one that costs you.
Frequently asked
Will my property taxes go up when I buy a rental?
Often, but not always. It depends on your state and county rules, how long the seller owned it, and whether they had exemptions. The safe habit is to estimate the bill at your purchase price and treat the seller's bill as a floor, not a forecast.
Why is landlord insurance more expensive than the seller's policy?
A rental policy covers different risks than an owner-occupied policy, and a quote today reflects today's pricing in that area. The only number that matters is the quote for your policy, so get one before you commit.
What does break-even occupancy over 100% mean?
It means the rent can't cover the costs even with zero vacancy. Our guide to reading the verdict explains how BuyBox flags that, and analyzing a rental property walks through every input.
This post is education, not investment, tax or legal advice. Assessment rules, tax rates and insurance pricing vary by location; every figure here comes from the worked example above.