Here’s one example: my house! Our purchase price was around $460k. You can estimate the value of unimproved land by subtracting the value the house is insured for from the actual price. It’s insured for $360k, so our land value would be estimated at $100k. (I’m sure there are better ways to estimate this—and I imagine if taxes depended on it, people might try to change their insurance amounts to game the system—but it works for now.)
From a quick look at Craigslist, it seems we could rent the place out for maybe $2,500 per month. Multiply that by $100k/$460k and you get that around $540 of the rent is coming from land value, which comes out to a yearly property tax of $6500 or about 6.5% of land value.
Landlords sometimes use a rule of thumb that a property is a good investment if you can charge at least 6% of the purchase price in rent per year. This is pretty similar to the 6.5% I got. In general, it seems that a roughly 5-6.5% tax on the unimproved land value gets you around 100% of the land rents.
($6500 is about 3x our current property taxes, which I think correctly reflects the fact that our house is in a pretty desirable location and the house itself isn’t that amazing. Actually, the current Redfin estimate on our house is at $540k, so it would be even higher than that.)
Here’s one example: my house! Our purchase price was around $460k. You can estimate the value of unimproved land by subtracting the value the house is insured for from the actual price. It’s insured for $360k, so our land value would be estimated at $100k. (I’m sure there are better ways to estimate this—and I imagine if taxes depended on it, people might try to change their insurance amounts to game the system—but it works for now.)
From a quick look at Craigslist, it seems we could rent the place out for maybe $2,500 per month. Multiply that by $100k/$460k and you get that around $540 of the rent is coming from land value, which comes out to a yearly property tax of $6500 or about 6.5% of land value.
Landlords sometimes use a rule of thumb that a property is a good investment if you can charge at least 6% of the purchase price in rent per year. This is pretty similar to the 6.5% I got. In general, it seems that a roughly 5-6.5% tax on the unimproved land value gets you around 100% of the land rents.
($6500 is about 3x our current property taxes, which I think correctly reflects the fact that our house is in a pretty desirable location and the house itself isn’t that amazing. Actually, the current Redfin estimate on our house is at $540k, so it would be even higher than that.)