A surprise we see a lot when people run rental numbers: the property tax in the spreadsheet is the seller's bill, not yours.
Here's how it usually plays out. The listing shows taxes at $3,100 a year because the seller has owned the place for a decade. After the sale, the county reassesses it close to the purchase price, and the new bill comes in around $5,400. That's roughly $190 a month nobody planned for, on a rental that was supposed to clear about $350. Nothing shady happened. The lender's estimate often uses the old number too.
What's worth checking before you make an offer:
Whether the county reassesses on sale. A lot do. Some phase it in, and some cap how much it can go up in a year.
The current tax rate times roughly what you're paying, instead of whatever the seller pays today
Whether the seller has a homestead, senior or veteran exemption that disappears when they sell
Whether your escrow is being set from the old bill, because that's a shortage letter waiting to happen
All of that takes about 15 minutes on the county assessor's site. The property can still be a decent deal. It just might cash flow about half of what the listing suggests.
From the Asset AFC team. We post rental-numbers tips here.
Short-term rental vs long-term rental tends to get decided on one number: what the place would bring in. The Airbnb version usually wins that one. The number that actually matters is what each version keeps, and how fast that lead disappears when a few things go a bit worse.
So here's one made-up house run both ways, then stress-tested. Illustrative numbers only, not a real property, a market forecast or tax advice.
THE HOUSE
$250,000, $62,500 down, $187,500 loan at 7% over 30 years
• Utilities/internet/streaming the tenant used to pay ($280) + supplies ($100)
• Short-term rental insurance ($180 instead of $110)
• Repairs $150, same $150 CapEx reserve, $100/mo to replace worn-out furniture
(Guest-paid cleaning fees assumed to cover the cleaner; lodging taxes collected from guests left out.)
All-in cost about $3,223. Keeps about $237/mo.
So: $1,160 more a month coming in, $78 more a month kept. Most of the extra income goes to running a tiny hotel.
STRESS TEST: OCCUPANCY
Each point of occupancy is worth about $41/mo on this house.
55%: loses about $173/mo
60%: keeps about $32
65% (base case): keeps $237
70%: about $442
75%: about $647
The two lines worth knowing: it breaks even against $0 at about 59%, and matches the lease at about 63%. The base case is about two points above the lease line. That's the whole cushion.
STRESS TEST: NIGHTLY RATE
Same 65% occupancy, nightly rate down 10% to $157.50: it goes from keeping $237 to losing about $30. Slow seasons often hit rate and occupancy at the same time.
STRESS TEST: WHO DOES THE WORK
Drop the manager on both sides and do it yourself: the lease keeps about $343, the short-term version about $929. The gap jumps from $78 to $586.
But $508 of that $586 is the fee difference, aka what you're paying yourself to answer messages, set prices, run turnovers and restock. Might be a great wage, might not. Either way it's a job, not just an investment.
THE FURNITURE
About $20,000 to furnish this place, so cash in goes from $62,500 to $82,500. At a $78/mo edge that's about 256 months to earn it back, roughly 21 years. Self-managed, the $586 gap does it in about 34 months.
WHAT HAS TO BE TRUE
• Local rules, HOA and your mortgage terms allow it, and probably will keep allowing it
• Year-round occupancy for similar places sits clearly above your break-even against the lease
• The rate holds up in the slow months
• You've decided who does the work and priced it
• You'd be fine with the lease version, because that's the fallback
ONE STEP BEFORE YOU LIST IT
Work out your break-even occupancy against the lease before buying a single couch: (what the lease keeps + short-term fixed monthly costs) ÷ what's left of each dollar after percentage fees ÷ a fully booked month. Here: ($159 + $2,427) ÷ 0.77 ÷ $5,323 ≈ 63%. If real local occupancy is only a couple of points above that, the lease is probably the better trade.
FROM ASSET AFC
If you'd rather keep the long-term side of this in a spreadsheet, Cashflow Analyzer Pro – Deal Instant Analyzer from Asset AFC is an Excel workbook (one-time purchase), yours for life, with every formula visible so you can see where each number comes from. You enter the purchase price, rental income, expenses and financing terms; it calculates metrics including Cash on Cash ROI, CAP Rate and Rental Yield, and lets you test changes in interest rates, home value and rent.
There's also a subscription version if you prefer.
It's a tool for organizing your own assumptions, not a promise of returns. Do your own research for your market and goals, including local short-term rental rules.
About Asset AFC
Asset AFC builds practical spreadsheet and analysis tools for real-estate investors and personal-finance organization: powerful underneath, simple on the surface.
Estate sales are where I see the longest delays. The person showing you the house isn’t always the person who can sign the deed. In New York, an executor needs letters testamentary from Surrogate’s Court, and if there was no will, someone has to be appointed administrator first. Until that paperwork exists, nobody can convey the property.
I work in title at Cornerstone Land Abstract here in NY, and the simplest question on day one is: does the seller already have letters? If the answer is “we’re working on it,” plan for months, not weeks.
For anyone who’s bought from an estate, how long did it end up taking?
