If we tell you "alligator property" is a real estate term, you might assume it refers to dodgy land opportunities in Florida, where swamp land never quite becomes viable tract housing despite the investment of your life's savings. Or just a place where alligator attacks are common.
In fact, it's a different grim financial situation.
An "alligator property" refers to a rental property which earns less rent than the place costs to maintain. When you own a rental property, you need to cover several types of cost. There's the mortgage on the place. There's taxes and insurance. And there's the general maintenance and upkeep. Theoretically, the amount you bring in for renting out the location more than covers the costs, leaving you a monthly profit. Otherwise what's the point?
If this doesn't happen, you've got an alligator property on your hands. And suddenly Florida swamp land doesn't look so bad. See Alligator Spread.
Related or Semi-related Video
Finance: What is Real Estate Tax?9 Views
finance a la shmoop. what is real estate tax? own a home?
well you'll pay tax on it on a high-rise well congrats and you'll pay a lot of
tax on it. own an airplane well congrats again and yep you'll pay a lot of tax on [money stacked in front of a high rise building]
it as well. as if it was real estate more or less. so
how do you know how much tax you owe on a given home or building or property and
well the answer is each state is different, or at least has its own laws.
and generally speaking real estate taxes are local. ie local to your state and
sometimes to the county that you live in. they are not federal. for example if the
state of California is the one collecting your real estate tax the
federal government in Washington well I'm just kind of coughs and looks away
when you pay up. so how much do you pay? hmm?
well in most states the amount is based on the purchase price of the home or
property and then it carries an escalator or it goes up a little bit.
that is if you've paid a million bucks for this awesome Shuba a mansion in Palo, [shack pictured]
Alto yes this home sold for a million dollars in 2017. then you'd pay one point
two five percent of the purchase price of a million bucks each year for your
taxes or said another way you'd pay twelve thousand five hundred dollars in
taxes each year on that home, and those taxes would go up a little bit each year
such that they rose roughly along with the rate of inflation. so that's a real
estate tax set by the purchase price. well in other states like Texas home
prices are assessed regularly. whenever that means ,maybe every year maybe every
few years, or if the owner asks. you know maybe something like that? well why [calendar pictured]
wouldn't owner asked for a reassessment of taxes? well often homes are bought in
a hot market and then for awhile the value of the home goes down. so by having
a home reassessed likely for a lower price the owner saves money on taxes.
well commercial buildings have different tax systems but are more or less based
on the same parameters as homes. usually with a lot more zeros on the end.
so where does all this real estate tax go? well back to the state to you know
run things, but also to the local local authorities we're a big hunk of the tax
dollar goes to local public schools to pay for teachers pensions their
secretaries and yes maybe one or two illicit Bermuda vacations. [teacher walks out with bag of cash]
Up Next
What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...
What are operating profits, net profits and gross profits? Profits for a company can be calculated several different ways depending on what metric...
Operating leverage is... good leverage. Unlike debt, which is a liability. What gives you operating leverage? Scale. Not the bathroom kind.