You have been working for many years and are now thinking about your future and the investments you can make. Even though there are many things you can do, you feel that real estate in Virginia is the best bet for you.
We all know that the real estate industry has been growing spontaneously. It is also one of the best investments you can make in your life. However, you should not just dive in and start buying real estate without consultations.
Do you even know about the tax implications of owning real estate properties?
If you have chosen Virginia for your investment, here are a couple of things you should know before getting started.
1. Understand Real Estate Property Taxes
If you are looking into buying property in Virginia, make sure that you understand property taxes and why they should be paid. These are taxes that you will pay based on the value of your real estate property.
You are supposed to pay these taxes to help the local government fund services like public safety, roads, schools, and parks, among others. You can find out about the tax you are supposed to pay by getting the value of your property and then multiplying it by the tax rate in your region.
Will your property tax remain the same every year? Well, you should embrace yourself paying different amounts of tax every year. Your local county government will determine the tax rate each year, so ensure you know the rate on time.
2. Paying Property Taxes and Lowering Them
You do not want to find yourself in a situation where you are late on the payment of your property taxes. In Virginia, property taxes are paid twice every year, by the end of May and the end of October.
If you are not careful with the dates, you will end up paying penalties or even interest charges. Did you know that you can lower real estate taxes in Virginia? Well, if this is something you are keen on, then you should first maximize your home buying power with SoFi.
SoFi will help you understand your buying power or the house you can afford. This will put into account the taxes you will be paying every year. They can even help you take advantage of tax deductions or exemptions, making home ownership easy for you.
3. Interest, Penalties, and Late Payments
This is one of the things you should be aware of before you start buying real estate in Virginia. Even though interests, penalties, and other fines associated with late payments might vary from one county to another, they might leave a dent in your pocket.
Wise County, for instance, adds a 10% penalty on late payments on the 1st of June and November every year. You will also have interest accruing from the 1st of June and November if you are late on your tax payments.
If you make your payments in Wise County before the end of May or October, then everything will be okay, and you should not worry about any interest or penalties. You also must notify the local government in case you do not get your tax bill on time.
4. Paying Real Estate Transfer Taxes
You might be asking yourself why you need to pay transfer taxes in Virginia or even what they are! Well, whether you are buying or selling real estate property in Virginia, you should pay transfer taxes.
Again, these taxes might vary from one county to another, but generally, the rate is mostly $3.50 for every $1,000 of the property sale price. However, you will split this with the person you are buying the property from.
As the buyer, you will pay $2.50 for every $1,000 of the property sale price while the person selling the property to you pays $1 for every $1,000 of the property sale price. Let us assume that you are spending $300,000 on property. You will pay $750 as transfer taxes, and the seller pays the balance.
5. Closing Costs and Deed Transfer Taxes
According to research by CoreLogic’s ClosingCorp, the closing costs for properties in Virginia averaged slightly over $6,000 in 2021. This is not little money, so you need to be aware of it before you start buying real estate in Virginia.
As discussed above, taxes like transfer taxes are shared between the seller and the buyer. However, a higher percentage of the closing costs in Virginia are taken care of by the buyer. You should, therefore, keep enough funds for these costs.
In addition, you will be responsible for paying city and state deed transfer taxes. You will also need to take care of the city and state recordation fees. Do not underestimate these costs because they might leave you with a financial burden if you had not planned well.
Research is Important
You might have the money or funding to acquire real estate properties in Virginia. That is great. However, do not just dive in without researching the real estate implications in the state.
If this is not something that you can do on your own, then do not worry. You can consult real estate experts in the state. Make sure that you understand all your tax obligations as a real estate owner in Virginia.
