I hate paying the IRS taxes. I’m not sure who loves them. But, they are a necessary evil. I also hate paying property taxes. Property taxes are used to fund the police, fire fights, build roads, etc. They are mandatory. And, when you own property, you are supposed to pay property taxes – duh! Also, I am a creature of habit. I get in a routine and I pretty much stick to it. For me, I am finding that there’s a lot to owning your own property and running it by yourself. It’s easy to mix things. No matter how smart you are, no one is perfect and that includes me. So, let’s discuss how my negligence almost cost me my beachfront condo!
The Failure To Pay Property Taxes
Prior to purchasing my beach condo (Calypso Memories), I already owned real estate. When I purchased those real estate, the taxes were being escrowed that my mortgage company. So, when I paid the mortgage, I was also paying the property taxes and insurance that went along with the property. Then, on my behalf, my mortgage company would pay the taxes annually.
The purchase of Calypso Memories (and Emerald’s Corner for that matter) was different. The mortgage company did not escrow the property taxes (or insurance). And so the responsibility was on me to pay for my property taxes. For some reason, I didn’t fully appreciate this reality.
Of course, I knew that since I was investing in short term rentals, I had to pay taxes. My system was setup to pay the required taxes to the city and county. I somehow equated in my mind that since I was paying those taxes, I was good to go.
A. The Routine
I got into a routine. Bookings came in and I would pay my short-term rental income taxes every month. In fact, the first year went by without any issues.
I realized after that first year that my mortgage company wasn’t escrowing the insurance and thus I had to pay that annually myself. No problem. I did that and now it’s stitched into my brain that I have to account for insurance annually.
But property taxes were never an issue. It just didn’t come up.
B. The Problem
The reason why these taxes didn’t come up the first year was because I paid those taxes upfront when I closed on the property. So, I got into this routine and really didn’t account for property taxes at all.
Then, a few days ago, I got the worst news ever! It was a reminder notice from the county that my property taxes were due! Also, I got the notice at the worst possible time.
Specifically, I owed $6000 in taxes and I had saved up the cash to pay for my federal taxes. But, now the County reminded me that I owed over $5000 in taxes! Ouch! Moreover, had I waited even just 24 hours, I would lose the right to pay the taxes with a personal check or card. I would have to then pay with a cashiers check afterwards. Even more scary, was that if I didn’t pay my taxes, the County would put my property up for sale come June!
It’s amazing the damage that simple negligence can cause. But that’s the reason why I had to pay my federal taxes with a credit card. I used the $6000 I had save to pay my property taxes right away.
Going Forward
Much like the insurance issues, paying for my property taxes is now etched into my brain. It’s going to take a little while, but I will eventually start saving for these little by little so I don’t have a huge bill at the end of the year.
The good news is that because I purchased Emerald’s Corner last year, I prepaid the taxes at closing. So, that property is good to go (I checked!). But, going forward, I will need to account for the property taxes for each condo.
Final Thoughts
It was no fun getting the reminder notice from the County. Thankfully, I was in a position to pay both the property taxes and the Federal taxes. So, now I’m again financially stressed.
My credit card is maxed out and I don’t really have any reserves. However, it’s not the end of the world just yet. We are in the busy season, so hopefully I get back to a good financial place in a couple months.
I do feel incredibly stupid not realizing that I wasn’t paying the property taxes. That bill comes once a year every November. All I can do now is make the appropriate adjustments in my financial plan to accommodate this expense.
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