Shutting down a rental property

[Hole9yard]

I live in Rhode Island . Have a rental property that’s run down and maybe a bad septic system. So think will be much cheaper just shut it down and board up the house. But how do I change the property to just land with no buildings on it for tax purposes. Do not plan ever to build anything on this property which is next to other property that I own

 

[quincy]

I live in Rhode Island . Have a rental property that’s run down and maybe a bad septic system. So think will be much cheaper just shut it down and board up the house. But how do I change the property to just land with no buildings on it for tax purposes. Do not plan ever to build anything on this property which is next to other property that I own

Because there are property value and property tax assessments and zoning laws to consider and building/demolition permits to acquire, you probably will want to seek the assistance of a land use attorney in Rhode Island. What you are proposing is unlikely to be as simple as tearing down the neighboring house.

 

[Taxing Matters]

I live in Rhode Island . Have a rental property that’s run down and maybe a bad septic system. So think will be much cheaper just shut it down and board up the house. But how do I change the property to just land with no buildings on it for tax purposes. Do not plan ever to build anything on this property which is next to other property that I own

You may have to tear down the existing structure to get the land reclassified for real estate tax assessment purposes. Even a boarded up building likely has some value that will find its way into the assessor's computation of the tax. You'll want to tear it down anyway if you are never going to use it. Unused and unmaintained buildings continue to deteriorate over time. That makes them a liability risk. Once you inform your real estate insurer about this change it will likely tell you to either tear it down or take steps to keep people out of it. Even if you do the latter, your rates may still go up. Tearing down the building also allows you to take a federal income tax deduction/loss for the building loss the year it comes down. All the while that you leave it up, you won't be able to take that deduction.

 

[Taxing Matters]

Because there are property value and property tax assessments and zoning laws to consider and building/demolition permits to acquire, you probably will want to seek the assistance of a land use attorney in Rhode Island. What you are proposing is unlikely to be as simple as tearing down the neighboring house.

I agree that the OP will want to get a full picture of what tearing it down will cost in making the decision, but for the reasons I stated above its probably going to be financially better in the long to tear it down now. The costs of tearing it down, including permits costs, etc, are also tax deductible. Without any additional information I see nothing here that suggests keeping up a structure that the OP never intends to use again will be a better financial outcome than just tearing it down now. Consulting an attorney is, of course, a good idea because there are specific steps that need to be taken to do it, including getting the necessary permits from the local government.

 

[quincy]

Rhode Island just changed their state property tax laws recently and different municipalities may also have their own taxes.

Because residential property with houses are taxed at a higher rate than vacant lots, the municipality may not want to lose the revenue.

 

[Taxing Matters]

Because residential property with houses are taxed at a higher rate than vacant lots, the municipality may not want to lose the revenue.

I agree. It's pretty much a certainty that that the local government (city or county) won't want to lose the extra revenue. But it won't have a choice but to lower the assessment value to the vacant lot if it is clearly just that — a vacant lot. A boarded up house invites all kinds of disputes over tax values that you don't get with a vacant lot.

 

[quincy]

I agree. It's pretty much a certainty that that the local government (city or county) won't want to lose the extra revenue. But it won't have a choice but to lower the assessment value to the vacant lot if it is clearly just that — a vacant lot. A boarded up house invites all kinds of disputes over tax values that you don't get with a vacant lot.

Zoning laws will need to be checked to see if a lot can remain vacant.

 

[Taxing Matters]

Zoning laws will need to be checked to see if a lot can remain vacant.

Yes, they will. However, there may be a lot of leeway in what kinds of structures are acceptable to meet zoning and buildling codes. It may well be that something small and affordable will suffice. Leaving an abandoned boarded up home on the property is probably also a local ordinance or zoning problem. Those kinds of properties invite vermin, drug users, vagrants, and homeless people. That can lead to not only ordinance violations and higher insurance (or no insurance at all) but higher risk of personal injury risk. As the OP has stated an intention not to fix up the existing home to make it habitable, removing it seems to me preferable than leaving up a home that's just going to sit there and deteriorate, for the reasons I've already mentioned.

 

[quincy]

… it seems to me preferable [to demolish the house] than leaving up a home that's just going to sit there and deteriorate …

I agree with the above quoted portion of your post. Abandoned homes that are left to deteriorate can cause all sorts of problems.

But structures cannot be torn down just because the owner (or a president) decides they want it gone. There are laws that govern both construction and demolition. There can be environmental concerns (i.e., asbestos). And there are zoning laws that can limit what can and cannot be done in an area.

In other words, wanting to reduce property taxes by changing the property itself might be a starting point but there is a lot that needs to be addressed prior to any changes.

 

[Taxing Matters]

In other words, wanting to reduce property taxes by changing the property itself might be a starting point but there is a lot that needs to be addressed prior to any changes.

Yes, which is why I agreed with the quote from you that I put in my last post.

 

[FarmerJ]

Have you learned if the house were to be torn down can a new home with septic system can be built on same lot ( if there is no city water-sewer connection available? ) knowing the answer could make it easier to sell it as a tear down property later on. As far as the local property taxes go if your property has a lower value due to its condition does the county assessed property tax amount reflect that? and lastly have you learned what the city county condemnation process is and as owner what your options would be should the property be condemned ?

 

[quincy]

Here is a link to “State Regs Today” with a good look at the laws in Rhode Island on vacant and abandoned property in Rhode Island, written by Jonathan Hall in January 2024. As I mentioned earlier, Rhode Island had significant changes to some real estate laws in 2025, so what is provided should be checked for updates.

https://www.stateregstoday.com/busi...t-and-abandoned-property-laws-in-rhode-island

Because property owners are responsible for maintaining the condition of their properties, and can be cited for not maintaining their properties adequately, it can be important to do more than just boarding up windows on a vacant house. Lawns still need to be mowed, exteriors still need to be cared for, hazardous areas (like rotting stairs) must be repaired/removed.

As a note: I have no connection to nor can I recommend the website I linked to. It is provided for informational purposes only.

 

[huddy61]

Usually, the tax assessor only updates the valuation if the structure is actually gone. If you just board it up, they’ll still tax you for the building because it's technically still there. You probably need a demolition permit to get it off the books.

 

[quincy]

Usually, the tax assessor only updates the valuation if the structure is actually gone. If you just board it up, they’ll still tax you for the building because it's technically still there. You probably need a demolition permit to get it off the books.

Incorrect.