How to best estimate after-purchase property taxes - Ohio

Question

I've been analysing a ton of deals in Cleveland area for buy-and-hold and the biggest variable that I have not been able to efficiently estimate is the property taxes.  I notice that on some sites, they estimate taxes as low as 1.5% and it can go all the way up to nearly 5% (even within the same zip code).  I realize some areas have crazy taxes, but how do I know for sure which ones?

In Southern California, where i'm currently located and have a few rentals, it is much easier to get property tax to within a few bucks per year (I use 1.33% x purchase price) and it pretty much doesn't deviate from that by much, even going from LA county to San Bernardino or Riverside county.

Thank you in advance for your help!

Oren K. · Answer

P.J.

If you don't want to bother doing it yourself, there are any number of firms that all they do is appeal property taxes. They do it on contingency and take 30%(?) of the first years savings.

Think of it this way; for each 10K 'market value' they can get the property taxes reduced, you save a couple of hundred (or more) each year going forward.

The way I calculate property taxes for any property I am evaluating is:

Purchase Price / Current County Market Value * Current Annual Taxes = New Annual Taxes

As mentioned, if the purchase price is higher then the county market value, they will catch up with you in due course but you have to take action if the purchase price is lower then the county value.

Oren

Jeff Brower · Answer

Yes, that is correct. If your purchase price is higher than city appraised value, account for it going up.

I petitioned and won on a SFR personal residence a few years back in Lake county. City valuation was 140k and my purchase price was 75k. I had the sale and appraisal to back me up and they dropped it with just my letter and form submission. Most times they will make you appear in front of the board to state your case. If it were a smaller discrepancy, then it may not be worth it.

Federico Gutierrez · Answer

This is a great website for you to refer to and bookmark

http://fiscalofficer.cuyahogacounty.us/AuditorApps/real-property/REPI/default.asp

Jeff Brower · Answer

Check out this site. You can also visit the county auditors page and have a look at the current assessment vs the tax rate. Cross multiplication with the new purchase price should give you a rough estimate of the post-purchase rate. If you purchase above the assessment, most will automatically increase. If you purchase below, you normally have to appeal to get it lowered, funny how that works.

http://www.cleveland.com/datacentral/index.ssf/2017/01/compare_new_property_tax_rates.html

Timothy Murphy III · Answer

@Tim Wong

For a property of that case, it's probably best to hire an appraiser if you're challenging the valuation. Ideally, one that has experience testifying before the Board of Revisions. They'll probably use an income based approach to valuation for that property.

Timothy Murphy III · Answer

@P.J. Bremner

Check out this page as well: http://fiscalofficer.cuyahogacounty.us/en-us/prope...

It lets you get an estimate of property taxes for a property in any taxing district in the Cleveland area by providing an assessed market value. If your property is currently assessed higher than the purchase price, as per the county auditor's records, there's an appeal process through the Board of Revisions that was discussed above in this thread. If your property was assessed at a lower value than your purchase price, keep your mouth shut about it until the county catches up. If you're dealing with larger value properties that are dramatically undervalued per the assessments by the counter, there are a few tricks that a savvy closing attorney can use to help delay that tax reassessment too. Not necessarily worth the trouble for smaller properties, but when you're dealing with higher value commercial properties, it makes sense to consider.

Oren K. · Answer

PJ,

The one I use is a 3 lawyer shop that does all of Ohio. As they are before the BOR or appealing BOR cases all the time, they know all the other firms, the BOR members, the appeal members, etc. They just sent out a marketing blurb on how they won a case that made it all the way to the Ohio supreme court.

As is usually the case, the more specialized you are more connected you are in the 'that' world and they are affiliated with other firms US wide. I'm sure they would be happy to introduce you; not sure if the fee arrangements are the same in other places. If you would like an intro, send me your direct email address and I will send out an eIntro to the partner I worked with.

Oren

P.J. Bremner · Answer

@Oren K.

Thank makes sense, I read it wrong.  Even better!  Do you know if they work in specific areas or is it a company that works nationwide?

Oren K. · Answer

PJ,

There are not 'costs' to you.

The whole point of the contingency is they take a share of the first year savings, you keep the rest and all the savings going forward. If they do NOT succeed in reducing the taxes, you pay nothing.

Oren

How to best estimate after-purchase property taxes - Ohio

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