Taxes, taxes and more taxes

Taxes, taxes and more taxes

Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes

So once again I'm looking at the proposed tax assessment of my South Minneapolis Duplex and for 2019 they have gone up once again, but this time 20%.  I've owned the property since 2014 and the taxes have gone up from $2,800 to now a proposed $5,200 for 2019.  The house has been painted per city requirement, a small deck was added in 2015 and the upper unit had $5,000 worth of renovating of a brand new bathroom, new floors and paint.  The lower unit hasn't had anything done to it.  I know the city has Class rates and that's what they base taxes on, a single family home that isn't being rented has lower taxes then a multi-family.  But from my research in the neighborhood, I'm seeing single family homes that are the same size and age with similar features are $2,000 less in taxes.    I've sent my realtor a message to see about getting addresses of Duplexes that have sold in the past two years and to compare their tax assessments for 2019.   I'm thinking about appealing this because it seems like every year Minneapolis is coming after us investors.    

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Tim SwierczekPro Member
Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
7y

@Marcus Johnson  I have some expierence with this.  I sued Ramsey County for property taxes on a commercial building I owned.  The County ended up setteling with me for a rather large sum, but in realiity it was probably half of what they overcharged me.  

I learned several things, but what I learned that would help you the most in this case is that you must focus you efforts on the property valuation and not how much you pay.  The amount you pay is a political issue based on the tax rate and occupancy, they don't care.  Try to show you should be valued like 4537 , 4541, 4528.  Good Luck.  If you don't get resloution I can connect you with an attorney that will take the case on contingency.  So you pay nothing and the attorney gets 1/3 of the recovery.  Be warned it takes 3-5 years to get paid from the start of your lawsuit, but you do not need to own the property anylonger to recover.

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  • Rental Property Investor · MN · Member since 2017 · 864 posts · 555 votes
    7y

    Oh wow, that stinks. I have a duplex in Shorewood that also is getting hammered with tax increases every year

    Keep us posted on how your situation turns out!

  • Rental Property Investor · Scottsdale, AZ · Member since 2018 · 49 posts · 44 votes
    7y

    If you determine your capitalized income value, you can compare that value to your assessment to determine if there is a position to argue for reduction.  The fun part of arguing income as opposed to market is you can argue both your net income calculation (Assessor may overstate) and cap rate (needless to say that is always an argument).  More wiggle room means more negotiation win/win room.  The jurisdiction will generally not consider single family against multi family, but by adding income as an approach to value, it might be just as good.  You can also reference any recent duplex sales in the area that would support your position.  You might check Loopnet for free cap rates in the subject property area for the income approach.  Good luck!

  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    7y

    In some areas you can view the tax assessments online.  Not sure if you have that option.

  • Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
    7y

    Thanks guys, I'll look into those suggestions.  What's crazy is you've calculated for $100 per door, a major tax increase by the local authority can wipe out those earnings in a hurry.  Luckily this property was $250 a door.  If I'm unable to get the assessment changed, I'm going to have to find some creative ways to put the buck back on the tenants with the next lease.  The city councils are largely to blame for such high rents in metro areas.  

  • Lititz, PA · Member since 2013 · 595 posts · 272 votes
    7y

    "Progressive" board members claiming to be champions for tenants don't realize they are taxing the tenants indirectly.  Property tax creep (gradual or not) is a significant problem in some communities.

  • Investor · Evans, GA · Member since 2015 · 190 posts · 103 votes
    7y

    I feel your pain.  I have a commercial office property in a county of the Upstate of SC, and it has been getting drilled by crazy high property taxes.  As my tenants are on 2-5 year modified gross leases, it’s harder to recapture those “anaconda-like” squeeze in property tax increases on a yearly basis.  Fortunately, we were able to appeal and finally get a lower tax assessment for 2019.  

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Marcus Johnson taxes generally have an appraised value associated with them. How does the appraised value compare to actual value? Assuming you pulled permits for the renovations, that could have triggered an increase in value. If the tax auditor thinks your property is updated, it could trigger higher quality rate for taxes. Best bet is to gather details and then call the property value assessment department. Usually there is a board you can appeal to, but it can be very hard for an investor to get concessions. Since you are an investor, it is assumed you are wealthy. Sadly, these taxes on rental properties are a tax on the poor, because every landlord passes the expense along. 

  • Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
    7y

    @Joe Splitrock

    So I've reached out to the Assessor and left a VM.  The City of Minneapolis suggests I do this before appealing to the

    County Board of Appeal and Equalization and maybe it can be resolved from there. Here are the facts I've been able to put together with the help of my realtor and the MLS. My duplex is 4145 42nd ave s. I cannot seem to get the addresses to shift over one place to the right, so keep that in mind when you read this.

    4145 42nd Ave S 4541 Minnehaha Ave 4528 41st Ave. S 4537 Minnehaha Ave 4321 Minnehaha ave
    Property type duplex duplex duplex duplex duplex
    Beds 2 2 2 2 2
    Bath 2 2 2 2 2
    Square Footage 1339 1308 1304 1312 1440
    Age 1915 1947 1912 1947 1937
    Garage Stalls 1 0 2 0 2
    Furnace forced forced forced forced forced
    A/C window window window window window
    Fireplace 0 0 0 0 0
    Last sold for $180,000 237,000 232,500 236,000 239,000
    Year last sold 4/16/2014 12/6/2018 11/12/2017 4/8/2018 6/4/2017
    Taxable Market Value $273,500 $205,500 $212,000 $206,000 $241,500
    Property Taxes 2019 $5,201.46 $3,731.82 $3,849.52 $3,740.58 $4,383.60






































































































































































  • Tim SwierczekPro Member
    Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Marcus Johnson  I have some expierence with this.  I sued Ramsey County for property taxes on a commercial building I owned.  The County ended up setteling with me for a rather large sum, but in realiity it was probably half of what they overcharged me.  

    I learned several things, but what I learned that would help you the most in this case is that you must focus you efforts on the property valuation and not how much you pay.  The amount you pay is a political issue based on the tax rate and occupancy, they don't care.  Try to show you should be valued like 4537 , 4541, 4528.  Good Luck.  If you don't get resloution I can connect you with an attorney that will take the case on contingency.  So you pay nothing and the attorney gets 1/3 of the recovery.  Be warned it takes 3-5 years to get paid from the start of your lawsuit, but you do not need to own the property anylonger to recover.

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y

    @Marcus Johnson it appears to me like your taxable value is much higher than comparable properties. I would focus on that in your discussions. Do you think you could even sell it for $273,500? I had one property that had tax value higher than what I purchased it for. They agreed to lower it, because it is unreasonable to have value higher than market price. I knew one guy who got his taxes lowered after trying to sell the property for several months. He used that as proof to substantiate the tax value was too high. 

  • Investor · Minneapolis, MN · Member since 2014 · 743 posts · 927 votes
    7y

    @Marcus Johnson

    I've challenged and won numerous changes to my valuations on my multi family properties in MPLS.  Focus on the value, not the tax.  Find comps that prove your point and challenge.  In all my cases, the assessor's wants to meet somewhere between so it doesn't go to court/arbitration.  I always got is very close to where I wanted it to be.  The values of similar properties don't matter, only sales of properties in the area that are similar.  Good luck

  • Lewisville, TX · Member since 2015 · 344 posts · 264 votes
    7y

    try syndication investing & you’ll never worry about property taxes or city councils again!

  • Edmond, OK · Member since 2012 · 456 posts · 270 votes
    7y

    @Matt Millard

    Please explain furthur. You have me intrigued

  • Rental Property Investor · Dyersburg, TN · Member since 2019 · 45 posts · 31 votes
    7y

    @Marcus Johnson At least in my market i start with the accessors office. They normally have a print out with all the specs and details of the property along with a grading system for each item. Make sure what they are taxing you for is actually there. Like HVAC it has a different tax class than window ac. Also make the Sq ft is accurate and the actual tax rate. Some areas have multiple tax rates based on classification. You could be incorrectly classed driving your rate higher. I can normally resolve this at the assessor level but if I can’t find any errors go to the equalization board(what it’s called in my market) normally meets once Per year or on a set appointment schedule. You can dispute further there with market facts to support the case for reduction of valuation. Have sales comps and if you have a recent independent appraisal or Bpo take that as ammo.

  • Tacoma, WA · Member since 2018 · 230 posts · 257 votes
    7y

    As everyone else said, focus on the assessed value of the comps. However, you might start by explaining that the bottom unit has not been updated (the city could be making an assumption).

  • Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
    7y

    Just an update on the process.  So the Assessor called me just now and we had a decent conversation regarding the issue with my high property value compared to other duplex comps in the South Minneapolis neighborhood.   Basically he stated that they use a standard model to determine property value and the model indicated that my property needed a 20% increase (273k) in value for it's assessment for 2018.  I did give him the addresses of duplex comps in the neighborhood and asked whey the disrepancy in values.  He did suggest that the two properties that are on Minnehaha ave S would be of lower value then mine since it's tucked into a nicer neighborhood.   If my property has such high value, I start to question whether or not I sell for top dollar and move onto another project.   hmmmm.........

    Anyway, to get back on track he is sending me an appeal application to get the ball rolling.  He said he'd be glad to do an inspection of the interior of the house to get a true value and then I present my comps analysis to the Minnesota tax court.  I'm going to start this process and see where it goes.

  • Lewisville, TX · Member since 2015 · 344 posts · 264 votes
    7y
    Originally posted by @Jai Reddy:

    @Matt Millard

    Please explain furthur. You have me intrigued

    Hey Jai, my point was that in a syndication deal the sponsor raises the money & completes the deal over time & pays out dividends off cash flow & capital gain from end sale or whatever. It doesn't require the traditional headaches of being a small time landlord with a few rentals like I once was. No worrying if your property will raise it's HOA Fee significantly or the county will drastically raise property taxes like we are seeing in Texas & Florida currently. Just a different way of doing the business. Studying private placements & finding a network for deals. I'm at the point I have more deals than money but now I only want to invest heavily in a handful of deals & many come & go while some rare partnerships that are great for the passive investor remain open.

  • Edmond, OK · Member since 2012 · 456 posts · 270 votes
    7y

    @Matt Millard Gotcha. I see that you meant that, in a syndicate, the passive investor gets his promised 7-8% (whatever it may be) and the Sponsor is the one who has to worry about increase in property taxes or anything else for the matter.

  • Residential Real Estate Broker · College Station, TX · Member since 2013 · 1k+ posts · 969 votes
    7y

    @Marcus Johnson. Based on your SOLD Comps, looks to me like you have an easy case for a Market Value somewhere in the Mid-Upper $230's!

  • Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
    7y

    @Jim Cummings

    I agree, but does the assessor?  The fact that he mentioned that duplex comps that are 4 blocks to the west on Minnehaha ave are apparently valued at 60k less because of the street, that was his assessment in our brief conversation.  

    So moving on in order to challenge the 2018 value of my duplex for 2019 taxes, I have to appeal the Minnesota Tax court and pay a fee of $299.00.  My thought is that since my taxes went up around $500, it doesn't make sense to appeal the value.   I will appeal the 2019 value that come out mid-March if it is high again and that appeal must submitted before April 30th.  At that point the assessor will do an inspection of the house and we can compare comps of homes sold again and come up with a more accurate value.  

  • Tim SwierczekPro Member
    Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
    7y

    @Marcus Johnson It is a rigged system.  The county has very little incentive to agree with you.  Good luck 

  • Deerwood, MN · Member since 2014 · 184 posts · 122 votes
    7y

    I appreciate this discussion as I too feel my properties are overvalued. It seems politicians like raising property taxes on rentals because they get to give the money back to the tenant as property tax refund. 

    It’s a racket if you ask me.

  • Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    7y

    Don't get comps from the last 2 years, get them from the last 6 months within a 1/2 mile radius or less. Make sure they are similar sq ft and bedroom count. Use that data to first talk with the assessor, then schedule a hearing

  • Investor · Saint Paul, MN · Member since 2015 · 663 posts · 512 votes
    7y

    So let me give everyone an update.  After speaking to the Assessor and providing him comps, he agree to doing a new inspection due to the fact he realized he had the wrong square footage of my duplex and was comparing it to 1000 square foot larger duplexes.   That took place 4 weeks ago.   He came and inspected my home and came back today with a new assessment of $255,000.   I agreed with the evaluation and won't have to go to Minnesota tax court.   According to their tax calculator compared to the initial $325,000 valuation and 2019's obscene evaulation of 273k, I will save anywhere between $800 to $1000 for 2020.  What I learned from the process is to work with the local assessor and to provide factual information to argue your point.  

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