Assessment warning STL

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Assessment warning STL

Kyle Eckert
Realtor · Saint Louis, MO · Member since 2017 · 228 posts · 174 votes

A cautionary tale with actionable advice for STL specifically, and probably REI in general.

Advice: When looking at tax numbers for your investment model, make sure the property is assessed correctly when running the numbers.

Story:  We purchased our first 2-family in Sept. 2017.  Looking at city records, we expected to pay $900 for the property, which seems reasonable for the condition it was in (Its quite ugly and out of date).  I didn't think to look at what it was assessed at: $57K...  

St. Louis assesses properties every odd year, but must have overlooked this one for some years.  Our purchase must have put it on the radar, and it was reassessed at $120K with a tax bill of roughly $1900.

While it did not totally destroy our investment, it did derail a few things.

The numbers:

At Purchase: 8% CoC return, $275 monthly cashflow

After assessment: 5% CoC return, $190 monthly cashflow

After $10K to bring to market rents: 9% CoC return, $370 monthly cashflow

Not a stellar investment once fully upgraded, but not too shabby for our first swing.  We are also learning a boat load, so I'm not too mad.  I am still looking for a reasonable person at the assessors office to explain how this was missed for so long.  They are quite rude and not helpful, but ill keep calling.

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Dan Hoehn
Investor · St. Louis, MO · Member since 2017 · 37 posts · 31 votes
8y

Hey @Kyle Eckert, If your purchase price is less than the reassessed value, you could contest it with the assessor's office. Using both the purchase price and appraisal if you have one.

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  • Dan Hoehn
    Investor · St. Louis, MO · Member since 2017 · 37 posts · 31 votes
    8y

    Hey @Kyle Eckert, If your purchase price is less than the reassessed value, you could contest it with the assessor's office. Using both the purchase price and appraisal if you have one.

    2Reply
  • Kyle Eckert
    OP
    Realtor · Saint Louis, MO · Member since 2017 · 228 posts · 174 votes
    8y

    @Dan Hoehn  Nope its not, it assessed at $118k and we bought a bit above that.  The problem is it was assessed at $60k in 2016.  I couldn't get a straight explanation from the rude girl at the assessors office, so Ill call back tomorrow afternoon and hopefully talk to someone else.

    If I can understand why it wasn't reassessed in 2015, I would feel a lot less like they were trying to rip me off.

    0Reply
  • Jeff Fullerton
    MO · Member since 2017 · 7 posts · 3 votes
    8y

    thanks for the info

    0Reply
  • Donald S.
    Accountant · Saint Louis, MO · Member since 2017 · 409 posts · 362 votes
    8y
    @Kyle Eckert hey I'm sure you know this, but remember government workers (of any kind) are basically expecting rude people so they put up defenses and may seem rude to you. I suggest to be overly kind when you call, give them a reason to want to help you. works every time for me, I actually kind of enjoy talking to the city hall people.
    2Reply
  • Vince Mayer
    Wholesaler · Arnold, MO · Member since 2013 · 348 posts · 183 votes
    8y

    @Kyle Eckert

    If you are going to do this for a living go down to their offices and talk to them. Tell them you are trying to learn what they already know. Ask for help, don't demand it. 

    These folks get these questions all of the time and they become pretty cynical after awhile but if you take the trouble to talk to them and get to know them, you'll find that they are pretty nice people.

    2Reply
  • Vince Mayer
    Wholesaler · Arnold, MO · Member since 2013 · 348 posts · 183 votes
    8y

    @Kyle Eckert

    Kyle, here is a great article from The Riverfront Times.

    https://www.riverfronttimes.com/newsblog/2017/05/18/st-louis-property-assessments-are-way-up-heres-what-you-can-do-about-it

    0Reply
  • Kyle Eckert
    OP
    Realtor · Saint Louis, MO · Member since 2017 · 228 posts · 174 votes
    8y

    @Vince Mayer Thanks for the link, actually a good read on the topic.  

    0Reply
  • Jeff Hug
    St Peters, MO · Member since 2017 · 9 posts · 8 votes
    8y

    Thanks for sharing your pain. I was actually going through some Anthony Chara lessons last night and he specifically mentioned always double checking the assessment and even talking to the assessor during due diligence period, because this can happen after a sale and when it's apartments the effect Cana be multiplied.

    0Reply
  • Max Householder
    Rental Property Investor · Saint Louis, MO · Member since 2014 · 313 posts · 326 votes
    8y

    Great note, @Kyle Eckert. A similar thing happened to us on our 4-family. We purchased in November 2016 and our cash flow estimates were based on the 2016 tax bill which was ~$2010. For 2017, the property taxes jumped 13% to ~$2270. A difference of $20/month didn't change our outlook dramatically, but it was still a wakeup call that we should have done more DD with the assessors office. I now run my numbers assuming a 10% increase in property taxes, especially since the city's m/o has been to fleece property owners in order to make up for reduced tax revenue. Don't even get me started on their shameful occupancy permit extortion scheme.

    I have to call on local government offices fairly regularly for my day job and the level of customer service is generally abysmal. If you don't have the stomach to kill them with kindness, playing really dumb and asking for help seems to work well. If you act like you know it all, they tend to shut down. Frankly I find it absurd that a customer should have to butter up an employee in order for them to perform the responsibilities of their job, but that's the public sector for you.

    1Reply
  • Shari Peterson
    Lender · St. Louis, MO · Member since 2009 · 348 posts · 164 votes
    8y

    Can you clarify if this is St. Louis City County or St. Louis County?

    0Reply
  • Kyle Eckert
    OP
    Realtor · Saint Louis, MO · Member since 2017 · 228 posts · 174 votes
    8y

    @Shari Peterson  This was in St. Louis city.  They assess every odd year, but apparently miss a lot of properties.  Buying in an odd year may put your property on the assessment list, so due diligence on the assessment price is key to avoiding surprises.

    1Reply
  • Account Closed
    Investor · Denver, CO · Member since 2016 · 736 posts · 582 votes
    8y

    It's very possible the prior owner had a homestead exemption or something similar on the property that you don't get to enjoy after the purchase.  Usually values don't jump by that much.

    0Reply
  • Zach Stillman
    Saint Louis, MO · Member since 2017 · 72 posts · 21 votes
    8y

    I mentioned it earlier this year in stl related posts as i bought in april and june and had some city hall meetings to accurately assess properties owned (aka informal conference)

    There is no homestead/homeowners exemption in stl that i know of.

    Link to article back in May:

    http://www.stltoday.com/business/local/the-tax-man...

    "

    Indeed, the city was under-assessed in the past, so much so that the state forced the assessor’s office to catch up, leading to increases in residential assessed values of 33 percent in 2005 and 22 percent two years later.

    But the assessor’s office says sales data from last year and 2015 point to sharply rising values.

    “It wasn’t really until the sales that started to occur in 2015 that those values started shooting up,” said Deputy St. Louis Assessor Shawn Ordway."

    0Reply
  • Kyle Eckert
    OP
    Realtor · Saint Louis, MO · Member since 2017 · 228 posts · 174 votes
    8y

    @Zach Stillman thanks for the article, its a good read and makes a lot of sense out of what I experienced.  

    Moving forward, I plan to look at the assessment on the city site, check that it is somewhat reasonable, and run my numbers accordingly. 

    0Reply
  • Dan Carver
    Webster Groves, MO · Member since 2018 · 24 posts · 12 votes
    8y

    A new purchase price will usually result in higher future assessments, both in the city and county, so I would be careful using current assessment when running your numbers.

    0Reply
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