Investor · Fort Wayne, IN · Member since 2015 · 54 posts · 9 votes
I'm looking at a commercial building that houses a restaurant and 2 apartments upstairs.
Owner is asking 69,000 but assessed tax value is only 11,000. This isn't making much sense to me. Shouldn't the tax value be at least close to asking price?
Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
11y
On top of that, while the assessed value is supposed generally to be reviewed / reassessed on some kind of cycle (3 year, 5 year, 2 year), there are many instances where this does not happen.
The sale of a property can trigger a re-assessment (depends on jurisdiction) so you do need to research this and if it will, the sale price assuming an arms length transaction, will be come the FMV which will impact the taxes.
In analyzing a number of opportunities, I have seen deals that appear 'good' but which degrade to 'not good' just based on the 'likely' change in property taxes.
You have to know the local jurisdiction laws and make sure you keep this in mind when running numbers.
Buffalo, NY · Member since 2014 · 371 posts · 146 votes
11y
"
Assessed Value
The assessed value of a property is a figure local governments use to determine a homeowner's annual property tax. It is always a percentage of the property's FMV, but the percentage varies from state to state. Most states calculate assessed value at 80 percent to 90 percent of FMV, and then impose a 1 percent to 2 percent annual property tax on the assessed value."
Buffalo, NY · Member since 2014 · 371 posts · 146 votes
11y
Forgot to mention... Double check the survey when it is ready to make sure you are buying what you think you are buying. And compare SBL numbers on the contract with the tax record to make sure they match and you are looking at the correct lot assessment. It is also possible that the "improvements" (ie the building) isn't accounted for. You can tell this by looking at the property type of the assessment. Mention your concern to your lawyer so they can keep an eye out.
Rental Property Investor · Toronto, Ontario · Member since 2012 · 538 posts · 298 votes
11y
On top of that, while the assessed value is supposed generally to be reviewed / reassessed on some kind of cycle (3 year, 5 year, 2 year), there are many instances where this does not happen.
The sale of a property can trigger a re-assessment (depends on jurisdiction) so you do need to research this and if it will, the sale price assuming an arms length transaction, will be come the FMV which will impact the taxes.
In analyzing a number of opportunities, I have seen deals that appear 'good' but which degrade to 'not good' just based on the 'likely' change in property taxes.
You have to know the local jurisdiction laws and make sure you keep this in mind when running numbers.
Investor · Fort Wayne, IN · Member since 2015 · 54 posts · 9 votes
11y
Right. I talked to another local investor, and apparently this is the norm for this area. Land value and improved value are both listed, plus the property sold in 2008 for 65,000
Flipper/Rehabber · Emeryville, CA · Member since 2015 · 158 posts · 124 votes
11y
Some states have laws capping the property taxes that they can charge & the speed at which they can raise appraised value. In California for instance, some people who bought 40 years ago in Silicon Valley for $50,000 are sitting in million dollar houses that appraise at under $100K.
Appraisals are also slow to keep up with any price depreciation--the city/state doesn't want to go out of their way to reduce their tax base.
Right. I talked to another local investor, and apparently this is the norm for this area. Land value and improved value are both listed, plus the property sold in 2008 for 65,000
There will obviously be exceptions, but my understanding is that most properties are still selling for significantly LESS than in (pre-GFC) 2008. May I suggest, ESPECIALLY commercial properties?
Much homework required before arriving at a good investment price for this one! Cheers...
Investor · Eagle, CO · Member since 2013 · 94 posts · 24 votes
11y
I'm an appraiser for a CO county assessor office. To further delinate, a super wealthy resort county w low population and high property values. I'm an expert at CO tax law. Ohio obviously has different
Investor · Eagle, CO · Member since 2013 · 94 posts · 24 votes
11y
Sorry about my post last night, tried typing on my phone. Every state has different procedures. If you call the local county, they should be able to explain how they value. You can be vague, don't specifically name the property in question, that way you don't raise any flags. If it is lower then it should be, a sale will likely trigger a revaluation, so plan expenses accordingly.