There are many factors to review and consider when buying a multifamily property. Property taxes are just one of those factors. The lagging effect of property taxes can be deceitful when evaluating their impact on a sale. Unfortunately, many times property taxes seem to be glanced at, but not thoroughly evaluated. Using last year’s tax bill is a start, but depending on the jurisdiction and their rules, you may be setting yourself up for a nightmare.
In Arizona, properties can have their taxable value changed when parcels are combined, split, or when significant changes are made to the structure. Deals that were financially viable on first review, can become complete financial losses if a revaluation is triggered. Since property taxes are a lagging factor, buyers may not see any effects until the following tax year. In one case, where a taxpayer consulted us after the deal, they were shocked to learn that the taxable value increased over 44% because of a parcel consolidation. Had they known the law they would have killed the deal.
In other states, such as Texas, the seller and buyer are not required to disclose the purchase price. When the purchase price is disclosed, the appraisal districts attempt to use it to value at sale price. Buyers and sellers from full disclosure states such as California sometimes volunteer the sale information not knowing that it is not required. In many cases, this not only causes their property to be reassessed at a much higher value, but the other multifamily properties in the community are increased based on the sales approach.
Seeking council from property tax experts can help you avoid some of these pitfalls and can help the community at large. When we work together, we can help keep the property taxes lower for all.
Wayfinder Tax Relief, LLC is the #1 multifamily property tax specialist in the industry. They focus solely on multifamily properties and are at the cutting edge of the industry change. They are involved in many local apartment associations and are members of the Texas Apartment Association and the National Apartment Association.