How One Investor Fought A 130% Commercial Property Tax Assessment Increase

Posted by Anne Sheehan on Aug 4, 2015

Here’s a true story about how one investor got slammed with an commercial property tax bill thousands of dollars higher than he anticipated after the county unexpectedly increased his assessment value more than 130 percent from a year prior — and what he did to fight it.How One Investor Fought a 130% Commercial Tax Assessment Increase

In 2014, Ryan bought an apartment complex in the Atlanta area, paying nearly twice what the property was assessed for during the last county revaluation. Five months after he closed the deal, Ryan received the property tax assessment for the apartment complex, only to be met with complete shock.

Staring at a sky-high figure on the assessment, Ryan panicked, wondering where in the world he’d come up with the money to pay the taxes. Ryan read the assessment over again and his panic turned into anger.

His property tax assessment for 2015 was $1 million more than he paid for the apartment complex in December 2014, just months before he received his notice.

The year before he purchased the property, the county valued it at $2.9 million. Ryan bought the property for $5.8 million on December 31, 2014. And the county’s assessment as of the January 1, 2015 lien date is $6.7 million — $1 million more than his purchase price and nearly 133 percent higher than a year ago — catapulting Ryan’s commercial property tax payments far beyond what he expected and had accrued in his budget.

Ryan could not believe this happened.

The Problem With Mass Appraisals

As an investor, Ryan forecasted property tax payments based on his purchase price; he knew he’d have to pay taxes on the property, but the assessment notice he received far exceeded his expectations.

Situations like this are common. Local taxing authorities typically use a blanket, mass appraisal system to assess property tax values. This method, while efficient, doesn’t take the specifics of an individual property into account. While Ryan calculated his property tax estimates based on his unique asset, the county didn’t.

Ryan is understandably stressed out about how he will be able to pay his property taxes. The extra $1 million means Ryan is responsible for about $16,000 in additional taxes — money that he has not budgeted for nor has lying around.

What does that kind of increase mean for Ryan? His apartment complex has 200 units. To cover the additional $16,000 in taxes, he’d need an extra $80 in rent from every unit this year. Besides being a lot money to ask from tenants in a competitive housing market, he is just starting to renovate the units to get them to market rates. He has units that are offline and unrentable until the renovations are finished.

The solution isn’t as simple as raising rental rates. If he raises his rental rates, he risks losing current tenants or pricing his property above the market, neither of which will make up the deficit.

How RPTA Helps Property Owners

Ryan called Real Property Tax Advisors for a free consultation. We examined Ryan’s current tax assessment, previous years’ assessments on that property, and data on similar properties in the marketplace. Then, we acted swiftly to meet the county tax assessor’s tight deadline to file a commercial property tax appeal.  

Now we’re working with Ryan to get the data that will help us prepare a strong case based on comparable sales, income, deferred maintenance and capital expenditures. Our appeal success rate is over 90 percent and we’re confident that Ryan’s property tax assessment will be reduced.

Ryan is not alone. Across the U.S., countless property owners and executives responsible for managing corporate costs are opening this year’s property tax assessments and are shocked at the jurisdiction’s proposed assessments.

RPTA’s mission is to use our commercial property tax expertise, market knowledge and access to exclusive industry data to make sure property owners like Ryan don’t pay any more than their fair share of taxes.

Are you facing sky-high commercial property taxes? Let RPTA help you ensure you’re paying no more than your fair share. Schedule your free tax consultation today!

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