How To Reduce Your Own Property Taxes

The chances are the value of your home has decreased in the past couple of years. The county has likely lowered the value and tax base but perhaps not as much as you think it should be.

You may not realize it, but every homeowner has the right to go to the tax assessor and request that their property taxes be lowered. Of course the assessor won’t do it just because you ask and will usually tell you to bring him proof that the amount should be lower.

Now that you know that it’s not going to be as easy as you thought you need to be fairly certain that the amount should be lower and the amount is enough to justify the work or money you’ll expend to comply with the assessors requirements.

The first thing to do is ask yourself why you think your property has decreased in value. Maybe you heard the one around the corner sold for a lot less than your assessed value. Before you jump to conclusions you need to do some detective work. Here’s a list of items you need to find out about that property:

a. What was the square footage of the property? How many bedrooms and baths? How many square feet?
b. How was the interior and exterior condition compared to yours? Ask the owner or a real estate agent.
c. What kind of amenities did it have? What kind of flooring for example, fireplaces, remodeling, etc.
d. What is size of garage? How was landscaping? How is the location such as backing to busy street, across from park, desirability of area, etc.
e. In today’s market one of the most important considerations is the reason behind the sale. Was it a normal sale or was it a problem sale such as foreclosure, job transfer or something similar.

If there are significant differences in your home and the one you’re comparing it with, you will need to adjust for the differences. In simple terms you estimate the value (what a buyer would pay) for the difference. If the feature of the comparable is more valuable than your home, you would subtract the amount from the sales price of the property that you are comparing yours to, and if it is less valuable, you add the estimate to the price. For instance your home has a remodeled kitchen and the comparable doesn’t then you would add whatever amount you feel the remodel would increase the value. Another adjustment would be if the comparable had a different number of bedrooms or bathrooms than yours. There again you add for fewer and subtract for more.

Now that you’ve got an idea of what your home is worth its time to make a decision. If it appears your home is worth enough less than the assessor has valued it to pursue a lower valuation, you’ll need to decide the best way to prove it. If you have the time and expertise to do it yourself then you need to find at least two more sold properties to compare yours to. You’ll want to approach this like an appraiser the same basic requirements. Try to keep the comparables as similar as possible, keep them within a 1/2 mile radius (same tract if possible) and sales with the last 6 months. If you find a listing or pending sale you can add it, but make sure you have at least 3 sales within the parameters. The more you deviate from these rules the less value your argument will have.

A report from a certified appraiser is the most important (and most costly) as far as the assessor is concerned with one from a realtor (Brokers Price Opinion) next in importance (and cost). A real estate agent will often give you a property profile and evaluation of what they think your house is worth, for free. This is helpful but the assessor won’t give it much validity. Still the profile will come in handy if you decide to do your own appraisal.

With information and documents from the internet along with some spare time you can do a pretty good job of putting an appraisal together. As long as you have the facts straight the appraisal doesn’t have to be perfect but keep in mind the more professional it looks the more weight it will carry.

Be careful in picking your comparables and don’t try to make things fit. If you have a comparable that’s out of whack with the others get rid of it and choose another one. Explain why you chose the comparables you did and the reasons you used the amounts for the adjustments. If you have to use a comparable that doesn’t fit the requirements we mentioned earlier be sure and explain why. Go into a lot of detail as long as it’s logical and helps your argument. The more information that proves your case the more chance you’ll have in convincing the assessor to change your value.

Posted in Uncategorized | Comments Off

Why The Apod Is Real Estate Investing’s Most Popular Evaluation Report

The APOD is an acronym for “Annual Property Operating Data” and is one of the most popular reports in real estate investing. Foremost, because it gives the real estate analyst a quick evaluation of property performance for the first year of ownership.

In daily life, the APOD essentially serves as the real estate equivalent of an annual income and expense statement, but more in the capacity of a “snapshot” of a property’s income and expenses.

Characteristics

1. Projects property performance for the first year of ownership only

2. Ignores tax shelter consideration

3. The bottom line is cash flow before tax (CFBT), not cash flow after tax (CFAT)

4. Reveals income, operating expenses, net operating income, debt service, and cash flow concisely and therefore serves investors well as a good “first-glimpse” of the investment opportunity

Construction

A well-constructed APOD is best for comprehension, obviously, and the clearer annual property operating data is presented the easier the determination of property performance. But the emphasis is on correct numbers, not on style, so pay particular attention to what data you include. Here’s the procedure.

1. Show the Gross Scheduled Income (GSI) This is the income derived from rents and should represent the annual sum of all rents as if the units were 100% occupied. Always show a rent for vacant units; you can use any rent you like (perhaps market rent) just as long as it is realistic.

2. Show an amount for vacancy and credit loss – Deduct this amount from GSI to compute the Effective Gross Income (or EGI).

3. Show the income generated from other sources (if any) – Include things such as laundry income, rents from storage units or garages (if any) and add the total to EGI to compute Gross Operating Income (GOI).

4. Show the individual operating expenses and total – Include expenses required to run the property such as property taxes, property insurance, utilities, trash, repairs and maintenance, property management, advertising, landscaping, and so on. Do not include debt service. Compute a total and label it Annual Operating Expenses.

5. Deduct Annual Operating Expenses from GOI – This computes the all-important Net Operating Income (NOI).

6. Deduct the annual debt service (mortgage payment) from NOI – This computes the investment property’s bottom line, cash flow, or more specifically Cash Flow Before Taxes (CFBT).

Format

Okay, let’s consider the entire list from top to bottom so you can see a typical format used in an APOD:

Gross Scheduled Income (GSI)

- Vacancy Allowance

= Effective Gross Income (EGI)

+ Other Income

= Gross Operating Income (GOI)

- Operating Expenses

= Net Operating Income (NOI)

- Debt Service

= Cash Flow Before Tax (CFBT)

Special Features

As stated earlier, an APOD is more about substance (accurate financial data is mandatory) than it is about style and panache. Nonetheless, annual property operating data that also includes computations for cap rate, gross rent multiplier, price per square foot, and cash-on-cash return are helpful. Yes, you can exclude the extra effort to include these additional computations, but it does create an APOD that will make you proud to present to customers and lenders so it’s recommended.

Posted in Uncategorized | Comments Off

Why The Apod Is Real Estate Investing’s Most Popular Evaluation Report

The APOD is an acronym for “Annual Property Operating Data” and is one of the most popular reports in real estate investing. Foremost, because it gives the real estate analyst a quick evaluation of property performance for the first year of ownership.

In daily life, the APOD essentially serves as the real estate equivalent of an annual income and expense statement, but more in the capacity of a “snapshot” of a property’s income and expenses.

Characteristics

1. Projects property performance for the first year of ownership only

2. Ignores tax shelter consideration

3. The bottom line is cash flow before tax (CFBT), not cash flow after tax (CFAT)

4. Reveals income, operating expenses, net operating income, debt service, and cash flow concisely and therefore serves investors well as a good “first-glimpse” of the investment opportunity

Construction

A well-constructed APOD is best for comprehension, obviously, and the clearer annual property operating data is presented the easier the determination of property performance. But the emphasis is on correct numbers, not on style, so pay particular attention to what data you include. Here’s the procedure.

1. Show the Gross Scheduled Income (GSI) This is the income derived from rents and should represent the annual sum of all rents as if the units were 100% occupied. Always show a rent for vacant units; you can use any rent you like (perhaps market rent) just as long as it is realistic.

2. Show an amount for vacancy and credit loss – Deduct this amount from GSI to compute the Effective Gross Income (or EGI).

3. Show the income generated from other sources (if any) – Include things such as laundry income, rents from storage units or garages (if any) and add the total to EGI to compute Gross Operating Income (GOI).

4. Show the individual operating expenses and total – Include expenses required to run the property such as property taxes, property insurance, utilities, trash, repairs and maintenance, property management, advertising, landscaping, and so on. Do not include debt service. Compute a total and label it Annual Operating Expenses.

5. Deduct Annual Operating Expenses from GOI – This computes the all-important Net Operating Income (NOI).

6. Deduct the annual debt service (mortgage payment) from NOI – This computes the investment property’s bottom line, cash flow, or more specifically Cash Flow Before Taxes (CFBT).

Format

Okay, let’s consider the entire list from top to bottom so you can see a typical format used in an APOD:

Gross Scheduled Income (GSI)

- Vacancy Allowance

= Effective Gross Income (EGI)

+ Other Income

= Gross Operating Income (GOI)

- Operating Expenses

= Net Operating Income (NOI)

- Debt Service

= Cash Flow Before Tax (CFBT)

Special Features

As stated earlier, an APOD is more about substance (accurate financial data is mandatory) than it is about style and panache. Nonetheless, annual property operating data that also includes computations for cap rate, gross rent multiplier, price per square foot, and cash-on-cash return are helpful. Yes, you can exclude the extra effort to include these additional computations, but it does create an APOD that will make you proud to present to customers and lenders so it’s recommended.

Posted in Uncategorized | Comments Off