As companies and institutions acquire real estate assets, either though purchase or defaults, the cost to hold these assets have a dramatic impact on net profits. These costs include maintenance, insurance, management, utilities and real estate taxes.
Most of these costs can be deferred or controlled. For example, if a property is vacant the required maintenance is nominal, insurance can be based on revised asset values, management costs are a function of rental income and utilities are based upon occupancy. The only cost that must be paid but can be reduced is for real estate taxes.
Real estate taxes are a function of the assessed value multiplied by the millage rate. The assessed value is established by the local government property appraiser, and the millage or tax rate is set by the taxing agency or government. The millage rate changes each year with government needs. As an individual, it is extremely difficult to influence the millage rate. However, the assessed value of real estate can be reduced, resulting in a lower tax bill or a refund.
The Miami-Dade County property appraiser is responsible for the valuation of a very large number of properties. For example, in Miami-Dade County alone there are more than 880,000 parcels. This requires that properties are appraised on a mass-appraisal basis. However, because each property is unique, the application of mass-appraisal techniques can create errors.
Some of these errors or issues can include the condition of the property on January 1st of the tax year, the actual size of the improvements and/or site area, the depreciated cost of the improvements, the assessment for the land, the net operating income and the tax assessment compared to comparable sales.
A property asset manager is responsible for producing the maximum net operating income for the property. To achieve this, it is prudent, for the nominal cost of filing an appeal petition, to appeal the assessment each year. The appeal presentation before the Special Magistrate can be prepared by the property manager, or an agent specializing in the tax assessment appeals can be retained.
Typically, agents are compensated with on a percentage of the real estate tax savings. This percentage ranges with 20% to 50% depending on the size and complexity of the assignment. If there are no savings, then the cost is the nominal fee of $25 to file the appeal petition. If you would like more information, please feel free to give us a call.
-Thomas J. Dixon