My 1st Acquisition in Cleveland Ohio ! - Property Tax question

[Achraf El Churafa]

Hi All 

I just acquired my 1st 6 unit building in Cleveland Ohio, I have a property tax question. I acquired the property from an owner who owned it since 97. The market value (in county records) is 120K but the assessed value is 43K. If i purchase it anything above the 43K, would I have exposure the taxes will go up based on new purchase price ?

If yes, what if I buy the LLC that owns the property, there will not be any change in title or deed ownership, would this impact my property taxes or not ?

[Timothy Murphy III]

@Achraf El Churafa

My experiences have been: When the deed is recorded, the Recorder's Office typically asks for the HUD-1 (or purchase agreement for properties transferred outside of escrow). The county auditor's page will reflect the new ownership based on that purchase price (plus any assumed liabilities such as outstanding delinquent property tax bills). This is the case regardless of whether you take title individually or via a corporate entity.

The County Fiscal Office periodically re-assesses valuations for tax purposes. I believe it is every five years. At that point, they'll take many things into account, including recent sales, to come up with the new valuation. I'm not certain if the transfer will trigger a revaluation to the sales price immediately, but I wouldn't be surprised if this was the case.

Keep in mind that assessed value is 35% of market value in Cuyahoga County. Meaning the county values your property at ~$120k and the tax calculations are based on 35% of that value, or ~$43k. The real point of comparison is your purchase price, and the $120k valuation. If you purchased it for substantially more than $120k, expect an increase in your tax bill. If you purchased it in an arms length transaction for substantially less than $120k, you likely have grounds to challenge that valuation and have it reduced.

Anecdotally, I've had some RE attorneys and investors tells me they have properties that they'd consider selling, were it not for their very low property tax valuation. The fear is that the tax valuation would be increased in the hands of the end buyer based on the sales price.