Property Taxes input?

[Mallikarjun Reddy Pateel]

Hello Chicagoans,

we are looking at a couple of Multifamily properties around Chicago, wanted to clarify a few things about property taxes and Valuation.

1. I see cook county calculates property taxes on a 3-year basis(northern, southern, Chicago areas), will the sale triggers new assessments increasing the property value to the sale price, therefore, an increase in property tax?

2. this is what I found on the cook county website :

"Residential properties are assessed as of January 1st of the current year, using three to five years of prior sales information. By using multiple sale years, this increases the stability of market value estimates.

The Cook County Assessor's Office uses mass appraisal to produce property values. Instead of appraising property one-by-one, mass appraisal looks to the real estate market to detect local trends in property values based on location and characteristics. Those trends are used to estimate the fair market value of each property based on its location and characteristics. Mass appraisal is a way to put fairness into the assessment system"

the above statement sounds a little contradictory to me, will they look at the property by property sale information to estimate the Market value or Mass appraisal or both?

3. I read an article that the cook county assessor's office shifting the tax burden from homeowners to commercial property owners being a significant property value Increase in the commercial sector. if apartments fall into the residential category does this have any Impact on Multifamily owners?

[John Warren]

@Mallikarjun Reddy Pateel the answer is, yes a sales price can trigger an increase. Depending on where you are at in the 3 year cycle, it might be a bit of time though. For instance, if you are in year one then you won't see an increase for almost two years. The formula's are complicated, but what I do is I run two scenarios based on the cookcountypropertyinfo.com website.  In one scenario, I look at the current taxes and make sure I am happy with the cash flow and the deal. Then I run a second scenario where I look at a worst case. For instance, if I buy for 500k and the property is assessed at 300k then I multiply this out as though the property is re assessed at 500k (40% higher). If the deal still works, it is a go. If it does not work, it is not a go! 

There is more to it than that of course, but that is the high level. On 7 units or more, there are some new tax incentives if you are doing rehabs and if you are renting to "affordable" housing tenants which can be market or subsidized. 6 units and under, you can check for home owner's exemptions, senior exemptions, senior freezes, etc.