All Forum Posts by: Mallikarjun Reddy Pateel

Hello folks, if you are an Indian national or foreign Investor looking into the Indian CRE market take a look at this article I recently published. I outlined all the reasons why one should invest in Indian real estate over US markets.

https://www.linkedin.com/pulse...

@Jonathan KlemmI think the state revenue department sets the equalization factor every year so it changes every year. it has been all the way from 2.7-3.3.  

 underwriting taxes my way is more conservative, based on tax projections from a tax consultant and your risk tolerance you can adjust your forward taxes for a more competitive offer. 

thank you. yes, we are OOS Investors and Chicago has been our primary focus. 

whether you're a new Investor or a veteran in Chicago Real estate, this is pretty much everything you need to know about Chicago Multifamily property taxes. 

Cook County has an effective rate of 2.10%, almost double the National Average.

How taxes are Calculated: In Cook County, property taxes are Calculated once every 3 years (triennial Reassessments), The Cook County Assessor's Office alternates reassessments between the north and west suburbs, the south and west suburbs, and the City of Chicago. map view. For assessment purposes Multifamily still considered residential and assessed Values will be 10% of the Fair Market Value. The assessed value is then Multiplied by the Equalization factor which is 3.2234. then the equalized assessed value will be multiplied by the assigned tax rate for the Municipality/Property. Let us look at a deal we are working on

Fair Market Value: $3.5 MM

Assessed Value: $350K or 10% of the FMV

Equalization factor: 3.2234

Equalized Assessed Value: $350,000 X 3.2234 = $1.128MM

Tax rate :6.911%

Property Tax bill: EAV X Tax rate = $1.128MM X 6.911% = $77,969.

Underwriting Property Taxes: some of the Investors I have spoken to underwrite their property taxes to increase 10-20% every year after the Acquisition and still ended up paying much higher, to an extent of 50-100% Increase post Acquisition or during the hold period. One of the reasons for this is that most of the Properties have been significantly under-assessed compared to their Fair Market Value. As new assessments take place and because there is no cap on Increases it's highly likely that these assessed values will catch up with the Fair Market values so prepare to expect a higher property tax bill. The way we underwrite property taxes for our new acquisitions is we underwrite property taxes assessed to the Purchase price. You will see the same in the above example. There is no way that Assessor is going to assess the values over the Fair Market Value, even if they do, we can make a credible dispute and appeal the taxes. Because underwriting higher projected taxes, only a few deals pencil out, but you are protected from day 1 and adjust your offer price accordingly.

You can also work with a Tax attorney or Consultant to provide you with the Tax projections for a 5–6-year period, they use similar methods to Cook County Assessor’s Office (CCAO) this is also another way to get a better sense of what your Property Taxes are going to be.

Keep in mind there are other factors that Influence your property tax bill such as the equalization factor, tax rate, and Property tax class. getting these projections from a tax consultant will equip you for success and better protect Investor's capital.

You can find taxes information
https://www.cookcountyproperty...

@John Warren 

Thank you, that's exactly how I underwrite my deals matching the assessed market value to the purchase price in a worst-case scenario. 

any thoughts on tax rate or equalization factor Increases in coming years?

not sure if you noticed, but did the sponsors underwrite their prop taxes based on purchase price or current taxes?

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?

Hello peers, 

recently I was listening to a Podcast that points to climate risk and rising Insurance costs for RE Investors, Houston, and other major TX markets are on this list, and these are the markets we are exploring to add to our Portfolio.  

some of you who have experience with Investing in these markets, what have you seen in terms of significant Insurance costs in the past ? where do you see things going? is it a Potential risk, in the long term? 

yes, the loan is not for the land it's for construction. 150 residential units

my partners are set to close on a Land in NC, we are exploring the option of Mixed-use Development, one main component for my analysis is Debt Interest rates so can someone Recommend what are some Good loan programs or resources where i can find more Information. TIA!