All Forum Posts by: Mark Hamblin

Thanks @Daniel Benoit.  Very helpful considering your unique experience at the Assessor's office.  

If the sale happened in 2016, would I expect to see a big jump the first year after the sale, or not until they're reassessed?  

Also, how much of the reassessed value is typically based on the recent sales price for a specific property vs. influenced by values of other similar buildings in the neighborhood?  I know in other places (San Francisco) you can expect the appraised value the year after a sale to be almost exactly what the recorded sales price was.  But based on what I read on the Cook Co Assessor's website, it seems they use more of a neighborhood average approach based on a variety of factors.  So if I have the "nicest" building in my neighborhood, my appraised value may get "pulled down" by the sale of similar, but "less nice" buildings in my neighborhood.  (By "nice" I mean most recently renovated, likely higher rents, etc.)  Does that "pull down" effect happen?

Any additional insight would be great!  I'll be closing soon on a property on the South Side very soon, so I guess I'll find all this out anyways, but just trying to hone my underwriting crystal ball for what may happen in 2018 on this and other properties.

Thanks!

Thanks @Account Closed  Appreciate your help!

I'll look around at taxes on comparable buildings in the area, as Damian said.

Troy -- thanks for the 12-15% rule of thumb.  Even at 12% of Scheduled Gross Income, that could be 25-30K! (SGI is listed around $220K, or ~$1150/unit on 2BRs and 3BRs).  And sorry if anything I said came out as negative against brokers....  I certainly didn't mean to generalize, and I know its difficult to pro-forma taxes in future years, especially in Chicago.  Oh, and I noticed on that one deal you sent me recently, the taxes in your pro-forma seemed quite realistic, so thanks for your openness there.  

Looking for some help from Chicago / Cook County multifamily investors, regarding a property tax question.  It seems property tax calculations there aren't nearly as straightforward as in other markets...  Free high fives to anyone who can help!  

I am evaluating some apartment buildings in Chicago (South Side, Woodlawn / South Shore / Chatham) and am trying to figure out what Property Tax figures to use when underwriting the deals. Some of the buildings are recent gut rehabs, so their previous assessed values are very low, hence the prop taxes were very low. Or they were owned by the same owner for a long time, also resulting in low assessed value. However, when a new sale happens at a much higher price, I imagine the assessed value and property taxes will soon catch up to the new sales price, as is normally the case. Perhaps not right away, but perhaps after the next assessment cycle? Or are there other factors and averaging (neighborhood averages, building types, etc.) that will prevent the new assessed value from jumping straight to the new sales price? And is the process different for residential (SFH, etc) vs. larger apartment buildings? I've read the Cook County Assessor's website, but can't find a clear answer (not surprised!), and they say they do mass assessments anyways, so perhaps a specific building isn't targeted?

Of course, when the listing broker puts together the pro-forma, they only use the historically low prop tax numbers, not saying anything about what could happen in following years.  I'm trying to cut through the broker BS and understand the real numbers.

EXAMPLE:

• Property in Woodlawn, asking price around $1.7M  (16 unit building)
• 2015 First Pass Assessed Value = 70,888 (which I believe means the assessed market value is 708,880, based on "market" = "assessed" x 10 in Cook County)
• 2015 Assessed Value (after review) = 18,576  (Their argument was likely based on the building being mostly vacant at that time, which it was)
• 2015 Taxes = 3,404  (=1.8% of the assumed "market" value used in the 18,576 assessment, see above)
• Current property taxes used in the broker pro-forma:  ~$5,000 / year
• So... lets say I paid full ask of $1.7M... does that mean my taxes could quickly jump to 1.8% of the new market price, or $31,000?  Obviously a HUGE jump vs. current taxes and whats listed in the pro-forma.
• Or does the Assessor in Cook County not chase the specific sale, but instead base assessments only on neighborhood averages, property type, etc.?
• Any idea how quickly Cook County assessor catches up to new sale prices?  Right away, the first year after sale?

Obviously, when I ask listing brokers to comment, they are evasive and don't want to give exact numbers, saying that they just base proformas on current taxes paid.  Regardless, I know hiring an attorney to fight property taxes is almost required in Cook County, so I will be doing that... I just want to know what we're up against.  

Looking for input from people familiar with Cook County specifically, as every state/county has completely different property tax laws / practices.  

Super thanks!!!

-Mark

Thanks for the reply @Mark Ainley

I actually sent you an email about a week ago, as I thought you may be able to help me out as a broker and/or property manager.  I'll send you another email as a refresher.  If you don't think its a good fit, just let me know.  

To answer your questions, I'm looking at buildings greater than 5 units, primarily in the Woodlawn, Washington Park, South Shore neighborhoods.  I think I saw that you guys have an office in Woodlawn, so perhaps that's an area you cover?  

Thanks!

Mark

Hi all,

I'm looking to buy multifamily buildings in select neighborhoods on the South Side of Chicago, and I'm looking for a knowledgeable broker and any recommendations on property management companies who specialize in the area.

Any input would be greatly appreciated!

Thanks,

Mark

Hi all,

I'm looking to buy multifamily buildings in select neighborhoods on the South Side of Chicago, and I'm looking for a knowledgeable broker and any recommendations on property management companies who specialize in the area.  

Any input would be greatly appreciated! 

Thanks,

Mark

Hi Frank, I just came across your post as I was researching the Woodlawn area.  I'm considering putting in an offer on a building there.  Apparently they just announced (about a month ago) that the final selection for the OPL is Jackson park, next to the Woodlawn neighborhood.  I'm hoping (without any real data or precedence to back it up) that it will do good things for Woodlawn, hence my eagerness to pull the trigger on the building I'm looking at.  

Are you currently invested in anything in Woodlawn or other areas of the South Side?  If so, I'd be interested to hear your take on the decision and any impacts on Woodlawn.

Thanks,

Mark

Oh, and since the Bay Area is a big place, any recommendations on the Peninsula would be preferred (Redwood City, Palo Alto, Foster City, etc...)  Super thanks!

I'm looking for recommendations of REI-knowledgeable CPAs in the SF Bay Area (CA). My current guy is too much of a generalist and not very responsive.

I need someone who can efficiently manage multiple LLC's (both REI-focused and other business LLCs), and is comfortable and knowledgeable about making recommendations for structuring deals, etc.

I know there's probably a ton of good ones out there in the Bay Area, but BP recommendations would be great!  Thanks!

@Tony Nguyen Thanks for the advice, Tony.  I think you're spot on that finding the right broker and management company will be key to my success for doing this out-of-state.  

Regarding your comment about seeing people double/triple their money in 12-18 months... that's quite an accomplishment.  Were they typically doing value-add deals such as buying a vacant property and focusing on lease-ups?  Seems like the only way to get such returns in a short timeframe.  Probably a higher risk strategy for beginners, but if you know the market and find the right deal, I'm sure it can be done.