How to Lower YourProperty Taxes– that's today's episode.
Let's get into it.
I'm Natali Morris.
And I'm Clayton Morris.
Thank you so muchfor joining us.
Today, we want totalk about taxes.
These are actuallymy favorite episodes, because this is whereI get to get wonky.
We want to talk about howto contest your property tax value with yourmunicipality so that you don't have to pay a ton inproperty taxes every year.
Now who wouldn't want that? Right.
And this is somethingyou could actually do.
So you might besaying, there's no way I can lower my property taxes.
I get that bill.
I have to pay it.
In fact, one of ourinvesting markets, where we've done a lot ofinvesting in Indianapolis– a number of yearsago, the city decided to raise property taxes.
And guess what.
People came out and protested,and they went to City Hall, and they said, nah-ah-ah,and they actually lowered property taxes.
Now that was amore broad protest, but you, individually,can go to the county and actually contestyour property taxes.
So we are going to tellyou why you want to do it, how it works.
We're going to give yousome steps to do it, and then we're going todo a little story time and tell you about aproperty tax assessment win– I like story time.
–we had last week.
I am still sort of ridinghigh on this win in my life.
I can't wait to tellyou all about it.
No, this is super exciting.
In fact, when we got theletter back from this win, we've been like both holdingonto it and carrying it around.
I kept it in my wallet, becauseI needed this win in my life so badly.
Now let's talk a littlebit about how this works and why you want to do it.
Now as a homeowneror an investor, you have to pay taxes to thestate, the city, the county– they sort of divvy it up– because you own that asset.
And you're taxed onthe value of the asset.
Now wherever the house isis how they set the rate.
So let's say ahouse is worth $100.
You're going to be taxed apercentage of that value.
And so some states, somecities, some counties have higher taxrates than others.
So obviously, you want the cityto think that your property is worth the least amountpossible, because you are taxed on a fixed percentage.
Now you don't want actually yourhouse to be worth a low amount.
You just want thecity to think that.
So where you start inall of this– number one, you have to go to thecounty, and you typically will get this– and everymunicipality is different.
But usually, it's the townietax assessor's office.
The townie? The townie– did Icall it the townie? The townie tax.
The townie tax.
The county's taxassessor's office, and it's very simple to do.
You just call up yourlocal municipality and find out where that is.
Who– what website? Usually, it's online, andit will take you about five minutes to find your property.
So this is something that ourteam does on a regular basis, because we do a lotof real estate deals.
And so our team is constantlyhaving to pull the property tax records for a property.
So you pull that card up,and it's just the parcel card for your property.
It's going to show along-winded tax ID or a tax number associated with yourparcel or your parcel number, and it's going to have yourbedroom-bathroom count, and it's going to have the taxassessed value listed there right on that parcel card.
In fact, just before wesat down to record this, I was looking at the propertyvalue of one property that we want tochange the deed on.
And so what I justgoogled was, let's say, so-and-so county tax– what did I google? Like, you just Google thename of the county tax, and then it showed mewhich school district tax is whichpercentage, and then there were sort of columns.
So this school district gets0.
0008 or something like that.
And then the countygets this percentage.
The state takes this percentage.
You add thosetogether, and that's the percent we tax you onthis particular property.
So you can look thatup pretty easily.
Now remember, once you havean agreed upon tax value, that number is the numberthat all future increases will happen upon.
So when you becomethe homeowner, if you get a valuethat's high, that value's just going toincrease, so that's why when you first seeit, you want to say, no, no, no, I don't think so.
So you're looking at– I mean they're giving youa value of the property.
And they're saying,look, based on the sales price of this property,we think it's worth this.
So they sometimescan be pretty lazy, and they're just looking at thesales price of the property.
Well, guess what.
That's sales price,which we'll get to in our story in a little bithere, may be wildly off base, meaning the sale of thatproperty may have included all sorts of repairs thatare not currently done in the property.
So the county maylook and say, OK, that's $300,000, becausethat's the sales price.
And then you lookat the property, and it's a burned out mess.
Well, they don't know thatthat would include construction costs and other things.
So they're just lookingat that sales price.
They might not even come outand even look at the property, because they can bekind of lazy about it.
We've fought this andhad to deal with this in the state of New Jersey.
Remember, in wherewe used to live, we had to do this withthe local municipality as well for our tax assessedvalue, because they were trying to claim a higher amount.
And we had to show themthat, no, no, no, no, no, just because of these fixes,just because of this– and we were actually able toget it lowered because of that.
So you want to–most of the time they'll send you in themail a notice saying, we intend to taxyou at this value, and we estimate yourtaxes will be this.
And that's sort of the shotacross your bough saying, do you agree to it,because the bill is coming after this notice.
Right? If you don't agreeto it, this is when you're going to take action.
Now you can requestinformation, if it's not already on that notice, on howthey're coming to that value.
A lot of times, it will includesquare footage of the property, bedroom count, things like that.
Sometimes they have it wrong.
Maybe they are taxingyou on too many bedrooms.
Then that's easy.
You go back aroundand say, no, no, this is actually not the case.
Or sometimes they've givenyou too much square footage.
You can sort of contest thosefactual things pretty easily.
But if they're justtaxing you based on their sort ofassessed sales price, that's a different story.
And you can, again, fight this.
And it's funny howquickly New Jersey was ready to pounceon us when we were doing an addition on our house.
Remember the tax assessorshowed up at our house? He knew that wehad pulled permits.
He knew that we wereunder construction.
He shows up, and he'slike, oh, is this done yet? Is this done yet? We're ready to tax you.
We're ready to taxyou at a higher rate, because we know you're addingon this amount of square footage to your property.
We're like, it's not done yet.
Please, can yougive us a breather here until you decideto tax us more? But literally, themoment the city permitted the completion of it,they slapped extra taxes on it.
So they were on top of that.
It's funny that it doesn'twork the other way around.
Like if I were to deed youmy property as a gift for $1, they would not allowyou to be taxed on $1.
They would– No.
So they are working to gettheir money out of you.
Now it's pretty easythese days to pull comps– Comparables.
Right, to pull comparablesales around your property to prove that your propertyis actually not worth what they say it is.
Nowadays, you can use Zillow.
You can use realtor.
You can use allmanner of websites to prove that propertiesaround this area are selling for less thanthey are assessing, right? Right.
You can absolutelylook these up, and you can find comparablesthat might be foreclosures, might be other propertiesof equal value, and you can show those andpresent those comparables.
It's different, ofcourse, when you get into commercial property.
So commercial propertyvalues are not based on what wassold down the street.
Commercial value propertiesare valued on the income that that property produces.
So it's a little bit different.
So if you're dealingwith something that's even more than a four unit,which would be classified as a commercialproperty, then you end up having to findcomparables based on income in the neighborhood.
And so then youpresent your case.
You are given theopportunity to appeal.
And in most states, youcan appeal all the way to the Supreme Court, if youdon't like the final answer.
It just is a matter of,how organized are you, how good is your research,and how much time you're willing to put into it.
Sometimes if it'slike, OK, I think the tax value islike $5,000 higher, it may not be worth your time.
But if it's hundreds ofthousands of dollars higher, it absolutely isworth your time.
And that's where we're goingto get to our story time.
It's story time, because– so a few weeks ago, Nataligets a Facebook message, of all things, from theone particular county.
And we'll show you somevideo here of this property and where this is in Ohio,where we own this property.
In one particular county,one of the tax assessors reached out to you via Facebook.
Actually, it gets evenweirder than that.
So I was sellingsome old spin shoes, because they don'tfit into my Peloton.
It uses a different clip,so I had old spin shoes that I was selling on a swapgroup in my neighborhood.
And I got a directmessage on this sale item, and it says, "I'm looking forthe owner of this property.
Is that you?" I'm like, you don'twant my spin shoes? And they said, no, butdo you own this property? And I said, yes.
And they said, OK, can youplease call this tax office? So I called it.
I'm like, this is somekind of weird trap.
What's going on? Right.
And the woman says,yes, we are with the tax office from this county.
Did you know thatthe school board is trying to contestyour tax amount, and they want to tax you basedon $200 sales price instead of it was before? I used to be taxedon $56,000, so this is a differenceof about $150,000 that they want toincrease my basis on.
And I said, I did know that.
I didn't know thatthere was anything I could do about it, becauseI got the notice in the mail, I want to say around thespring, and I didn't really do much about it.
And she goes, no,there absolutely is.
We can set up ahearing for you, if you want to contest thisagainst the school board.
And I said, but Idon't live in the area.
She said, that's OK.
You can do it overconference call.
So what was amazing aboutthis is because Natali– you know, you thinkabout the government.
You think, oh, you're nevergoing to get anywhere.
You're going to deal withthe IRS and whatever.
Red tape and everything.
But here's an opportunity for usto thank some of our government officials, because theyreached out to Natali– On my spin shoe post.
Yeah, on her spin shoe post.
And Natali said,I got to ask you, you're from the tax office.
Why are you trying to help me? Like, don't youlike higher taxes? That's exactly what I said,because I was just like, is this some kind of a trap? And the guy– itwas a guy, actually, that got on the phone.
He was the main taxassessor, and he goes, yes, but we'recitizens first, and we know that if taxesare hiked in our area, we'll get less investment.
We'll get less incomingcitizens and residents, and we don't think it's fair,so we decided to help you.
Now what happenedin this instance is that the propertyis worth about $56,000.
But we paid, when we boughtit from the rehabber– it was a wholesalerin that area– he charged us for the rehabinside the sales price.
Right, so we bundled in theconstruction of it, which is going to make it look reallynice, inside the sales price.
Now, we were comfortablewith doing that, because we had a scope of work.
We had an agreementwith the contractor, and we liked what we thinkthe finished product will be.
Turns out this job wentabout almost a year over budget for timing.
So– It's a big project.
It's a six– The city is on top of this one.
It's in a historic district.
They had to pull permitsthat took them longer.
It's going to be agreat investment.
But again, we paid for therehab inside of the sale.
Well, that triggeredthe school board to say, oh, we can tax them more,because obviously, the school board wants moremoney for the kids who go to school in that area.
And so I had to thendo all my homework, pull comparable listings aroundthat area, and prove nothing there is selling for 200,000.
It will be worth that,but it's not now.
So what I presentedto them was all of the comparablesales in that area that showed the valuecloser to 50, not 200.
And some of them were 40.
I showed also picturesof the current state.
It's boarded up.
You cannot even walk in it.
Yeah, take a look at this.
As we walk through here– It's not beautiful yet.
You can see where it's going.
Obviously, the contractors–they are doing an amazing job.
But I couldn't sell it for 200.
No way, no how.
Right, look at this.
I mean look at theframing that's happening.
There's electric and stuffdone, but the outside is still a mess.
It's boarded up.
There's no drywall.
There's no mechanicalsin the property.
The roof just got done, so wedid just put a new roof on it.
But look, there's aton of work that needs to be done on this property.
And then I also sentthem the scope of work that we are expectingthe contractor to do.
So I gathered all of that.
I submitted all thatinformation in advance.
The county was superhelpful, because I was like, how do I present thisif I'm not going to be there? How do I present this evidence? They said, email ithere, and we'll have it at the time of the trial.
Trial comes along,and I'm super nervous.
Well, it's not a trial.
It's a hearing.
It's a hearing.
And I'm thinking, OK, I'm goingto play lawyer here and present my case.
Is this even a real thing? Are they reallygoing to call me? They do.
They call me atthe appointed time, and they say, OK, we'rehere for this trial.
Who is here with us? And I say, I'm Natali Morris.
I own the property.
On the other side,I'm so and so lady.
I represent the countyschool district, and so we're just saying theybought the property last year for this much.
We want to tax them on that.
So then I speak, and I say,it's clearly not worth that, if you look at thecomparable values, if you look at howit looks right now– these pictures weretaken last week– and if you look atthe scope of work.
So they said, OK, we'll– Get back to you.
We'll consider all this.
And a week later, wegot a certified letter in the mail saying,we approve the fact that your taxed valuewill remain $56,000.
Which is so exciting, right? Yeah.
So don't ever think that youcan't take action, and lower your taxes.
Or look, these agenciesdon't have to be scary.
If you talk to the right people,and you develop relationships at construction permit offices,with the city, the water office– we were on the phonewith the water department in Michigan, turningon electric and water and all that kind of stuff.
So often, they say tome, oh, well, you gotta bring this thing down then.
And I'm like, Idon't live there, and I just try and be nice.
And usually, I can come upwith some kind of solution.
It's not– you have toget past the first no.
They're trained to tellyou no, and then you've just got to keep going.
But in this instance, theysought me out and said, lady, I don't think it'sfair that you're being taxed on this high value.
Why don't you let me helpyou do something about it? So yesterday, I actually wentback to that spin shoe email, and I said, I justwant to thank you for this, because you didn'thave to find me this way.
You didn't have todo this, but you acted like a littleguardian angel for me, because now Ican pay reasonable taxes on this from here on out.
And look, I think there'sa moral in this, too, just beyond protecting yourselfand going after and taking action on this.
Which is what? Sell spin shoes online.
Sell spin shoes online,because you don't know what you're going to find.
Now the other moralof this is, look, taxes matter to businesses.
And I mean maybe Californiacould take a lesson from this.
Maybe these high tax areascould take a real lesson from what thesecitizens are trying to do in some of these states.
They want investment,want growth in the state of Ohio or Michiganor other areas, where, look, they're trying to keep costsdown, prices down, property taxes down, because guess what.
Investors like usgo into those areas and are totally revitalizinga historic building.
A coffee shop justopened up nearby.
There's going to bemultiple tenants who are going to be living inthis great new property that we're revitalizing, andit's helping the community.
So there's a lesson inthat on the tax side.
Don't talk bad about California.
That's my home state.
No, I will.
There you go.
So that's how to loweryour property taxes.
We hope you found this useful.
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So thanks so much.
We'll see you next time hereon the Investing in Real Estate show.