Are My Real Estate Taxes Too High?

Are My Real Estate Taxes Too High?

Local real estate taxes are charged to nearly all privately-owned properties, including residences. These taxes pay for many public improvements such as infrastructure, schools, libraries, parks, police, and fire protection. Homeowners are not averse to paying taxes. They expect to pay their fair share of taxes, although not more than their neighbors with similar properties. Understanding how taxes are assessed, whether those taxes are reasonable, and how to reduce inflated taxes is important for any real estate owner.

Elements of a Tax Bill

A real estate tax bill is made up of two parts: property tax rate and assessed value. The property tax rate is applied to a property’s assessed value. The local property tax rate is determined by a town’s Board of Assessors, based on projected town expenditures for the coming year. The Board of Assessors also develops opinions of fair cash value (as of January 1 of the prior fiscal year) for every property in its jurisdiction. The property tax rate is expressed in number of dollars per thousand dollars of assessed value. So, if a home is assessed at $100,000 and the tax rate is $25 (.025), the tax bill is $2,500.

Researching Your Property’s Real Estate Taxes

The first step to understanding your property’s tax bill is to review the assessor’s description of the property. Most assessors’ offices keep property records in online databases; therefore, you can research your house’s assessment record from anywhere with internet access. Your property records are located in the assessor’s section of your town’s website. The assessor’s record will include a detailed description of your house, including its lot size, year of construction, square footage, number of bedrooms and bathrooms, and special features, such as fireplaces and air conditioning. The record will also specify whether your property is residential, commercial, or industrial.

Furthermore, the record will reflect the property’s sale history and past assessed valuations. Those valuations will include separate value estimates for the property’s land and improvements. The assessor’s value estimates are created using a mass appraisal system. An assessor staff enters descriptive elements for your house into the system; the system selects recorded sales of similar properties (‘comparables’) and analyzes them relative to your house. The analysis results in the value estimate for your house.

Tips for Reducing Taxes

Several events might prompt you to think your real estate taxes are outrageous: your recent tax bill might be significantly higher than it was in previous years, or you might have learned that a neighbor’s tax bill is considerably lower than yours. Below are steps to ensure your tax bill is fair.

Start by studying the assessor’s description of your house. Does the description indicate more bedrooms than your property possesses or more finished area in, say, your basement? Assessors rarely have the personnel or time to inspect the interior of every property; hence, the assessor may be making incorrect assumptions about yours. Also, check the most recent sale price for your property. If you know it included items other than real estate, like furniture or vehicles, the assessor should take that into consideration.

At the same time, verify that the assessor has identified your property as residential. Commercial and industrial properties are usually assessed at a higher value than houses. Confirming this one element could result in lower taxes for you.

Assuming your property is being assessed at the correct rate, there is little you can do to change that rate. Assessor boards adopt uniform rates for all properties within their jurisdiction. Your best bet for influencing future rates is to attend your town’s public council and board of assessment meetings to protest your town’s (presumably) excessive rates. However, you should also investigate whether any special tax exemption programs apply to your property or town.

If your research suggests that your real estate taxes are steep, you can apply for tax abatement. Your local assessor’s office will have information on the abatement process, as well as the application forms required. The application will ask you to state your own property value estimate. This is the point where it will help to have professional assistance.

Keeping an Eye

Real estate taxes are a regular component of any property’s ownership costs. Understanding a building’s taxes, and ensuring those charges are fair, can result in lower expenses and enhance such property’s income-producing potential. Besides, you will gain a better understanding of how the local government views your property and how your community pays for its public improvements.

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Rent Concessions: What Are Other Rental Owners Offering in Your Market?

Rent Concessions: What Are Other Rental Owners Offering in Your Market?

The value of knowing what competing rental properties are offering tenants in your market cannot be understated. To remain competitive and ensure your building remains at a stable occupancy, rent concessions (also known as “leasing incentives”) can be a powerful tool because these incentives can attract new tenants to your building. In this post, we’ll discuss some basic details regarding rent concessions, including real market examples, sources for information on rent concessions, and identifying how to maximize your rental property’s earning potential.

What Are Rent Concessions?

A rent concession is any reduction in price or rent or any other benefit(s) provided to a tenant or buyer as an inducement to buy or lease. Put plainly, it’s when a landlord offers a (usually) short-term incentive to potential tenants to rent at the landlord’s property. Rent concessions may not be necessary in all markets at all times. Some markets with very low vacancy rates and high demand for multi-family rentals may not require incentives to attract new occupants. Boston’s vacancy rate is currently stable at below 4%. However, in markets where vacancy rates may be higher, where there’s an oversupply of rental units, or where there are many new units coming onto the market—as is the case in Boston—landlords will commonly offer rent concessions to potential (or even existing) tenants to compete with other similar properties in their market.

Common examples of concessions include initial rent reductions for one or more months, free rent for one or more months, free parking, extra services such as free internet or cable access, unit upgrades such as superior quality finishes or new home technology installation (think Google Home or Amazon Alexa), and social perks such as access to private events, a pool or gym facility. It is important to note that most properties tend to offer rent concessions as a short-term lease-up solution or one-time offers to new tenants, as long-term rent concessions can indicate instability in a property and appear as a red flag to lenders. Long-term rent concessions can impair the profitability of a rental property, so informed and astute accounting is required.

Sources for Information on Rent Concessions

Now, to obtain information about rent concessions in your designated market, you need local property management firms. These companies often conduct their own research or pay for data related to this topic; hence, they can be a great local resource for rental property owners. Another approach is to survey apartment listings on websites, such as craigslist.org under the “Housing” section, to determine what competing properties are doing in your market. A quick google search should reveal many other websites that perform similar role, and it should be easy to find several websites that serve your area.

Should You Offer Concessions at Your Rental Property?

After you’ve completed your initial investigation into your market’s current rent concession offerings, the next step will be to identify your rental’s competing properties and place within the market. To this end, you should ask some relevant questions. What’s your vacancy like? Is there a need to offer rent concessions? Are your rents above or below market rates? How much free rent can you afford to offer, if any? What services or amenities are competing properties offering? How is the condition of your property compared to others in your competitive market? Do you need to modernize or upgrade some elements of your rental property, or would a remodel or addition to your property constitute a superadequacy relative to your market? The information generated by the potential inquiries may seem like a lot to consider, but one of the best things you can do to address these questions is talk to local experts. Local real estate agents and leasing brokers will have a good understanding of the dynamics at play in your market and can best advise you on an appropriate course of action for your rental property.

For many small-scale or family-run rental properties, sometimes dealing with things like surveying the current market for rent concessions can seem burdensome and unnecessary. Yet failing to do so could put your property at a disadvantage and lead to a lower income stream. In some instances, if you find yourself unwilling or unable to keep up with the demands of your specific market, it might be a good decision to sell your property rather than deal with the highly competitive rental market. Selling your rental property to another investor could bring back a strong return on your initial investment and free up capital for you to reinvest in other ventures, or simply cash out and enjoy your profit. If you chose to take this route and sell, Boston Seller Solutions is always ready to assist you in the selling process.

Benefits of Possessing the Right Information

Being well informed and up to date on your local rent concessions market (or lack thereof) can give you an upper hand in ensuring your multifamily rental property remains competitive and profitable. While it can appear to be just another time-consuming step in the property management process, proper research into the matter can lead to a lower vacancy rate and low tenant turnover. A well-run rental property can offer its owner a reliable income stream for years on end, and surveying local rent concessions is an important element of a good property owner/manager’s market research.

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Getting More from Your Investments: Improving Rental Property Cash Flow?

Getting More from Your Investments: Improving Rental Property Cash Flow?

What’s the point of owning a rental property if we can’t get the most benefit from it? For all the hassle of dealing with tenants, paying property taxes, and managing the property, we sure-as-heck should be properly compensated. Fortunately, this is something that’s well within your ability to control. Unlike market factors and the futility of trying to control the stock market, with your real estate investments, you can take easy steps to improving rental property cash flow.

In this week’s post, we’ll talk about some essential strategies to maximize the cash flow from your rentals.

Improving Rental Property Cash Flow by Reducing Expenses

The first and best step to improving the cash flow from your rentals is by reducing the expenses. If you sit down and thoroughly analyze how much you spend on things like maintenance, management, marketing, and other typical rental ownership costs, you’ll begin to see opportunities to eliminate or reduce costs that are negatively affecting your bottom line as a rental investor. A good place to start is by looking at energy, water, and gas costs. Simple improvements in building insulation, weather strip and HVAC equipment over time will result in reduced and more consistent expenses.

Providing More Amenities

You might be leaving money on the table if you’re not using at least one of these strategies: laundry, vending, parking, cable/phone/internet service… the list goes on. Look for opportunities to monetize your property by offering additional value-add services that will attract tenants and provide additional convenience. You’ll not only boost revenues, you’ll also improve your property’s value according to the income appraisal approach using the prevailing cap rate (that’s the typical return demanded by investors when taking a risk on an investment). An additional benefit of implementing auxiliary revenue generation strategies is that your tenants will appreciate the extra convenience and comfort, leading to improved tenant satisfaction and less likelihood of evictions and vacancies.

Physical Improvements

Sometimes the best way to reduce long-term expenses is by spending a bit upfront to fix up the property. As you would expect, sprucing up the curb appeal will attract new renters, support rental rate increases and reduce the potential for large capital expenditure (big repairs) to creep up on you and eat up any capital reserves you might be holding. Another benefit of keeping up the property is reduced liability for injuries and health problems that can arise from deteriorating properties. Don’t let uneven sidewalks or mold take hold of your wallet.

Rent Increases

If it’s been awhile since you’ve increased rents and market lease rates have been rising, then it’s time to follow along (it’s okay here) and give notice of an increase to tenants. To avoid alienating tenants, limit rental rate increases to around 5% per year or less. If your property is rent-controlled, rental increases may not be an option; however, you can successfully use the other methods here to reduce cost and keep your rental units full all year, increasing your profits despite the fixed rental rate situation.

Considering Exit Strategies

Rental properties are perhaps an ideal way to generate consistent long-term cash flow with relatively little economic or legal risk compared to other ventures. If you’re enjoying the cash flow, but not the management duties, please reach out to us to learn more about strategies to keep the cash flow without the property ownership and management challenges.

Call us at (617) 250-7100 or click here to discuss more strategies to keep your rentals in the red (making money!).

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