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FDIC

admin — Fri, 18 Jun 2010 13:49:30 +0000

Recently, I went to a Tulsa Commercial Real Estate update. The keynote speaker was John S. Baen. Mr. Baen is a professor of business, finance, and real estate at the University of North Texas in Denton, Texas. He was very interesting and informative. I was most captivated by his belief regarding FDIC, the federal insurance that insures the money you put in the bank. He presented a compelling case that FDIC is broke. One of his main points was that there are seven major U.S. banks that are currently in the hole and have been for some time. Although all common sense would promote the closing of these banks, they remain open. Mr. Baen believes that the reason is because FDIC does not have the available funds to cover the money for the patrons of these banks. I thought his premise was somewhat scary, however, he supported this with lots of data.

If this is true, obtaining financing is going to become even more difficult than it has already become. This means to invest, you may need cash, a hard money lender, or a partnership. It is important to foresee issues such as this in order to be prepared ahead of time. This is a good time to focus more on networking. Find people who have cash and people who can partner with you. If it continues to become more difficult to borrow, you will need people in your network to help you keep your business moving forward.

Contesting Tax Assessments, continued again

admin — Sat, 15 May 2010 23:41:02 +0000

Below you will find some helpful information that I obtained directly from the Tulsa County Assessor’s website. Pay close attention to the definitions of market value, taxable value, and assessment value. These will be helpful to you. For more information from them, visit their website at;

http://www.assessor.tulsacounty.org/index.htm

How do I file a protest?

You may call our office at (918) 596-5166 to request a protest form be mailed to you or you can come into our office to fill out the form. After we receive your protest form the Board of Appeals will contact you to schedule your hearing.

When I received my “Change of Assessment”
notice, it had the Market Value, the Taxable Value,
and the Assessed Value.
What do these different values mean?

Market Value is the value the property would sell for in an open market between a willing seller and a willing buyer. These sales are used to arrive at the market value of similar properties. It requires the reconciliation of differences among the various properties that have sold and the properties being appraised.

Taxable Value is the value the assessment will be based on. The Taxable Value cannot increase more than 5% over last year’s Taxable Value unless the title is transferred and/or new improvements are made to the property. The Taxable Value may or may not equal the Market Value.

Assessed Value is currently 11% of the Taxable Value of the property. The Net Assessed Value (Value after any exemption is applied) is used to calculate the tax bill.

Example:

Tax Yr Market Value Taxable Value Assessed Value
(11% of Taxable)

1995 $80,000 $80,000 $8,800

1996 $88,800 (11% of increase) $84,000 (5% increase) $9,240

1997 $88,800 (no change) $88,200 (5% increase) $9,702

1998 $88,800 (no change) $88,800 (less than 5%) $9,768
(Taxable cannot be more than Market)

For more information about Properties, please contact:

Ken Yazel
Tulsa County Assessor
Tulsa County Admin. Bldg., Room 215
500 S. Denver
Tulsa, OK 74103
(918) 596-5143 or (918) 596-5118 or (918) 596-5166
(8:30 AM – 5:00 PM, CST, M-F)

Contesting Tax Assessments, continued

admin — Sun, 11 Apr 2010 22:35:35 +0000

The most time consuming part of disputing a tax assessment is the preparation. In order to prepare an adequate case, you will need to be a licensed real estate agent, to hire a licensed real estate agent, or to get access to the home sales data in your area. It is likely that disputing based on something that your next door neighbor told you will result in defeat. We have won two thirds of our tax disputes, but bear in mind, we do not dispute an assessment if we cannot lay out a solid case as to why a home should be revalued.

To show that your home’s assessment is too high, you will need to prove one or more of one of the following; 1) There is adequate reason to believe your home cannot be compared in value to other homes in the neighborhood (ie. Your home is not livable, or does not have similar features or amenities, has significantly smaller square footage, has a different amount of bedrooms than most other homes or has a design that is different from the other homes that could lower the value), 2) That recent comparable sales in the neighborhood prove to be lower than the assessment (ie. Home values are declining in the neighborhood), or 3) that a recent appraisal of your home shows the value lower than the assessed value.

You should take as much data to your hearing as possible. Get a comparative market analysis (CMA) done by a local Realtor. If you have an appraisal, take it with you. Obviously, the more recent the appraisal is, the better it will be for you. However, if you have a 3 year old appraisal that shows a value of $300,000 and you can show that the appreciation rate over the past 3 years has been steady at 3% (the value of the home should have appreciated to $327,818) but the assessor’s office has valued your home at $350,000 you should still use the old appraisal to make your case.

I have even brought in photos of other houses in the neighborhood to show that they are comparable to my home. I bring as much data as I can get to back up my case. I bring so much stuff that the assessor’s employee would have no way to explain denying my claim. I’ve even had them began stammering and stuttering as they’ve attempted to defend their position. I just sit there and stare back at them as they struggle to explain themselves. After stuttering through several sentences, they will usually give up and tell me they will reduce the assessment. At times it’s almost funny to watch them try to wiggle out.

Contesting Tax Assessments

admin — Wed, 31 Mar 2010 12:40:02 +0000

The actual process of contesting a tax assessment is very easy. In fact, there is nothing particularly difficult about any part of it. The only issue is that your preparation time may be a little time consuming. Bear in mind as we discuss this that each county is likely to have its own process. I suspect most counties will be similar. In Tulsa County, if you wish to protest the assessment value of your property, all you have to do is call them and ask them to send you the form to protest. They will mail it to you or you can go in and fill it out there. You will then, be contacted by phone and will be given a date to appear at an informal hearing. On one occasion, I was able to have my informal hearing over the phone. I don’t believe they do the informal hearings over the phone at all anymore. However, I don’t think it’s a good way to get what you want anyway. On the date of your informal hearing, you will meet with an employee with the assessor’s office to present your case as to why you believe your assessment value is too high.

It is important to know that the employee you meet with will have computer access to view the home sales in the neighborhood you are contesting. If you tell the assessor that homes in your neighborhood are selling for $15,000 under what yours was assessed at, they will easily be able to verify your information. Most of the employees in the tax assessor’s office will be fair and will give you a good opportunity to present good reason as to why they should lower your assessed value. However, “I want my taxes lowered”, is simply not going to get you anywhere. You will need some data to reinforce your belief that your home is valued too high.

If you win your informal hearing, you will be finished with the dispute process at the end of that hearing. If you do not win the informal hearing, you will have the opportunity to file for a formal hearing in order to present your case again. You will be given a date to appear for this formal hearing, if you can’t be there on that date, you lose.

Holding Costs Revisited

twilson23 — Sat, 06 Mar 2010 00:10:59 +0000

I want to spend a little more time explaining the importance of holding costs. Let’s say you purchased a $100,000 property for $70,000 and you expect it to cost $10,000 for repairs and $6,000 to list the property with a real estate agent. Let’s suppose you did not use a real estate agent when you purchased your investment. That leaves you a profit of $14,000, right? I’m aware these are not necessarily the numbers that professional real estate investors are looking for. I chose these numbers because it makes the point well. Now suppose you expect your rehab time to be two months. Also, your research shows that 60 days is the average amount of days on the market for homes in the neighborhood. Therefore, if everything goes as expected, you will have a holding time of four months, two for rehab and two for the sale. Now let’s throw some holding time expenses into the mix. Keep in mind that these expenses vary drastically from city to city. If my numbers are greatly different from those in your area, just keep in mind this is merely an example. The same concepts apply anywhere.

Acquisition Price 70,000
Rehab Expense 10,000
Real Estate Agent 6,000
______________________
Total Expenses 86,000
(Excluding Holding)
Expected selling price 100,000
Profit Amount 14,000

During the rehab you will need electricity, water, and trash service (all which total $300 per month). You also have to keep up with your mortgage payment which is $665 per month. The taxes average $100 per month and the insurance averages $50 per month.

Utilities- 300 per month X 4 months = 1,200
Mortgage Payment- 665 per month X 4 months = 2,660
Taxes- 100 per month X 4 months= 400
Insurance- 50 per month X 4 months= 200
______________________________________________
Total Holding Expenses $4,460

Now let’s see this amount deducted from the profit amount displayed above-
14,000
- 4,460
_____
$9,540 Total Profit

Now this amount of profit may be fine for you. For many of us, that would not be enough profit. Keep in mind that the costs above are expected costs and the holding time is the time expected. If it takes longer to do the rehab or longer to sell than you expected, obviously, the holding expenses would be greater. I like to keep a good buffer in order to make up for any mistakes and/or unexpected expenses. What if you had not considered the holding expenses? I’m sure you can see how such a mistake could make a drastic difference? Always include holding expenses when running the numbers. One thing many people are guilty of when calculating their holding expenses, is that they don’t like the outcome, so they change the numbers. Make sure to be true to yourself and calculate using accurate numbers. Don’t get too excited about the property, only get excited about the deal if the deal is right.