1st Net Real Estate Services provides low cost (and sometimes complementary) consulting services for clients. Pre-acquisition or pre-development due diligence should always include a property tax analysis so as to avoid issues such as the following.
- Two very similar 70,000 sq. ft. office buildings originally built by the same developer with the same characteristics, age and location attributes are situated approximately four miles apart. They compete for the same tenants and charge roughly the same base rent. The one located in Adams County pays $2.70 per sq. ft. in property taxes while the one located in Denver County only pays $1.54 per sq. ft. in property taxes. This means the Denver property’s tax bill is lower than the Adams County property by $80,000! Our client had considered acquiring the Adams County asset but, after our brief analysis, chose to pursue the Denver County property even though it had a somewhat higher original all-in cost.
- In the instance in No. 1, we also estimated the impact on assessed value that the sales price would eventually have on the property’s going forward operating budget.
- Construction of a 10,000 sq. ft. owner occupied building (day-care center) on a 1 acre lot situated in a tax district that has 50 year infra-structure bonds ended up costing the owner $80,000 per year in property taxes for a building that is undervalued! If the owner had consulted with us, we would have suggested she consider building on some other available near-by lots that might have been somewhat initially more expensive but would have ultimately saved the client hundreds of thousands of dollars in operating costs over the last six years.
- Every year as operating budget season approaches (typically during the 3rd quarter), we work with some of our clients to help them plan the NNN budget for the next calendar year. (i.e. In 2016 we helped on the 2017 budget). By collecting appropriate tax NNNs in 2017, the property will have sufficient reserves to pay the taxes for 2018. This means no surprise recapture demanded from your tenants and no need for a temporary capital call from ownership due to under estimation.
- We inserted a list of needed repairs for a 330,000 sq. ft. office building totalling more than $5,000,000. This helped to immediately reduce the assessed value of the property.
Because property taxes are the largest operating expense most commercial and owner occupied buildings will have, it just makes sense to contact us at 720-962-5750 to help you manage this expense during the ownership term.