If you’re filing a Cobb commercial property tax appeal, you will find that hiring a reliable tax reduction consultant to become your advocate is a must. You have to make myriad decisions that you will likely be unable to make wisely for many reasons, such as your lack of knowledge and skills in dealing with the process, papers and people involved in the appeal. Your tax advisor, who will likely become your tax advocate during the appeal hearings, has the knowledge and skills for these things.
Direct capitalization is used to convert a single year's income into a value estimate. The income is converted by a capitalization rate. Capitalization rates can be determined in a variety of ways, but the best way is to derive them from market transactions of similar properties. The overall capitalization rate is determined by dividing a single year's net operating income (NOI) by the sale price of the comparable property. From an adequate sample of market transactions an appropriate capitalization rate can be reconciled and used to estimate the value of similar properties.
If you have a 10 year old community retail center in "Eastside Neighorhood" then ideally you will use sales of retail centers in this neighborhood, that are similar in age, quality, size, etc. You must be certain that the sale comparables used have net operating income calculated in the same way as the subject NOI. Any financing that affected the sale prices of the comparables requires adjustment, as do nonmarket rents. The objective is to compare apples to apples, because a small change in capitalization rate can result in a big difference in the value estimate.
Net operating income (NOI) is defined by the Appraisal Institute as "the actual or anticipated net income remaining after all operating expenses are deducted from from effective gross income, but before mortgage debt service and book depreciation are deducted."
Effective gross income (EGI) is "the anticipated income from all operations of the real property adjusted for vacancy and collection losses. This adjustment covers losses incurred due to unoccupied space, turnover, and nonpayment of rent by tenants." This definition refers to market estimates of gross income adjusted for market vacancy and market collection losses. Your actual income may be very different from the "market."
Property taxes are a critical source of income for both state and local governments. Property owners nation-wide are subject to taxes on their properties, both commercial and private. Property values and their associated taxes in the state of Florida are highly unique and require an intimate understand of the state's tax code. If a property owner feels that their property taxes are too high based on the states valuation of their property value, they can file a property tax appeal to reduce the valuation of their property and the associated taxes. Such appeals are not a common occurrence in Florida. According to an article in the Palm Beach Post, less than five percent of property owners typically file a property tax appeal in the state of Florida. However, when these appeals are filed and they are successful, the results can be dramatic. Richard Nilsen, the co-founder of a company called Mattress Giant filed a challenge on the county's $14 million valuation of his property and netted himself a savings of $124,000. Such results are, of course, not typical as the average value of an individual's property rarely approaches such a valuation, but the underlying message remains the same: property tax appeals in Florida can yield significant financial rewards if pursued appropriately.
Property tax assessment is serious business. In Florida, the specifics span from the state constitution to local regulations. Section 4, Article VII of the Florida Constitution mandates that property appraisers use the "just value" assessment method. The Florida Supreme Court has ruled that "Just Value" and "Market Value" are legally the same. Other value considerations can include investment value and going-concern value, although they must be related back to "just value" to hold water.
When appealing assessment results, wiggle room can often be found in the principles of value applied including:
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