Fulton County Property Tax Valuations and the Hot Multifamily Market

Posted by Jill Noelle Olandria on Feb 29, 2016 11:30:00 AM

The good news: The multifamily market appears to be sustaining its momentum started in 2015 with many investors enjoying the increase in rents and rates of occupancy as well as the decrease in cap rates. The bad news: Taxpayers may see an increase in Fulton County property tax valuations, which multifamily development investors must be prepared for particularly in challenging possible over-assessments on the real property. 

Are you a multifamily development investor? You should be aware then of the abovementioned good news and bad news of the market. Your awareness of the myriad of property tax issues related to the construction, purchase, and sale of multifamily development projects will contribute to better returns on investment. 

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Decide on the Amount of Attention

You have to decide early on the amount of attention that you will pour into the matter of property taxes. On one hand, you may consider property taxes as among your most pressing concerns because of the higher Fulton County property tax valuation, such as 50% higher than the prior year’s valuation.

Your property’s higher valuation may be a product of the high sales price paid for a new development project a block from your multifamily units. Your business will experience several negative consequences including increased competition for tenants, higher taxes due to the increased valuation, and decreased operating income.

On the other hand, you may pay lesser attention to property taxes because site selection, construction costs and timetables, and financing sources are topmost on your list of priorities. Just be sure to consider property taxes and their related issues, such as property tax incentives (e.g., affordable housing exemptions), valuation date for the assessment, and method used by the assessors in valuing construction in progress, among others. 

Tax Planning Is a Must

No matter your priorities as a multifamily investor, you have to ensure that effective and efficient tax planning is in place for your property. Your property taxes will be affected by the methodology used by the Fulton County property tax assessor, said method of which can be based on the construction costs, income information, or sales of comparable properties, or perhaps a combination of these three methods.  

You should also avoid the trap of believing that property tax values will not change after a transaction (e.g., sales). Keep in mind that while a sales will not automatically cause a change in assessed value, the assessor may try to match or exceed the sales price in relation to the current assessed value. 

Don’t underestimate the amount of property taxes that you will likely pay for the multifamily property especially at the time of purchase. Your return on investment can take a substantial hit due to the property taxes payable, thus, emphasizing the importance of scrutinizing the tax estimates based on the subject property’s assessed value. This is particularly true when its assessed value is lower than its purchase price. 

You must also be aware that the Fulton County property tax assessors frequently rely on the deed of sale to determine the purchase price and, hence, the fair market value. But this can work against your favor because the declared transaction value may include business value, which assessors rarely consider in their assessments.  Your best bet: Hire an experienced tax consultant with the right experience and appraisal background during the tax planning process. 

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