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."

When appealing your property tax assessment for an income producing property there are some expense items that you should not include in your income approach to value. The Appraisal Institute defines operating expenses as the periodic expenditures necessary to maintain the real property and continue the production of the effective gross income. Operating expenses can be fixed expenses that do not vary with occupancy, or variable, which generally vary with the level of occupancy or the extent of services provided. They include management charges, leasing commissions, utilities, heat and air conditioning, general payroll, cleaning, maintenance and repair of structure, decorating, grounds and parking area maintenance, security, supplies, rubbish removal and exterminating.  

There are non-operating expenses that you might be tempted to use in your income approach but the tax assessor will throw them out, or tell the board of equalization that you are including non-operating expenses. Some of these non-operating expenses are expenses that the IRS allows on your tax return, which causes some confusion.

It's springtime in Atlanta! Oh wait, it's in the 60s with thunderstorms and a tornado watch and it's only January 30! Such is life in the capital of the new South. If you don't like the weather just wait a little while. There will be a similar tornado watch this spring as the tax assessors begin to send out tax assessment notices to every real property owner in the state of Georgia.

Last year the Cobb County Tax Assessor created quite a storm when they sent out huge increases on commercial properties. Many of the unsuspecting commercial property owners were dumbfounded at the taxable value increases they saw, considering they were still struggling to keep tenants in their buildings and competing with other struggling property owners for new tenants. Even though some of their values were, honestly, a little low, they couldn't believe that with the same net operating income as the previous year their taxable value could be 50% to 100% higher. 

Given that it is January 2013 it is time to start talking about Gwinnett County property tax in 2013. As you may be aware the effective date of appraisal in Georgia for property tax purposes is January 1 of every year. Currently, the tax assessors personnel are verifying sales that took place during calendar year 2012 that they will use to change values for tax year 2013. According to the Case-Shiller home price index for Atlanta Georgia home prices have risen approximately 10.5% since February 2012. However, this is an average and not all market areas have risen.

For example, based on data from AtlantaREValues.com, values in the Brookwood elementary school district in Snellville, Georgia declined 32% from the market peak to trough, and values have declined 11% in 2012 as compared to 2011. Overall values in this market area are considered weak. In Riverside elementary school district in Suwanee Georgia values also declined 32% from peak to trough and were down 5.3% in 2012 as compared to 2011. Values here are also considered weak. In the Gwin Oaks elementary school district in Lawrenceville, Georgia values declined 44% from peak to trough but values were up in 2012, approximately 14% over 2011. In Freeman's Mill elementary school district also in Lawrenceville, Georgia values declined 38% from peak to trough and recently values have been stable.

This article contrasts the work done by Fair Assessments, LLC vs. Appraisers. During the recent real estate depression (some might say ongoing) many people saw that there was money to be made in property tax reduction work and got into the business. Many of the people/companies that have gotten into this work are real estate appraisers. Some people might think that this is a natural extension of what appraisers already do for a living. They might be wrong. 

The appraisal business has changed a lot since I did this work twenty years ago. The government, in the name of protecting federally insured institutions and the public, has (unintentionally) driven down the price of a real estate appraisal. There are a handfull of large companies that make software for appraisers, and some of them saw a way to make more money by providing marketing services to appraisers. One that I am aware of, a la mode inc., pushes it's print and email marketing software to appraisers that "will proactively help you get new clients that pay higher fees."

For residential property tax appeal consulting the cost falls in a narrow range. Your best bet is to find the most qualified consultant that you can. Typical residential flat fees may be $350 or higher. Alternatively, many companies charge $250 up front and 25% of whatever tax savings are generated. Some offer $150 +/- plus a third of the tax savings generated. Generally speaking qualifications are more important than saving a few dollars in up-front cost.

Beware of companies that send you a letter or postcard that says "this is how much we think we can save you $." You can be reasonably certain they are using a database of old values to generate these postcard savings estimates. I would be very cautious about this, especially if there’s a high flat fee involved. Some of these companies may charge $350 or more, and if you’re in a city or county that reappraises on an annual basis, spending that much money may be a losing proposition. If they get a reduction that doesn't cover their service fees, and the County increases your tax assessment the next year, then you have just wasted your money.

Equity is not an approach to value, yet for assessment purposes it can be as important as one. Equity is all about fairness. Specifically that your property tax burden is fair when compared to your neighbor, or your competition. Most states that I have worked in require that tax jurisdictions must assess based on equity, or “uniformity.” This is to ensure that the tax burden is distributed fairly. The exceptions that I am aware of are Florida and Ohio. (Full disclosure: I have worked property tax appeals in ME, VT, NH, MA, CT, RI, NY, PA, NJ, DE, MD, VA, WV, OH, NC, SC, GA, AL, FL)

The Income Approach uses capitalization to convert the anticipated benefits of the ownership of property into an estimate of present value.

As reported in the Atlanta Journal-Constitution (AJC) the Fulton County Taxpayers Foundation (FCTF) is on the verge of collapse. They have laid off the staff that was doing property tax appeal work and have hired an auditor to make a decision on whether to continue the organization under new leadership, or shut it down. The current President, John Sherman's health is failing.

The Sales Comparison Approach estimates a property’s value (or some other characteristic, such as its depreciation) by reference to comparable sales.