The Hall County tax assessor sent out year 2013 property tax assessment notices on April 14. The appeal filing deadline for all counties in Georgia is now 45 days, so you have until May 27 to file a Hall County property tax appeal. A client of ours was thoroughly shocked when he got his 58% increase in Hall County, GA property tax assessment for tax year 2013. This was a community retail center, so it will be interesting to see if the Hall County tax assessor hit just certain property types, or whether many properties throughout Hall County, GA, were increased in value.

It is possible that the Hall County tax assessor is sticking it to commercial property owners and giving residential property owners a break. It has yet to be seen. During the recovery from the great recession the commercial real estate sector has been doing quite well, due to the low level of interest rates in the economy and institutional money seeking out higher rates of return with relative safety. Commercial real estate, especially the apartment sector has been especially desirable for institutional money and all commercial real estate capitalization rates have fallen since the height of the recession.

The Cobb County tax assessor is gearing up to send out 2013 assessment notices to all property owners in Cobb County, Georgia. Last year the Cobb County tax assessment notices came out two weeks after the Gwinnett County notices and we'll see if that happens again. Gwinnett County was sending out their 2013 notices on Friday, April 5. Last year we filed our Cobb County property tax appeals very early during the 45 day appeal period and our board of equalization hearings were scheduled very early in the process. You can realize tax savings quickly if you do the same.

There's a good chance that the Cobb County tax assessor will be looking at flex/warehouse properties for the 2013 revaluation adjustments. According to Real Estate Research Corporation (RERC), institutional investors see the industrial sector as a good investment and they suggest that as the economy improves the industrial sector has the most potential upside. However, the flex sector was not seen as desirable as the industrial warehouse sector. According to CBRE, industrial vacancy declined to 12.8% during the fourth quarter of 2012, and over the past two years the industrial market has shown a steady decline and availability.

The Gwinnett County tax assessor was first out of the gate in 2012 when their notices were released on April 6, 2012. It remains to be seen whether they will be the first out again in 2013, but my guess is yes! (Update, they were!) It is officially tax time here in the great state of Georgia and everyone in Gwinnett County should be on the lookout for a 2013 property tax assessment notice. I know that last year people in the Gwinnett County tax assessors commercial section were saying that they thought their full service hotel values were too low, so I think you may see those rise.

ATLANTA (MARCH 14, 2013) -- Companies and individuals thinking about filing a property tax appeal for 2013 are in luck.

In the Income Approach, the deductions from gross income are typical and reasonable operating expenses, and taxes are considered typical and reasonable expense items. However, for tax assessment purposes, the taxes are not known. The values are being established so that the tax rate can be calculated for the current year. If the assessor is establishing a value for 2013 and is doing it at the beginning of the year, the tax rate is typically not known yet. If they are to include a tax component in the Income Approach as an operating expense, then they would have to use the prior year’s tax amount. Because the Income Approach and resulting value is going to have an impact on the current year’s tax rate, last year’s tax would affect the new tax rate. As a result there is a circular argument against using last year’s tax in the Income Approach.

Instead of including property tax as an expense item, the tax assessors add their effective tax rate to the appropriate capitalization rate for a particular property type in a particular market area. This gives a property tax component influence on the final value, but it’s not used as an operating expense and it’s not used as an actual number, such as the prior year’s tax amount. The loaded capitalization rate is then applied to all net income produced by the property, which, in turn, produces a value estimate.

While preparing your property tax appeal you need to be aware of how the tax assessors generated your value. For residential property they have probably used a cost approach to value in combination with a sales comparison approach. For commercial properties they may use the cost approach, the sales comparison approach, and an income approach to valuation.

For residential properties, the tax assessors often use a cost approach on all properties. Then they compare their values generated with the cost approach to actual sales prices to determine whether their cost approach is low or high. Based on sales in your neighborhood the assessors will adjust their cost values up or down to get as close to market value (sales) as possible.

Unless you are real estate professional you probably don't have the expertise to do a cost approach on your property. The best approach is to look at sales within your neighborhood and compare them to the assessed value of your property. If the sale prices per square foot of building area are lower than your assessment per  foot of building area then you have a basis for a property tax appeal.

The same is true of commercial properties, but often an income approach to value is thrown in. Income approach is used on properties that are often rented, and that is true of most commercial property types. To do an income approach to value you need market rental rates, typical expense ratios, and a capitalization rate.

As a commercial property owner/operator you may have a firm grasp of what the market rent is for your property, in your market. You probably know what your expense ratio is as well, but you may not know if this is typical. Your Net Operating Income (NOI) needs to be capitalized into an estimate of value. Capitalization rates can be developed in a couple of ways, but deriving them from sales of similar properties is the best way to get them.

So those are basically the three things that you can argue that the assessor is wrong on. You can argue that the market rental rate is lower than what the assessor is using. You can argue that your property is unique in some way and will never have an expense ratio as low as what the assessor is using. You can also argue that the capitalization rate that the assessor is using is too low.

You can look online for rental rates and sales at a site like LoopNet and you can get expense ratio and capitalization rates at RealtyRates. If would like to put your property tax appeal on autopilot, contact the professionals at Fair Assessments LLC.