It is good to review how homes are assessed, how to appeal those assessments
and why it may be necessary to do so next year even if you won an appeal
this year. The assessment that you see at the local level starts in
Lansing. There, the state determines what they consider to be the total
assessed value of each county. The county then takes the number they are
given by the state and determines, in its opinion, what the total assessed
value of each municipality within the county should be. It is then the responsibility
of the local assessor to arrive at this total by determining which neighborhoods
are worth how much by calculating a percentage increase over the prior year's
congregate value. Not all neighborhoods go up at the same rate.
Obviously, under this procedure, while the assessed value is supposed to
represent 50% of the true or market value of your home, it seldom does. With older
homes the assessed value is usually much lower than it should be. When the assessor's
office looks at homes, they calculate depreciation based on the improvements in
the home. A home built in 1939 may have been updated frequently and still have
its value depreciated by 50%. Newer homes on the other hand,may have assessed
values much higher than 50% of value. A home built in the 80's may only be depreciated
10%. This may seem like a rather sloppy way to arrive at the value for your home
but understand that in most cases no city official has been inside your home since
it was built, if ever. It would be easier if the city could appraise all the homes
at the same time. But, the last time that a municipality approved such a procedure
the City Council was recalled.
If you appealed your tax assessment this year and won, congratulations.
To all those who either wanted to and did not
or those who did and lost let me offer some hints on how to appeal your
assessed value. Remember what the assessed value of your home is supposed
to represent before you start to prepare your appeal. The first thing you
want to do is go to the city and make sure that they have the properly described
properly. Are the bedrooms correct, the bathrooms, and any other aspects
about the home? If the information is incorrect you might want to bring
it to their attention. This should result in an immediate reduction in your
assessment.
For those of you who are not as fortunate to be able to reduce your assessment
because of a descriptive error there is another way. Each spring municipalities
hold hearings with those who feel their assessed value is incorrect. At
the hearing you will have an opportunity to present facts that will help
you to explain the reason you feel they are incorrect.
At the hearing you need to present information about the sale of other properties
in your immediate area. It is best to do this using homes of similar size, style
and age. In appeals I have done for homeowners I have broken the age of the homes
into pre-1940 and post-1940. If you do not have homes similar to yours, use larger
ones that sold for the same price yours is assessed at. At all times, remember,
the people at the hearing are just like you or me. They only need a logical argument
and supporting facts to see if there has been an error. Anything more on your
part may obscure the message you want to deliver and cause you to lose your appeal.
If you have any questions send me a note via E-mail.
Some of you may have an interest in rental property or using your
present home as a rental if it does not sell. The ownership of rental property
provides many pluses and some minuses you must take into consideration. Let us
first deal with your home as a rental property.
Seldom will you find someone who will love your home as much as you. With
living in a home comes nicks and chips you would ignore. Seeing them for
the first time after a year will horrify you. To help offset the cost of
making minor touchup repairs after a home has been rented always get the
maximum security deposit allowed by law. This money can be used to cover
such repairs. If you want to sell the home next year or after the end of
the lease, spell out what the provisions are if the lease will not be extended.
You cannot decide to show the property unless you have such an arrangement
with the tenant. While a tenant is in the home they may be less excited
about your selling the property than you think. Difficulties in scheduling
and unfortunate off-the-cuff remarks have made the sale of rented property
difficult in many cases.
The benefit of renting your house out is that you will have someone making your
payment while you wait for the right time to sell. There are also some tax advantages
but you should see your accountant about your specific situation regarding those.
On any rented property you may be required to have a Landlord's License. Make
sure you check first. If you have any questions send me a note via E-mail.
When you decide to buy rentals, investigate how you are going to
finance the purchase. The days of land contracts and assumable mortgages
are gone except in rare instances. This means you will have to obtain financing
from a mortgage lender. Lenders that finance investment real estate have
different guidelines than for owner occupied purchases. While the qualifying
ratios are the same, they usually want thirty percent of the purchase price
for a down payment. Lenders generally have a higher rate than is standard
for an owner occupied home and in many cases want a shorter term than thirty
years.
When you determined how to finance a purchase, you need to look at the monthly
rent you can generate. Make sure you realistically look at the costs of
being a landlord. A benefit to renting property is its appreciation, making
it worth more when you decide to sell. If you ignore the maintenance of
the property, you will you have to put in cash to sell it and diminish the
monthly rent potential.
The changes in tax laws are such that it does not make much sense to have
a negative cash flow other than in very unusual circumstances. If the probability
for a positive cash flow exists (make sure you include taxes and insurance
on the expense side of the ledger), then you would be wise to move forward.
Do not hesitate too long, homes meeting these conditions do not come up
with great frequency.
Renting also means dealing with a lease. The contents of your lease will
dictate the terms and conditions under which you and your tenant are going
to operate. Nothing that was agreed to verbally is binding. Pets, children,
and all adults residing at the property should be enumerated. Statements
about who is responsible for the payment of utilities, including water,
should be clear. Clearly state, in your lease, who is responsible for exterior
maintenance of the property, including snow removal.
Have all adults staying at the property sign the lease and indicate that
they are all individually liable for the rent.
This is critical if you are renting a home to persons other than family
members. Clearly state how payments are to be made, to what address and
at what point a late charge attaches for late payment. Specify that the
amount due from the tenant is the total of the payments for the term of
the lease, payable in monthly installments.
A provision dealing with service calls and repairs can be helpful. Instead
of the landlord being responsible for all
costs, I suggest your lease allow for the tenant to pay for the first $50.00
or $75.00 of all repairs. This way, when a window is broken, or the sink
gets plugged, or the garbage disposal jams, you are not called to the property
to fix it.
While there are many additional provisions, you should include one I want
to make sure you are aware of. It is the inclusion of language that deals
with the tenants' use of illegal substances. You need to be able to establish
that the use of such substances is not condoned by you. Make it clear that
the use of drugs by the tenants or their guests will void the lease and
result in immediate eviction.
Finally, remember that when entering into any legal contract, such as a
lease, you should always seek the advice of an
attorney. If you have any questions send me a note via E-mail.
©1996 Bob Taylor