I got a letter today stating that the taxing agency wishes to re-assess the value of my MHP. Pretty sure they don’t wish to lower it.
While the previous owner did make some physical improvements to the park, they weren’t of the scope to account for the increase in price from what he sold it to me for and what he bought it for when it was really run down.
Rather, it’s the “business” being run there that accounts for the value. He got rid of the bad people, got a good manager in, made some cosmetic improvements, got the cash flow good, and now people wish to live there.
So two questions:
First, do I have a prayer of convincing the taxing agency not to raise the value to the purchase price, and if so, what is the best strategy? Involve an attorney?
Second, when I buy my next park, do you think it’s possible to buy the park and the business separately? Perhaps buy the LLC or something for the second part? In this way the park purchase price is less than the entire purchase price and prop taxes don’t get jacked big-time?
The likely hood is that they will assess the property based mostly on the income as opposed to the price you may have paid. Did you over pay for the property or does the price reflect the true income. If you over paid you may be able to convince them of that but if the price reflects the value then you will be assessed at what it is worth.
Don’t worry about your taxes going up simply pass the increased cost along to your tenants. That’s how it’s done.
Your park likely should be assessed to the value you paid for it. Not to be a downer, but you established that it was what it was worth when you paid that much for it. Hopefully you built this increase on the property taxes into your pro-forma when you were putting in your offer. If not, you’ll know for the next park that you need to build in the assumption that the taxes will increase.
I wouldn’t even know where to begin by trying to separate the business component from the land, but I have my doubts that it’ll work the way you are describing. Many of the counties we deal with run their assessments based on an income approach. They don’t have the exact numbers, but they do get pretty darn close sometimes. The best one I ever saw came from a county in SC. Their assessor’s website includes a rough pro forma for multifamily properties showing how they arrived at their assessment. Secondly, do not buy an LLC. If you do, you’ll inherit all of the previous owner’s liability and you’ll likely have a horrible (if not impossible) time getting financed.
Your property taxes are just a fact of life. Always assume that the property’s assessed value will jump to the price you are paying for it. This way, it won’t actually hurt that bad when the county increases your taxes.
Is it possible between the seller and buyer to put the park/land into a newly created LLC, just to facilitate the transaction? This way the buyer won’t have to worry about the liability of the LLC, and be able to keep the original tax base. If this is possible and legal, then this could be very valuable to potential buyers in states like California where park values will be reassessed by the transaction price.
That is an interesting question and I guess you could do that, but I’m not sure it would do any good. I’m doubting it would get you over the financing hump. Again, building the reassessment into your numbers is always the safest thing to do and any reasonable seller should agree with you on that point. Trying to play little tricks on the county to get a lower assessed value while simultaneously overpaying will likely still get you caught with your pants around your ankles…Even in CA.
Death and taxes are inevitable. You can not cheat either with any likely hood of winning.
When it comes to taxes just accept and move on. There is no real reason to dwell on them it’s simply a cost you pass along.
BEFORE buying properties we spend time at assessors and they are VERY helpful how to indicate blue sky, personal property etc. and the history of the properties plus the neighbors or what is for sale or in default. Looking at a property over the weekend and found the seller had the wrong acreage and property line and the assessors explained how to in detail to keep the taxes almost the same by the sales agreement. The assessors are our friends and have the time and knowledge to be very helpful BEFOE the sale.
