Sunday, August 11, 2013

Learn How To Save $ This Week By Using Roanoke Cities Tax Abatement Program…

This week at REI will be the week of showing you how to keep money in your pocket by using Roanoke Cities Tax Abatement program. Our guest speaker will be KC Bratton, appraiser for the Real Estate Valuation office. I have used this program many times and we used it on our REI Group Flip to benefit the buyer as it passes on to them.

Essentially the way it works is you give them a little money to apply for the program, they come out and look at your property before rehab and take plenty of pictures, count how many rooms you have, etc. They at that point in time assess the currant value of the structure and lower it to what it should be.

You then are required to fix it up to at least 40% greater value and they come back out and take another look when it's done. Depending on the exact location of the property, you don't have to pay taxes for 5 to 10 years on the additional value they assessed the property for. So if you buy a junker that is worth 20K and 5K is the land value you have 15K on the structure. Then they come back out and say that the structure is now worth 60K, you won't have to pay 40K of taxes for the next 5 to 10 years. Nice way to save some money.

This works out great for the city because when you fix up these eye sores, they can go around all of the surrounding property and increase the tax assessed value significantly which more than makes up for the deduction that you get. I like to look at this as an Old Neighbors helping the New Neighbor program. The may not be happy about their tax assessed values going up if they aren't selling but they sure would be when it's time to cash out.

If you are flipping your property it's absolutely essential that you are involved in this program since there are so many people that think that the tax assessed value is what the property should be worth. You then can get the value increased for the numbers to look good on the GIS.

Like all things, there are pros and cons:

1. Save a substantial amount of money over the next few years.
2. Raise the value of the whole neighborhood by putting some lipstick on that pig.
3. For flipping purposes, get the correct tax assessed value so people have a generality to go by.
4. The higher tax assessed value of the property certainly will affect a bank appraisers opinion to some degree. The more it's worth, the more you can borrow.

1. You have to get a permit even if you're doing nothing more than cosmetic work that doesn't require a permit. (Update) At the meeting they said you don't have to have a permit if only cosmetic but I have been required to do so.
2. They will take lots of pictures that will be used against you in court if you make non permitted changes. Everything you are doing has to be on that permit.
3. If you are buying to hold the property as a rental, and didn't get a permit because you weren't required to do so, they wouldn't know that it got fixed up in the first place so you would most likely continue to have low taxes. Their final assessment of your property will allow you low taxes for a few years. Maybe many more if they didn't know it happened.

Fun stuff people. I'm telling you both the positives and negatives of this program because you should know. As I said before, I like it and continue to use it therefore in my opinion in many cases, the pros outweigh the cons.


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