Property Tax Woes

[Overachiever]

When I bought my first car wash two years ago, my attorney that helped me a long with the process apparently treated the price I paid for the business as being what the real estate / land value is worth and they didn't provide any value for the business or any inventory, spare parts, tools, etc that I received with the it so I'm paying between 50 - 150% more in property taxes than any comparable property I can find. My appraisal at the time of purchasing said I should receive a reduction in my property taxes to match similarly to other comparables around here.

So to me this seems like an easy thing to fix but IL requires me to have an attorney sign off on the dispute form and all the attorneys that answer my calls seem to not understand that the business has value and I shouldn't have to pay property taxes on that.

This is my 3rd year trying to dispute it. The first year the attorney just got it lowered to what I paid for the whole business. The second year I was told over the phone that I could dispute it myself so I did all the research and put my evidence together and received a letter back saying I had 10 days to get an attorney because I'm an LLC and I couldn't find one in time because no one around here takes or returns calls.

Anyone have any advice on how to get my taxes reduced to what they should be? I only have 20 more days before it needs to be filed and all the lawyers I've talked to just want to charge me a ton of money to do the research I've already done and still have ominous sounding tones on whether it will actually get reduced, even after me providing all the evidence.

 

[JamboWash]

I Had the same issue when I bought my property ,so I just went to the tax assessor office and spoke directly with the then and from there we itemized the land value, equipment and inventory , then they send this for approval which was approved. are they accessing you taxes based on the sale value or the previous accessed value before the sale.

 

[JMMUSTANG]

Sent you a PM
Call me

 

[Randy]

Overachiever, you should count your lucky stars you’re not in Washington State. It’s almost impossible to get your property taxes lowered. If you want to try to get your property taxes here you have to go before the Board of Equalization and present your case, 99% of the time it is rejected. If you do win and get your taxes lowered next year they will be up again, usually higher.

Along with sky high property taxes we pay a personal property tax of 6% on all the equipment at the car wash, vacuums, pumping equipment etc. Every quarter we pay 8.9% sales tax on every car wash dollar that comes in, and to top it off we pay 8.9% Use Tax on everything we buy out of State, so everything we buy from Kleen-Rite, Windtrax, Dultmeier we pay use tax on.

 

[Overachiever]

are they accessing you taxes based on the sale value or the previous accessed value before the sale.

They are assessing them based on the sale value now because my attorney got it reduced to that in 2014 shortly after I bought it.


@Randy - we are definitely lucky here in IL with the sales tax but we are supposed to be paying for the use tax too. I just hope my accountant knows that .

 

[robert roman]

So, at time of purchase, attorney (and you) claimed business was worth fair market for real estate and F/F/E and other assets zero.

However, opinion of value at the time of purchase was from appraiser who suggested you should seek a reduction in property taxes to match comparables.

Now you face paying 50 to 100 percent more in property taxes than comparable property.

Why? The reason must be that you received a higher tax bill that is based on a higher appraised value.

Sounds like Chinese fire drill.

Maybe you can sue attorney for malpractice or get the fee returned.

 

[Overachiever]

So, at time of purchase, attorney (and you) claimed business was worth fair market for real estate and F/F/E and other assets zero.

However, opinion of value at the time of purchase was from appraiser who suggested you should seek a reduction in property taxes to match comparables.

Now you face paying 50 to 100 percent more in property taxes than comparable property.

Why? The reason must be that you received a higher tax bill that is based on a higher appraised value.

Sounds like Chinese fire drill.

Maybe you can sue attorney for malpractice or get the fee returned.

Yes, my attorney totally dropped the ball and I was younger and more naive and now I'm out over $20k in property taxes compared to all comparables and the appraisal in the last 3 years. I pay 150% more than a guy with the exact same cookie cutter car wash on the better side of town that is in better shape (but 2 years older).

 

[Earl Weiss]

Over achiever. What county in Illinois are you in? I may be able to refer someone.

Did you get a mortgage when you purchased? If so what was the amount of the mortgage percentage wise in relation to the total purchase price?

 

[Overachiever]

Over achiever. What county in Illinois are you in? I may be able to refer someone.

Did you get a mortgage when you purchased? If so what was the amount of the mortgage percentage wise in relation to the total purchase price?

Winnebago - The mortgage was 80% of the total purchase price (I put 20% down).

Thanks!

 

[Earl Weiss]

Winnebago - The mortgage was 80% of the total purchase price (I put 20% down).

Thanks!

Sorry, as far as Winnebago goes you may as well be on another planet. You may have been and may be between a rock and a hard place. Here is why. A mortgage is secured only by real estate. Typical banks want a certain "Loan To Value" ratio. 80% would be common. As such the real estate value would have to be declared on the contract as 100% of the purchase price for the bank to OK the 80% loan. There are a very few banks that will bend this for people with stellar credit. Similarly the county would argue that your mortgage represented 80% of the real estate value. If you argue the comparable pays less, maybe they will raise his taxes. However, other factors come into play. For instance if the other property is leased, the value will be affected by the lease payment rate.

 

[Overachiever]

Do you think it would be a waste of money for me to "update" my appraisal? The bank required the appraisal when buying and it did say in it that I was over-assessed by a large amount of money. Apparently they only accept evidence dated in the current year.

I can probably find 3-5+ comparables in the area that I'm paying 50-150% more taxes than, made out of similar materials, some are quite a bit bigger.

Its so ridiculous I have to pay property taxes on barrels of soap and brand new pumps that were just sitting around in inventory. Uhg.

 

[Earl Weiss]

Do you think it would be a waste of money for me to "update" my appraisal? The bank required the appraisal when buying and it did say in it that I was over-assessed by a large amount of money. Apparently they only accept evidence dated in the current year.

I can probably find 3-5+ comparables in the area that I'm paying 50-150% more taxes than, made out of similar materials, some are quite a bit bigger.

.

Size, construction and location are not the only factors. Take 2 buildings with the same factors but one generates double the rent of the other one. Both leased for another 10 years. Different rent factors affect value which affects the real estate taxes.

If you own the property and operate the business hopefully you own it in one entity like ABC LLC, and operate thru another entity XYZ inc. You should do a lease from A to X,. establish a fair rental which reflects the value, create a history of payments and perhaps use that as a factor to try and get taxes reduced.

 

[Overachiever]

That'll have to be plan B if I fail this year. Is there a formula you use to calculate a fair rental price? Like value of property x .008 = fair rent.

 

[Earl Weiss]

Areas differ. For something like a Walgreens the Cap rate may be 6.5% triple net. So for every $100K in value the triple net rent would be $6500.00 / year.

 

[mjwalsh]

Overachiever, you should count your lucky stars you’re not in Washington State. It’s almost impossible to get your property taxes lowered. If you want to try to get your property taxes here you have to go before the Board of Equalization and present your case, 99% of the time it is rejected. If you do win and get your taxes lowered next year they will be up again, usually higher.

Along with sky high property taxes we pay a personal property tax of 6% on all the equipment at the car wash, vacuums, pumping equipment etc. Every quarter we pay 8.9% sales tax on every car wash dollar that comes in, and to top it off we pay 8.9% Use Tax on everything we buy out of State, so everything we buy from Kleen-Rite, Windtrax, Dultmeier we pay use tax on.

Randy & others,

What should operators in states that do not have such a horrific overall tax situation say when proponents of the variety of taxes ... both by way of elected officials & the media ... putting out glowing rhetoric ... about all the wonderful things taxes have done for other states in terms of better roads, better schools, better law enforcement & other similar arguments?

I try to share what the Citizens Against Government Waste Association (CAGW) tries to shed light on!

mike

 

[getnbusy]

I got mine lowered around $100k and this is what i did.

In my case I paid 250, tax value was 175 or so, and i got it lowered to 85 or so. its been a couple years ago now but thats the gist of it. IMO, what you paid for the property and what the tax value is have nothing to do with each other.

I had to go before the board of equalization and review. They only meet once a year and you have to get on the agenda in advance. In my area a tax appraisal consists of land value, building value, other improvements value. The equipment value is taxed in a different bill which is business personal property. I dont know the rates but that is something to be aware of.

You must have factual data that supports your request. I made a spreadsheet listing the comparable properties down the side and the value of land, building, and improvements across the top.

ok going off memory here
I took the building value of each and divided by the sq ft to get a building cost per sq ft. I found that the price per sq ft varied greatly
over the properties. example: comparable 1= $15 sq ft, comparable 2=$35 per sq ft, my building =$75 per sq ft. These are not the actual numbers but you should get what im tryin to say.

I did the same thing with land value, breaking it down to price per acre. my lot was is 1/2 acre, and one of the comparables was 2 ac, but my property was valued much much more. thus a discrepancy.

I did the same thing with improvement value. In my case the improvements was the concrete parking lot. The lots were very similar in size but one listed at like $7500 on up to like $50k, thus another discrepency.

What i did was I threw out the highest, threw out the lowest, and averaged the 3 in the middle. Then i added the average of each item and considered that a new happy medium for my "new value".


Its not a perfect formula, but it did get my tax value reduced significantly because I had DATA to back what i was asking for.

I got my spreadsheets and averages enlarged at Staples and attached them to poster presentation board and went in there confident as heck cause I knew I had numbers to prove I was being overcharged. I also had an 8 x 10 pic of my site and each comparable hung up there so they could see that the sites were all pretty similar when you look at them side by side.

I also found out ahead of time how many people were on this board, did a little county research to get an idea of who i was presenting this to, and also printed out 8 packets of info inlcuding spreadsheets, averages, all my math, and the pictures. One for each member of the board, the chairman, and the county tax assesor(who was also there) so they would all have their own to look at.

When they realized i was serious and that I had a legitimate argument, they listened, and took me seriously.

I should note that by dorking around it took me 3 years to get on the agenda b/c i missed the deadline to sign up or whatever. Also I went in there unprepared the first time. If you want the powers that be to make a change in the countys taxable base, you better have a good reason. I think it took like 3 months to prepare for this

Anyways that was my experience with my wash.

------------

I also had prop taxes lowered on my rental units. In this case, I still had comparable data, but I did not have to make a presentation to a board. On a revaluation year, when new values are mailed out, our county allows a week or so when property owners can have a consultation with the man or firm that performed the revaluation. You can state your case to him and he has the authority to change it on the spot. Again, preparation is key.

I hope this helps somebody

 

[Overachiever]

Thanks. When you did your comparables did you choose car washes similar to yours like all tunnels or just anything classified as a car wash?

I gave my tax assessor a call and he sent me an email with the stats per square foot for 5 recent car wash sales and 10 equity comparables so I already have a good start. I was planning to just submit evidence for self service / ibas as that is what mine is and the tunnels and full service seem to have drastically different numbers.

 

[getnbusy]

I used like property. Mine was a SS only at the time so i used SS only comparables. I even nabbed a comparable in the next county east and west to emphasize that my county asseement was way out of line

 

[getnbusy]

Plus all my data came from the assesors office so it was i thought hard to argue with. It was all info they already had. It just had to be packages up an explained to them in a way they could understand it

 

[Overachiever]

Here's an update:

Received about a 7% decrease in property taxes (was expecting closer to 50%) so now I need to stand in front of the Board of Review with my attorney and appraiser on Tuesday to try to get it to match closer to what my appraisal and what other similar self service car washes around me are paying.

They've sent me their evidence and they are using sales data of one self service car wash in a different city that has a building that is 10 years old (mines closer to 30 years old), a brand new asphalt lot, and modern equipment (laserwash 360, credit cards in all bays, etc). I still have mostly the original equipment.

Then they submitted sales data for an express wash and a full service wash in the same city as me, which I don't really view as being comparable to me since I'm a self service car wash and I don't think my price per square foot is comparable in anyway due to the differences in business models and equipment. I looked up the full service car wash and it's for sale again minus the equipment for much less money. The express was foreclosed and recently sold but has much newer equipment than me considering the building is only 10 years old.

Given the evidence, anyone have any other advice for what to say during my 15 minutes in front of the Board of Review?

Here's the evidence I submitted:
Appraisal
Pictures and stats of most of the other self service car washes including a few that are the exact same cookie cutter design. Some of which have newer equipment (which I pay 50%+ more taxes than).
Profit and Loss statements since the day I bought it to the day my evidence had to be in by.
Estimates for new roof and brickwork needed.