CLIENT KNOWLEDGE BASE

    Property Tax Abatements

    Property tax abatements can offer significant savings for real estate investors.  We often talk about income tax, but property tax can eat up a significant portion of your income each year.

    These are reductions or eliminations of taxes owed, often used by municipalities to incentivize certain types of development or improvements.  Remember, assessed values and fair market values are often different.  The same goes for assessed value and cost basis.

    Here's a step-by-step guide to help Anomaly's investors pursue property tax abatements:


    1. 1

      Inventory All Properties

      Begin by creating a comprehensive list of all the properties in your portfolio. For each property, note down:
      • Address
      • Property type (residential, commercial, industrial, etc.)
      • Current market value (use comps)
      • Net Operating Income
      • Current property tax amount and Assessed value
      • Recent renovations or improvements?
    2. 2

      Understand the Tax Abatement Criteria the City/Town uses

      Research local tax abatement criteria, as mentioned in the guide above. This will give you a foundation for understanding which of your properties might qualify.

      For example, do they take into account the vacancy % or the property income growth?  You want to be armed with these stats.
    3. 3

      Prioritize by Location

      Properties in certain zones or districts might be more likely to qualify for tax abatements, especially if they are in:

      • Economic development zones
      • Historic districts
      • Environmental or green zones
      • Low-income districts

      Highlight the properties in your portfolio that are in these zones.
    4. 4

      Assess Property Condition & Rents

      Some abatement programs are available to properties that require significant renovation. Identify properties in your portfolio that:

      • Are in a state of disrepair and newly purchased
      • Have outdated systems (e.g., HVAC, plumbing, electrical)
      • Could benefit from energy-efficient or environmentally-friendly upgrades
      • Have had significant turnover or vacancy issues due to market conditions
    5. 5

      Review Recent Renovations and Improvements

      If you've recently carried out improvements on a property, it might already meet some abatement criteria, especially if renovations:

      • Preserve historical character
      • Add environmentally friendly features
      • Boost local economic development
    6. 6

      Evaluate Financial Impact

      Before deciding to pursue an abatement, evaluate its financial implications coupled with the costs to hire attorneys.

      • Estimated tax savings per property
      • Potential increase in property value
      • Costs associated with bringing a property up to abatement criteria
    7. 7

      Consider Future Plans

      Your long-term plans for each property can influence whether you should pursue an abatement:
      • If you're planning to sell a property soon, an abatement might increase its market value.
      • If you plan to hold onto a property long-term, the ongoing tax savings from an abatement can significantly boost your ROI.
    8. 8

      Consult Professionals Including a Property Tax Abatement Specialist

      It's a wise step to consult with professionals before making decisions:

      • Real Estate Attorney: Can provide legal insights and help with the application process.
      • Property Tax Consultant: Can offer a detailed breakdown of financial benefits and implications.
      From our experience, these abatements can save you THOUSANDS in the right setting.  However, you usually do not want to DIY this.  We can help refer you or find you the appropriate counsel that can advise you and save you the headache of trying to fight this alone!
    If you still have a question, we’re here to help. Contact us