Author Topic: Krazy Kommercial real estate around DETROIT!  (Read 15310 times)

DTEJD1997

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Krazy Kommercial real estate around DETROIT!
« on: October 14, 2016, 04:30:25 PM »
Hey all:

I'm off work for a few days, as the new project hasn't geared up yet...

SO I'm out & about looking at commercial real estate.  HMMM...the accountant's office 1/2 mile from me is now closed & up for sale.  Wonder what the ask is?

Get the owner's son on the line.  He is very nice & informative.  Father passed away and now mother wants to sell the building.  BUT WAIT it is a "two fer" deal.  You also get the building attached to it! ????OK????

So you get just under 2,700 sq. ft.  of "move in ready" space.  You might want to redecorate though, as the last time it was updated was in the early 80's.  OK.

Price?  $40K

But here is where it starts to get KRAZY!

THAT IS FOR BOTH BUILDINGS! 

OK, what are property taxes?  They are about $7,900 per year!

WTF????  Did I hear that right?  Surely you must be mistaken.

Answer:  Please don't call me Shirley, and NO, I am not mistaken.

What is the assessed value?  Approximately $42k per building.

This is a SUBURB of Detroit....Assessed property taxes are almost 10% a year?  On grossly inflated property values?

I told the seller that if the information he gave me is correct, I don't see how he will be able to sell the property.  He sounded quite deflated and said, well yes, that is why the price is low, and we want OUT.

Am I krazy?  Does this sound like an out control situation with property taxes?

I am going to dig into this and find out.  The buildings are in good shape...Heck, I could easily walk to work!


racemize

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #1 on: October 14, 2016, 04:53:07 PM »
In texas you can go question the assessed value and just show a receipt.  Then they lower to the purchased value for you.

DTEJD1997

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #2 on: October 15, 2016, 07:36:18 AM »
In texas you can go question the assessed value and just show a receipt.  Then they lower to the purchased value for you.

I asked a couple of people more knowledgeable about real estate in MI...

They said that you absolutely can contest the property tax assessment and will likely prevail.

The PROBLEM is that if the tax is $7k per year, you'll get it lowered to $6k per year.  Not to the $2k per year, which is where it needs to be based on market conditions.

If the tax rate is 18% for commercial property in my little suburb, no wonder the vacancy rate is 40%.  This is destroying the market...

racemize

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #3 on: October 15, 2016, 07:39:39 AM »
Isn't it 42k per building vs 40k for both?  So, assessed is 84k, of which 8k is assessed, which is still incredibly high, but less than 10%.  So it would seem like it would get halved?

DTEJD1997

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #4 on: October 15, 2016, 08:21:14 AM »
Isn't it 42k per building vs 40k for both?  So, assessed is 84k, of which 8k is assessed, which is still incredibly high, but less than 10%.  So it would seem like it would get halved?

I believe the assessed tax value is supposed to be approximately 1/2 of market value.  Each building's assessed tax value is something like $42k.  That would imply market value is $84k PER building.  So on that basis, the tax is about 4.5%.  The problem is that the taxing authority is saying the properties are worth 4X more than they really are.  Heck, it might be even more than that.  These properties have been listed for sale for months.

The problem is that the assessed values are the absolute height of lunacy.  I can't think that either of these buildings was EVER was worth $84k.  They are small, at about 1250-1300 sq. ft. per unit.  This area of town, while not hit with the crime & decay that Detroit has been, is not prosperous by any stretch of the imagination.  The commercial vacancy rate is 40%+ in this particular area.  The vacancy rate has been high for years & years & years.

I am sure that the high tax rate is contributing to the vacancies.  Landlords simply can't lower the rent too far, as they have to pay high taxes.  In that case, who really owns the land/buildings?  In the properties that I am looking at, taxes would tax 1/2+ of a "reasonable" rent!

racemize

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #5 on: October 15, 2016, 10:26:30 AM »
Well, right, but all it takes are a few sales, and then you go and get the taxes lowered.  It is a very straightforward situation in Texas at least.  Maybe it doesn't work that way in Detroit though.

gg

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #6 on: October 15, 2016, 11:47:31 AM »
I would suggest that you contact a lawyer that specializes in reducing real estate taxes. I know some people that have used these services very successfully in the past

Value^2

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #7 on: October 30, 2016, 12:33:55 AM »
any updates.... did ya buy it?

thanks.

DooDiligence

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #8 on: October 30, 2016, 12:49:50 AM »
I would suggest that you contact a lawyer that specializes in reducing real estate taxes. I know some people that have used these services very successfully in the past

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DTEJD1997

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Re: Krazy Kommercial real estate around DETROIT!
« Reply #9 on: October 30, 2016, 08:43:56 AM »
Hey all:

I have not purchased this property...

While it passes almost every test...the problem is the property taxes.

I am going to try and get an option contingent on getting the taxes lowered.  The property simply does not work with the current level of taxation.

I also want to see what happens with the election and see if the economy falls into chaos again...

Right now real estate is/has been strong in the Detroit area.  It makes me think that the stupid money is flowing in now...after prices have risen.

If the economy declines substantially, the Detroit area is going to get hit HARD. 

If there are any developments, I'll let the board know.