Anyone else get a 'Chapter 91' notice from the city assessor demanding rent & expense info on income property?

Submitted by Blecher_onthe_Hudson t3_11di8ev in jerseycity

We've owned rentals here for decades and this is a first, even though Googling shows it's a common NJ thing due to the law NJSA 54:4-34. From the articles I found, apparently the main purpose is to take away your right to appeal if you don't comply within the 45 days given.

Have other rental owners gotten this previously, or is this a new trick for JC? We weren't planning to appeal, but giving them all our property cashflow info worries me they might use it to increase our assessment! This may only be relevant to commercial properties which are valued by income, not comps like a residential property.

4

Comments

You must log in or register to comment.

DirectorBeneficial48 t1_ja8x1vh wrote

> giving them all our property cashflow info worries me they might use it to increase our assessment!

Oh no, how dare they want you to pay what you owe

41

bodhipooh t1_ja8zvsd wrote

Dafuq? How is cash flow, or even rental profit, indicative of what a property is worth if it was to be sold? Lots of people live in properties that could potentially bring in much more money if they were rented out (as opposed to lived in) or sold on the market for someone else to live in. Imagine if we taxed real estate based on its potential rental value! Very few people, particularly long time residents, would be able to afford their tax bills.

I get that some people here just love to hate landlords and shit on their choice to buy and rent properties, but this is ridiculous. If you spend even a minute to actually think through the implications of adjusting property taxes to reflect potential rental revenue, you would see why that’s an absurd idea. Besides, OP's rental income is already taxed in other ways, both by the state and the feds. It’s not like some sort of secret, tax free scam he is trying to hide.

−16

micmaher99 t1_ja9cl6a wrote

Cash flow is the main determination of market value for most commercial real estate. For 4 unit multifamily and smaller properties, you usually do a sales approach and an income approach. For single family homes or condos, you do a sales comparison approach, but that reflects that some people will buy these and rent them out.

Cash flow is 100% a great indication of market value.

26

bodhipooh t1_jaccva9 wrote

>Cash flow is the main determination of market value for most commercial real estate

OP is in residential real estate, not commercial real estate. Though, your 4-unit example is obviously very much on point and something I had not considered. Those types of properties are obviously meant as rental businesses, but they are still considered residential real estate, no? Ultimately, the landlord is getting taxed on rental business income, so I am still not understanding why the city needs all that accounting information.

2

micmaher99 t1_jacgviq wrote

>OP is in residential real estate, not commercial real estate

OP has owned "rentals for decades.". Based on that, plus the fact JC is asking OP for property financials, I'm assuming OP doesn't just own a random condo or two.

4 unit multifamily is really where banks and the industry make the switch in talking about "residential" vs "commercial", but with multi-million dollar companies buying up single family homes to rent them out, that line has gotten blurry. It's really a difference without a distinction for OP.

The city wants accounting info to sharpen their income approach value to ensure the property tax assessment is correct. Yes, real estate that is rented for income pays property taxes, even though the landlord gets taxed on that income.

3

Blecher_onthe_Hudson OP t1_ja9g7ix wrote

It's the way it's always been, and typically the tax on a commercial property is lower than what you'd think for a similar residential. Residential is subject to what Alan Greenspan called "irrational exuberance" in the market, whereas a commercial property is a business and businesses are valued according to how profitable they are. Unless you're a tech startup of course!

The real arbiter of all this is the banks. If you try to borrow money for a commercial property that their appraiser says isn't producing enough income for that price, they're just not going to loan you what you want. Most residential properties and especially condos in JC have prices that are unsupported by their rents.

7

bobomerk99 t1_jacb822 wrote

>and typically the tax on a commercial property is lower than what you'd think for a similar residential

Really? Can you pull some examples of commercial properties and their property tax?

3

Blecher_onthe_Hudson OP t1_jad7a6d wrote

Very easy, just compare the assessment of a local property with a store vs similar ones without. https://oprs.co.monmouth.nj.us/oprs/External.aspx?iId=12

265 8th st, AKA 'Walt's Liquor", commercial property with store and 3 units $964,600

267 8th st 4 units $1,284,600

269 8th st 4 units $1,419,600

Note that 265 is a corner and obviously worth more just in land value.

https://preview.redd.it/47zqe9znwzka1.png?width=632&format=png&auto=webp&v=enabled&s=05ad45070ce1577b8ede07181fe0d5c639e4f9d6

2

vocabularylessons t1_jaa066a wrote

Cash flow is the basis for determining the value of an income generating property (the income approach). Sales approach isn't as good a method when you have the income information, cost approach isn't nearly as useful in this context.

5

bobomerk99 t1_jacb29d wrote

>I get that some people here just love to hate landlords and shit on their choice to buy and rent properties, but this is ridiculous.

They'll be crying as soon as they realize it gets reflected in their rent though.

−1

downvotes_puffins t1_ja8yge3 wrote

Residential properties can certainly be valued based on income. What fundamental difference would there be between commercial and residential rental property.

12

Blecher_onthe_Hudson OP t1_ja9gv7r wrote

Residential properties can be bid up by irrational exuberance and as long as the comps support it the banks will loan on it. A commercial property is a business appraised by its income.

What's hilarious is to look at an appraisal of a three family for example, the dishonest appraisers will torture the numbers so that the three completely different methods of appraisal: comps, rents & replacement, all fall within a couple of percentage points of each other.

−5

tcbafd t1_ja95g95 wrote

Yes. I've received as well. It does feel like an overstep that they want an accounting of the property. They say you can't appeal if you don't provide the info. Not sure if it could be used against you on a one off basis.

4

Puzzlekitt t1_ja9ck65 wrote

Have not gotten anything like that. Curious are you an llc or individual that rents out?

4

Blecher_onthe_Hudson OP t1_ja9hiza wrote

It's an LLC, but I don't know why that should make a difference. Quite a few individuals hold their single family homes in LLCs.

One working hypothesis for why some people get this might be that their algorithm shows that you are overtaxed and this is a way to preempt your appealing if you don't submit the info, as apparently many fail to do. Most of the articles I found online regarding this issue were about people who failed to submit within the specified 45 days.

4

Puzzlekitt t1_jaaiwdy wrote

I was just curious, didn’t mean anything by asking which. Gotcha, that’s interesting. They overvalued places during the reval and I haven’t known anyone who won an appeal.

2

Stillill1187 t1_ja8z1o8 wrote

Sounds like a you problem.

−8

jersey385 t1_ja99b0a wrote

It sounds to me like they were asking for other people’s experience with this type of notice. It seems like this subreddit has gotten very mean spirited lately.

13

Blecher_onthe_Hudson OP t1_ja9ob4t wrote

Now now, lets not be down on the narcissist for being honest, we've had enough trouble recently with the dishonest ones. In their mind, every problem that doesn't directly involve them is a 'you problem', though it does baffle me why it needs to be stated. Narcissism?

6