REALTY TAX ON INVESTMENT PROPERTIES

By Dino Nicosia, Broker of Record, Investpro Realty and Appraisal Ltd., Brokerage

Are you paying too much property tax? Let’s face it, realty tax on investment properties could significantly impact the N.O.I. (net operating income) and dramatically affect value. Unfortunately most investors take this large expense for granted and assume that the assessment on their investment property is correct and never bother to investigate it. 

The reality is that many landlords are paying too much realty tax and they are not aware of it.  

In the Hamilton area, the following is a quick test to determine if your realty tax is properly assessed. 

To prove my point that some properties are assessed incorrectly, I would like to share the following real life experience;

In a recent transaction I noted that the property tax on my client’s new acquisition (a 20 unit apartment building in Hamilton) appeared to be extremely high based on my comparables.  Doing a quick check by applying the above formula, I calculated the realty tax was about $12,000.00 too high. My first step was to ask MPAC (Municipal Property Assessment Corporation) to review the assessment through a simple application called “Request for Reconsideration (RfR).”

If you believe your property taxes are too high, go to the MPAC website, www.mpac.ca and follow the instructions; download and fully complete the (RfR) form.  A local assessment officer will be appointed to review your application.

Should you not agree with the results from the reconsideration process, you still have the option for an appeal, which is not covered in this article but fully explained on the MPAC web site.

In reference to my application for the Request for Reconsideration, I am please to say it was successful. The owner received a revised tax assessment and a refund cheque for over $11,000.00 was issued.  It was not just the refund that was huge; what was even bigger was the increase in the net operating income as a result of the realty tax reduction. This translated to a large rise in value.  By taking the revised net income and using a market cap rate of say...7%, this equated to about a $150,000.00 increase in value!