After The Storm: What To Do When Your Portfolio Takes A Hit From Mother Nature
The roar of the wind, the pounding of the rain, the distant sound of thunder and cracks of lightening. Or maybe it’s thundering of the ground beneath the feet, causing concrete foundations to crack and disintegrate. And for some, it’s the crackling of millions of acres of forest and land burning while smoke blots out the sky.
It’s that inevitable time of year again: Storm season. Whether that means the ending of Tornado Season from the Midwest to the south, or the middle of Hurricane Season from Florida to New England, Mother Nature takes a toll on the real estate beneath her with no regard to cost or the people within. Texas and Florida have learned this first-hand in the previous few weeks due to Hurricanes Harvey, Irma, Jose, even Maria and Nate. California is currently disappearing under devastating layers of smoke and flames from wildfires.
When you possess a large real estate portfolio, you may be aware of the risks that come with properties located in the most common paths of natural disasters. Do you know what to do after a natural disaster strikes your portfolio? How do you mitigate the negative impact of hurricanes, tornadoes, floods, wildfires, earthquakes, or sink holes?
TIP #1: Property Health Check Post-Disaster
After the natural disaster has struck, be sure to review your properties and do a wellness check. How much damage has been done? Are any of the properties in need of serious repairs? Is the land still in good condition? Has the whole area been affected heavily by the natural disaster? This is important, especially if these are residential properties a borrower or renter calls “home.” If this is a commercial property, the business within will be affected if the building needs extensive repairs. In Texas, over $23 Billion in property damages and more than 30,000 homes were destroyed due to Hurricane Harvey.
TIP #2: Call Your Local Property Appraiser or Assessor
After the storm, your property’s value may be affected. If there has been significant damage to the building or the land, request to have the local appraiser do a thorough inspection to reassess the property, even if they have already been assessed for the 2017 tax year. For example, Florida properties are generally assessed in January each year. If your property was damaged by Irma in early September and repairs aren’t made before January 2018, the assessor will lower its value.
If you do decide to have a property assessed before the 2018 tax year, request a new appraisal. Once you receive the new assessment, be sure to review it thoroughly. Does it look too low? If so, you have the right to have it appealed and re-examined.
If there are damaged properties within your portfolio, their values may decrease when they are re-assessed. This will cause lower property tax rates until the land is either repaired or rebuilt. Tracking these new rates is vitally important to your portfolio as Taxing Authorities may re-assess installment amounts. In some states, laws and ordinances will allow owners to file claims for a lower assessment amounts or lower property tax rates.
In California, Revenue and Taxation Code section 170 says that a property owner may file a claim within a set amount of time for property tax relief after a natural disaster. The county could then immediately reappraise the property. Current taxes may be reduced in the affected area until the property is rebuilt or repaired. But this is only for counties where the ordinance has been adopted. If your California properties have been affected by a storm or wildfire, seek out your local Taxing Authority to ask if you’re eligible.
In Florida, real estate taxes make up 36 percent of the state and local revenue. When a large natural disaster, such as Hurricane Irma, hits the state, communities lose out on the currency generated from “healthy” property taxes. After the disaster, properties that are damaged and reassessed may qualify for lower property tax rates, which means less money in local governments’ budget. Once properties are repaired, property tax rates may be raised back to their former or higher rate depending on if new developments were added post-storm.
The Florida Senate proposed a bill in January 2017, Bill 272, that stated natural disasters could be categorized as: hurricanes, earthquakes, fires, floods, tornadoes, and even sinkholes. News Journal Online journalist, Tony Holt, reported in an article in January that the bill stated, “if a home is uninhabitable for two months out of the year, the tax bill would be adjusted accordingly, according to the bill’s language.” But unfortunately for Irma victims, this bill died within the Senate committees in May this year. Where complete devastation has occurred, Florida appraisers may value the land a property sits on rather than the property itself if it’s been extensively damaged and need to be torn down.
If you decide to take an interest in repairing damaged properties within your portfolio, there are tax statutes that may help in some areas of the country. In 2012, New Jersey locals were offered a sales tax exemption on labor and materials for capital improvements of homes and businesses. This also included installation for storm windows and doors (Bloomberg BNA Salt Talk Blog).
New York, too, gave their citizens help with a “partial abatement” of property taxes after Hurricane Sandy. This statute was put in place to aid homeowners in rebuilding and repairing their properties. Check with your local Taxing Authorities to see if there are any relief programs your properties may be eligible for.
When disaster strikes, critical action is key in protecting your portfolio’s assets. Fast assessments and appraisals can make a huge difference in managing your collateral’s property taxes. And we’re here to help: NRTT is partnered with nationwide tax appeal providers to offer quick turn-around times to include probable outcomes and relevant comparisons for local tax markets for your property assessments. We also provide property insurance through NRTT Insurance, LLC to help protect your portfolio. Go to NRTT.com/Services to learn more.
After all, the storm doesn’t last forever…
If you want to donate to charities to help victims of Hurricane Maria, please check out this article by Time.com to learn more!