residential rentals & mass appraisal...gross rent multiplier gross rent multiplier (grm)—(1)...

PRESENTED BY:

Allen County Assessor’s Office

&

Wayne Township Assessor’s Office 2

WHAT IS A RESIDENTIAL RENTAL PROPERTY?

Section 2. IC 6-1.1-4-39: “…real property regularly used to rent or otherwise furnish residential accommodations for periods of thirty (30) days or more…..

By this definition, this could be a property, 1-4 units, which is rented on the open market, providing housing for friends, family, charity, and/or owner-occupied, etc.

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HOW IS A RESIDENTIAL RENTAL TO BE ASSESSED?

IC 6-1.1-4-39:

“The true tax value of real property regularly used to rent….is the lowest valuation determined by applying each….Cost… Sales… Income….”

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HOW IS A RESIDENTIAL RENTAL TO BE ASSESSED?

Section 2. IC 6-1.1-4-39(b): The gross rent multiplier method is the

preferred method of valuing: (1) real property that has at least one (1) and

not more than four (4) rental units…. Preferred – definition: “1Like (one thing or person) better than another or others; tend to choose:” http://www.oxforddictionaries.com/us/definition/american_english/prefer

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http://www.oxforddictionaries.com/us/definition/american_english/like#like-2__9

http://www.oxforddictionaries.com/us/definition/american_english/good#good__4

http://www.oxforddictionaries.com/us/definition/american_english/prefer



ALLEN COUNTY RENTAL BREAKDOWN

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Agriculture/Farm, 120

Duplex, 1006 Triplex, 114

Multifamily, 210

Single Family, 8196

Agriculture/Farm Duplex Triplex Multifamily Single Family

2015-2018 RENTAL SALES PER SQUARE FOOT

2015 2016 2017 2018

Aboite $79.48 $79.52 $90.65 $99.59Adams $44.22 $40.79 $49.27 $59.19St Joseph $55.39 $63.23 $71.44 $74.55Washington $57.54 $61.21 $73.91 $80.53Wayne $29.61 $34.34 $39.23 $54.93County $40.15 $46.36 $53.85 $67.74

$25.00

$35.00

$45.00

$55.00

$65.00

$75.00

$85.00

$95.00

$105.00

Average Sales per Square Foot by Township

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2019 ASSESSED VALUES – RESIDENTIAL RENTALS

$4,610.74

$1,054.87

$1,703.75

$3,059.61

$3,858.51

$2,819.65

ABOITE TOWNSHIP ADAMS TOWNSHIP PERRY TOWNSHIP ST. JOSEPH TOWNSHIP WASHINGTON TOWNSHIP

WAYNE TOWNSHIP

Average Increase in Assessed Value 2018 to 2019

Total

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GROSS RENT MULTIPLIER

Gross Rent Multiplier (GRM)—(1) The factor by which gross rent is multiplied in order to obtain an estimate of value (2) The ratio between sale price and potential gross income or effective gross income. By convention, the gross rent multiplier is typically the term used when developing the relationship based on monthly rent. Glossary for Property Appraisal and Assessment: Second Edition,

International Association of Assessing Officers, © 2013

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GRM FORMULA

Formula (GRM): = Sale price/Monthly Gross Rent Example: Sale $30,000/Mos. Rent $500 = 60.00 Example: Sale $50,000/Mos. Rent $850 = 58.82

Formula (GIM): = Sale price/Annual Gross Rent Example: Sale $30,000/Ann. Rent $6,000 = 5.00 Example: Sale $50,000/Ann. Rent $10,200 = 4.90

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PREPARING TO ASSESS RENTALS

Three Requirements for the Income Approach: 1. Market Rent 2. Sales 3. Gross Rent Multipliers

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1ST REQUIREMENT FOR INCOME MODELS:

Market Rent

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DATA COLLECTION & OUTREACH

In order to determine market rents, we request rental verification in two ways:

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1. New properties/sales – Whenever a property is purchased and is not marked to receive a homestead exemption, we will contact the buyer and mail a rental questionnaire.

We recommend that buyers file the questionnaire regardless of

whether the property has been rented yet. This allows us to determine if the income approach may be applied, dependent upon when the former owner’s homestead is removed and appeal deadlines. This is also the best time to notify us of any condition issues with a

property to ensure a correct assessed value.

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2. Once every four years, when an area (25% of Allen County) is being reassessed, we will mail rental verification requests to all owners of rental properties in that area. Once verification is provided, that property is complete until the

next reassessment or appeal, whichever comes first. If no verification is received, the property will be assessed with the

cost approach, likely causing an increase in value. *If the income pricing is removed, the owner will still have the ability

to provide the necessary verification to have the income status reinstated, up to the appeal deadline – June 15th of the assessment year.

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QUESTIONNAIRE SAMPLE:

We also request a copy of the most current lease, within the last 18 months, or a copy of the most recent Schedule E, especially for properties that are now month-to-month.

*Family members being housed are not required to file a lease, only a questionnaire.

An Online questionnaire is available at: www.allencountyassessor.org. Leases/Sched E’s may now be attached as well.

Multiple property questionnaires may also be requested from our offices.

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http://www.allencountyassessor.org/

WHAT DO WE DO WITH THE DATA?

Once we have collected the data, confidential under IC 6-1.1-35-9, we enter it into our CAMA database to be analyzed.

This allows us to determine the most accurate market rent possible, within limits. Market rent can be determined by: Location House type House condition Bed Count Square footage Etc.

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2ND REQUIREMENT FOR INCOME MODELS:

Rental Sales

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RENTAL PROPERTY SALES:

Sales of rental properties – Condition - these properties should be in rentable

condition with few alterations in order to be considered for use in a GRM study. Gross Rent – what is the actual gross rent, not including

expenses, vacancy, etc., that a sold property is renting for?

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SALES DISCLOSURE PAGE 2:

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POSSIBLE RENTAL SALE TRANSACTIONS:

1. Open market, valid real estate transactions

2. Sales after foreclosure – in Allen County, these sales are the most common method of acquiring rental properties. The main concern is condition at the time of sale.

3. Auctions – Was the auction advertised? How far in advance was the property advertised? What is the condition of the property?

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POSSIBLE NON-VALID PURCHASE METHODS FOR GRM PURPOSES:

1. Tax sale – this sale price is based upon the taxes due. The taxes due are based upon the assessed value. This is not an acceptable method for establishing value. Investors may also purchase with the intent of receiving interest payments from the current owner.

2. Package sales – these are often discounted due to “buying in bulk” and may not have individual values broken out for each parcel.

3. Sheriff Sales

4. Judgements/Divorce

5. ……….

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SALES VERIFICATION INVOLVING CONDITION ISSUES:

Is the condition of the property correct? We can only judge by the exterior without the involvement of the owner.

Example: Exterior of property

purchased 10/21/15

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SALES VERIFICATION INVOLVING CONDITION ISSUES:

Interior of the previous property purchased 10/21/15:

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3RD REQUIREMENT: Actual Gross Rent Multipliers

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GRM’S

Formula (GRM): = Sale price/Monthly Gross Rent Example: Sale $30,000/Mos. Rent $500 = 60.00 Example: Sale $50,000/Mos. Rent $850 = 58.82

Once we have sales and rents for only verified rental

properties, these will be stratified and the median gross rent multiplier for each category will be determined. In order to prevent unusual fluctuations, we always use the

median (middle) to prevent high/low multipliers from improperly weighting the category.

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GRM’S – 3BR 1STORY SINGLE FAMILY

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Class Address Bed-

rooms Rpt

Rent GRM Sale Date Sale Price

Valid Sale

Invalid Reason Building Style

Act. GRM

510 Sale #1 3 600 38.31 8/16/2014 21,000 Valid Rental 11 Older conventional 1 story 35.00 510 Sale #2 3 590 38.31 10/13/2014 22,700 Valid Rental 11 Older conventional 1 story 38.47 510 Sale #3 3 610 38.31 10/7/2014 23,000 Valid Rental 11 Older conventional 1 story 37.70 510 Sale #4 3 650 38.31 6/15/2014 20,857 Valid Rental 11 Older conventional 1 story 32.09 510 Sale #5 3 610 38.31 8/18/2014 29,000 Valid Rental 11 Older conventional 1 story 47.54 510 Sale #6 3 627 38.31 2/2/2014 24,000 Valid Rental 11 Older conventional 1 story 38.28 510 Sale #7 3 575 38.31 4/12/2014 27,000 Valid Rental 11 Older conventional 1 story 46.96 510 Sale #8 3 600 38.31 3/17/2014 23,000 Valid Rental 11 Older conventional 1 story 38.33 510 Sale #9 3 700 38.31 6/3/2014 25,000 Valid Rental 11 Older conventional 1 story 35.71 510 Sale #10 3 675 38.31 1/6/2014 42,500 Valid Rental 11 Older conventional 1 story 62.96

Median GRM 38.31

ALLEN COUNTY GRM’S THROUGH THE YEARS:

6p7 7p8 8p9 9p10 10p11 11p12 12p13 13p14 14p15 15p16 16p17 17p18 18p19 19p20

20.40 18.72 18.48 21.00 21.00 28.80 29.76 29.79 29.79 32.04 33.33

27.36 26.76 28.44 28.32 28.80 33.36 35.88 35.64 35.14 35.14 36.14 38.14

39.36 41.46 41.46 42.22 42.68

40.80 42.60 43.44 41.28 41.64 42.00 42.00 45.96 45.00 44.46 45.24 47.27 47.83

55.08 49.80 52.80 53.16 53.88 54.24 54.24 54.24 54.60 53.16 52.94 53.28 54.77 55.77

60.96 65.88 71.16 66.72 69.36 69.24 69.96 66.72 66.72 66.39 66.72 67.46 67.96

73.92 72.96 78.60 77.40 82.56 83.16 75.24 77028 78.72 78.84 79.04 79.20 80.00 81.00

99.96 88.68 89.28 93.84 88.56 88.08 88.20 89.52 89.52 89.04 90.34 91.08 92.96 93.46

103.80 102.24 102.24 99.96 98.88 100.44 102.60 102.12 102.60 102.72 102.96 102.96 103.23

111.60 115.56 114.96 114.72 117.24 117.84 117.84 117.60 117.63 120.00 120.00 120.50

127.08 127.08 124.20 124.44 131.28 131.28 131.28 131.28 131.50 131.76 131.76 132.26

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COMMON MYTHS & MISCONCEPTIONS ABOUT GRM’S:

There is a state-wide GRM. *False – Each county in Indiana determines its own GRM based on available data. Allen County has one GRM *False - Factors that can affect GRM’s include: Property type, Location, Condition, etc.

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FINAL RESULTS Applying Market Rents & GRM’s for mass appraisal

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APPLYING THE INCOME MODELS

Once GRM’s have been created, these are: Applied to all known rental properties Tested with ratio studies Compared cost versus income and choose the lowest method

This is expected to be completed in early to mid-March each year for the current year’s assessment. Form 11’s are typically mailed in April, notifying owners’ of any increase in Assessed Value.

The appeal deadline is June 15th (or next business day)

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APPLYING MARKET RENT & GRM:

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Parcel Number Nbhd Class Address Bed-

rooms Est

Rent GRM Income AV Building Style 02-13-19-182-010.000-070 694201-070 510 Property #1 3 600 38.31 23,000 11 Older conventional 1 story

02-13-19-182-010.000-070 694201-070 510 Property #2 3 600 38.31 23,000 11 Older conventional 1 story
























Est Rent * GRM = Income AV

APPEALS

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IN DEFENSE OF THE APPEAL PROCESS:

1. To question an assessed value is never viewed as a challenge or waste of time.

2. This is mass appraisal – by definition, 49.9% of all parcels will be over-assessed and 49.9% will be under-assessed. It’s rare for the under-assessed to file appeals.

3. We understand that this is, in the end, your money and you have the absolute right and responsibility to ensure that you are being assessed uniformly and fairly.

4. We also encourage anyone with questions about their value to contact us once receiving a Form 11. Many times, issues with an assessment can be resolved without the filing of an appeal, saving time and paperwork.

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TIPS FOR A SMOOTH APPEAL PROCESS: 1. Complete a Form 130, available online, and include any relevant

information. This would include the most current lease/Schedule E, information regarding condition, appraisals, etc.

2. Make sure to include accurate contact information. Phone numbers, emails, and fax numbers are all used to contact taxpayers during the appeal process.

3. Be sure to return any requested documentation as soon as possible. Many appeal delays are simply from lack of required documentation, including a signed agreement form.

4. Appeal status can be checked on our website: www.allencountyassessor.org. Do not hesitate to contact us if you are concerned about the status of your appeal.

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TIPS FOR A SMOOTH APPEAL PROCESS: 5. Look for comparable sales online, using “COMPS” Comparable

Online Multiple Property Search (COMPS) - this allows taxpayers to review actual sales county-wide and determine whether their assessed value is actually reflective of the current market.

6. If the appeal is forwarded to PTABOA (Property Tax Assessment Board of Appeals), please attend! There is the possibility of the Board deciding to raise the assessed value. All materials should be provided prior to the hearing for each party to

review. Allen County has five voting members on PTABOA, consisting of real

estate professionals. Their information is available on our website under “Appeals (PTABOA).” Please feel free to ask any questions about the process!

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http://www.acimap.us/assessors.html

http://www.acimap.us/assessors.html

FREQUENTLY ASKED QUESTIONS:

1. Can a family member be a tenant? Absolutely. Under IC 6-1.1-4-39, a rental is any property used to

furnish accommodations for periods of thirty days or more. We request a rental questionnaire for written verification of this status.

2. Why do I have to provide my lease or Schedule E? • In order to determine market rent, we need to have a database of

actual rents. This allows us to see what the actual market in a specific area is and to take into account issues such as location, size and condition. This information is confidential and cannot be disclosed to anyone. Only the owner, upon presenting a valid ID, can request this information.

3.What is the website? • www.allencountyassessor.org 37


CONCLUSION:

Your cooperation and participation is what has made Allen County’s residential rental assessment/Income modeling work. Thank you!

Please don’t hesitate to contact us with any questions, concerns, or suggestions for a smoother process.

Please take advantage of our website and all of the tools available.

Lastly, spread the word to any other investors who may not know or may be concerned about participating.

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residential rentals & mass appraisal...gross rent multiplier gross rent multiplier (grm)—(1)...

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