‘Everyone Wins’: How Forward-Thinking Property Tax Strategies Increase ROI For Florida CRE

After property tax notices were mailed in August and tax bills officially went out Nov. 1, many Florida property owners may still be experiencing sticker shock.

Contrary to current conditions, 2022 property taxes reflect Florida’s economic climate as of Jan. 1, 2022, the official lien date when properties were last assessed. As interest rates and inflation continue to rise, the outlook for the near future is murkier than the rearview 11 months ago when demand was much higher — something harder to stomach today as tax bills reflect a more prosperous time.

Fortunately, opportunities to lessen property owners’ highest line-item costs exist for proactive players in Florida’s markets. To learn more, Bisnow spoke with Steve Tropea, director at the Property Tax Alliance Group, a prominent boutique firm in Fort Lauderdale exclusively focused on reducing property tax liability for owners of Florida commercial property.

Regardless of various channels' speculative economic rhetoric, local experts suggest property owners pay their bills by Nov. 30 to take full advantage of Florida's early property tax payment incentives, Tropea said. Bills paid by Nov. 30 received a 4% discount. There is still time to receive a 3% discount, however, if people pay in December. The discount drops 1% each month after November. The earlier bills are paid, the more taxpayers can take advantage of an easy tax break.

PTAG provides full-service property tax consulting to Florida commercial property owners with a comprehensive suite of customizable tax reduction solutions for every stage of ownership. A widely undiscovered practice for most owners and a premium component of PTAG’s program is helping clients plan for transactions with strategies to reduce their tax liability upon acquisition and disposition. 

“Knowing options to control cost basis ahead of time will help win more deals and increase profitability,” Tropea said. “Buyers are especially willing to pay a premium to win contracts, knowing their operational costs will be less than competitors’ normal thresholds. Methods like entity purchases and unique approaches to allocations play a significant role in our practice. The firm also helps sellers pay transfer taxes on the real estate only instead of the customary percentage of the total sale price thresholds."

As a result of these forward-thinking approaches, owners avoid excessive tax overhead by communicating their plans with professionals capable of initiating protocols long before transactions close, Tropea said.

Tropea said buyers can establish a lower base assessment with county appraisers, significantly impacting the new owner’s overhead for a new asset.

“Florida law permits owners to submit reports that specifically separate actual real estate values from the total purchase price, but many aren’t aware or consider options early enough,” Tropea said. “Proper planning prepares our clients for the spread between real property only and total purchase price once they commit to acquiring new assets. They’ll communicate with the selling entities whose participation is required to include the reports in the closing contract.” 

Whether potential owners pursue a retail center, hotel, office or multifamily property, such approaches allow buyers to be more aggressive with competitive bids. It is also possible to avert the need for a formal tax appeal after property appraisers reassess values during a new owner’s first calendar year of ownership. 

After properties sell, Florida’s county appraisers remove the assessment cap and reappraise the property’s market and assessed value on Jan. 1 of the following year. Hence, the new owner’s base assessment or base value. 

“For the past decade, most transactions throughout Florida have traded at a premium to the county’s previous appraisals, resulting in a higher tax bill for new owners,” Tropea said. “It is critical to proactively apply strategies during the planning stages to improve the chances of preventing an excessive increase. Also, when our clients sell, they want to pay less transfer tax on just the real property. So they naturally introduce buyers to our process since they know capping the lowest possible base values is vital to optimizing the new owner’s returns. Everyone wins.”

Tropea said that factoring in additional approaches like these will help connect the dots for those speculating about the financial feasibility behind recent deals.

Additionally, he suggested that proactive efforts exhausting every opportunity to minimize commercial properties’ largest line-item expense, property tax, should be a primary component of every owner’s playbook. 

“More owners should apply proactive strategies targeting property tax because their effects on margins can be substantial," Tropea said.

This article was produced in collaboration between Property Tax Alliance Group and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.