Frequently Asked Questions
Do property taxes go up after a sale?
No. Taxes on each property are what they are, regardless of the sale price. Credit goes to Measure 50 (enacted back in the late 1990’s) and it’s locking down on taxed assessed values. Property taxes do go up by a fixed amount of increase each year and they can also go up by voter bonds, but not by the event of a sale!
Are there any transfer taxes involved in property sales in Oregon?
There is no city, county, or state property transfer tax in the state of Oregon with the exception of Washington County. Washington County assesses a tax of $1 per thousand. The standard practice is to split this tax 50/50 between the buyer and seller.
What is a 1031 Exchange?
A 1031 Exchange is an investment tool that should be used when someone wants to buy and sell more property. Instead of selling, paying taxes, and then acquiring other properties, you can avoid the tax payments by exchanging properties. The basic rules are:
Something must be given away, and something received
The exchanged property must be a like kind. Any property used in a trade, business or for investment may be exchanged for another property used in a trade, business or for investment.
To ensure a fully tax deferred exchange, property value, equity and mortgage must move straight across or up in value from one property to the next.
There must be continuity of vesting throughout the exchange – the same entity that gives up the relinquished property must receive the replacement property.
The replacement property must be identified within 45 days of the relinquished property closing date and received within 180 days of that same closing date.
What do I get when I hire you?
You get me front and center every step of the way. If selling, I prepare a full marketing package for your property. The data is then fully propagated throughout multiple websites via the RMLS and all other sister websites. If buying, you’ll get detailed market data on whatever property type we are looking for, so we can make immediate real time decisions when property comes on the market. For property management, you’ll get direct and personal care of your property and each property is handled as if I own it myself!
What’s the difference between you and other brokers?
The honest answer is technology pretty much makes all brokers equal, at least in terms of getting information out to and in from whatever market is the target market. The difference is we will empower you with all the information up front, coming and going, so you can make an equally informed decision on our recommendations but understanding WHY we make a certain recommendation. And if you like brevity and high energy, you’ve come to the right place!
What is a GIM?
GIM stands for Gross Income Multiplier, which is also known as Gross Rent Multiplier (GRM). This is a method used to value plexes/apartments by dividing the price of the property by the current rental income. If the total current rental income is $20,000 and the asking price is $240,000 then the gross income multiplier is 12. ($240,000 divided by $20,000 = 12)
What is a CAP rate?
A Capitalization Rate (CAP rate) is the percentage rate of return based on a piece of property’s income. This is the income divided by price. A property that costs $1,000,000 with a net income of $120,000 would have a CAP rate of 8.30 %.
What does LTV stand for?
LTV (loan-to-value) is simply the amount of the loan as a percentage of the total purchase price. A loan of $200,000 for a property worth $400,000 would mean an LTV of 50%.
What does DCR stand for?
CR (debt-coverage-ratio) is the ratio of a property’s net operating income (income after expenses but before debt service) to the annual debt payments due on the loan. For example, a property with an NOI of $100,000 and annual debt payments totaling $80,000 would produce a DCR of 1.25 ($100,000/$80,000). This is the ratio that Lenders use to determine whether aproperty can produce enough income to support the underlying loan placed on the property. Higher DCR is better from the lenders perspective and is a ratio that is predominantly used in 5 units and up properties (not plexes).
What can I learn from a Proforma?
A proforma tells you the Gross Income Multiplier (GIM) and the CAP (capitalization) rate for the property. But they come in many different versions, so there is no real standard to consider. Hopefully you will also learn what current rent rates are overall along with income and expenses and other building details. Ideally it would include the unit mix, price per unit, rent per square foot, overall square footage, amount of acreage, assessed values and details about unit amenities too.