Best choice for Financial and Cryptocurrency News

- Advertisement -

- Advertisement -

Cook County’s Class 9 Can Mean Lower Property Taxes, But Is It Right For You?

Apartment buildings with more than six units in Cook County are generally designated as Class 3 properties, and they’re assessed at 26% of market value (as estimated by the Cook County Assessor).

But Class 9 properties are assessed at a lower 16% assessment level for a period of ten years. And that’s means significantly lower property taxes for owners of buildings designated Class 9.

For example, an seven-unit worth $300,000 (by the Assessor’s measure) would normally have an annual tax bill of somewhere in the neighborhood of $12,500. Under Class 9, a building with similar value would owe around $7,700 in property taxes–an annual savings of 38%.

Sounds like a no-brainer, right?

Not so fast. Just like any other government incentive program, there are strings attached to qualifying. Read on…

Get Ready to Rehab

First, Class 9 is only for new construction or older properties about to undergo major rehabilitation. Rehab costs must amount to at least $6.00 per square foot in 2005 (goes up to $7.00/sf in 2006 and $8.00/sf in 2007). So, for a 10,000 square foot apartment building, you’d have to spend at least $60,000 to qualify. And you must apply before you start the work.

The good news is that most projects make a building eligible, including electrical, plumbing, roofing, and windows.

Get Ready for Paperwork

First and foremost, Class 9 is an affordable housing incentive, designed to encourage building owners to keep rents affordable to seniors, low income renters and working families. Depending on who you normally rent to, you may already have the tenant demographics needed to satisfy Class 9’s requirements. But, under the program, you must designate 35% of units as Class 9 units…

…And document tenant income for those units, showing that the household earns no more than 80% of the area’s median income.

Maximum rents for each unit type are set by the county, and in 2005 are:

Studio/Efficiency $745

1 BR $804

2 BR $965

3BR $1,116

4BR $1,251

Get Ready for Commitment

Not only must you commit to documenting tenants’ income every year, it’s important to know that the Class 9 designation runs with the building for ten years. So, if you plan to sell any time within that timeframe, give some thought to whether the affordable housing restriction will be attractive to investors looking at your property and area.

If an investor later buys your property and needs to get rid of Class 9, he’ll be required to repay all the tax savings from previous three years. Chances are, he’ll know about this requirement at the time of sale and look for a discount in price to cover that penalty.

Class 9 is a great cost reduction tool for multifamily owners citywide, just make sure it fits your investment objectives today and tomorrow.

Comments are closed.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. AcceptRead More