October 9th, 2007 categories: Condos & Lofts, Mortgage/Finance, Downtown
Will the Downtown Columbus Condominium Market implode in the next 8–10 years? Ironically, I’m talking about tax abatements, one of Downtown Columbus’ Best Residential drawing cards which could also lead to a very messy real estate market as they begin to expire.
Think about this. A major attraction to purchasing a home downtown would be the 75 or 100% tax abatement the city has given the developers and they’ve passed on to you, the home buyer. You’re thrilled because you’re now living in a $400,000 Brunson Building condo and paying about $100 month in property taxes.
When your tax abatement runs out, there is no grace period in place, there is no gradual ramp up of taxes, there is just going to be a very harsh and very steep increase in your mortgage payment. (If you, like most home buyers, chose to pay your taxes every month via your mortgage payment instead of twice a year lump sums)
In eight years, your downtown Columbus condo property tax won’t just be based on the purchase price you paid for your downtown Columbus Condo, it’ll be based on eight years of (hopefully) appreciation on top of that. Let’s assume a modest 2% per year appreciation on your Columbus Condo. After 8 years, your Downtown Condo’s (from the Auditor’s Tax Estimator):
- Market Value $468,663
- Owner Occupied Yes
- Residential or Commercial Residential/Agricultural
- Effective Rate (Tax Year 2006) 49.893485
- Estimated Yearly Tax(Current Rate) $7,161
- That’s about a $500/month increase over the $100 you’re paying now.
- Yikes.
What’s that you say? You’ll just call me and have me sell your condo and you’ll move in to a new condo in Downtown Columbus when the abatement is about to abate? We’ll if everyone does that, there will be a lot of condos on the market. Just something to think about and juxtapose with all the national mortgage mess and talk about how many home owners are about to/just had their ARMs adjusted.
If you’re buying downtown, you’re no dummy and you’ve considered this from the very beginning and you’ve probably got a plan in place since you and your Realtor discussed the possibility when you were entertaining the idea of making the purchase. But if you’re only considering a purchase, consider the end of the tax abatement too.
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