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The Real Estate Addicts (REA) podcast is a must-listen for anyone interested in real estate development, investment, construction and entrepreneurship. Each episode dives into a wide range of industry topics and features conversations with savvy, successful entrepreneurs who candidly share their career paths, challenges, breakthroughs, and the stories behind the remarkable companies they’ve built. Expect big personalities, thoughtful insights, and conversations that both educate and inspire.
Co-hosted by Ray Hurteau, Dan Rubin (Instagram: @rhinvestgroup), and Marc Savatsky (Instagram: @choose_boston)
Follow the Real Estate Addicts Podcast on YouTube: @RealEstateAddicts
00:16
already. Hi guys. Hey, hey, going on? We live? Marc, happy birthday. Thank you. Today's your birthday? Yes. It was yesterday. Yesterday? Yeah, thanks for sure. Happy birthday. Happy birthday, my friend. I think I texted the group you just ignored it. were in such a bad mood, right? Yeah, yesterday was a day. Let's not rehash it. No. Good vibes only. I'm sitting crisscross applesauce as they say.
00:40
I don't know how you do that. I sit like that for like five minutes and my legs fall asleep. Yeah, this couch is not the most comfortable, but I also have horrible posture and I'm fat, so not conducive to me. What happened yesterday? I'm gonna get a recliner. What happened yesterday? I can't speak on the record about it. Without sharing all the details. It was a day in court. It's never for you. For an eviction proceeding. Yeah. One of our tenants.
01:08
It depends on how you want to classify it. So that's up for debate. All right. I lead the fifth like Anthony Fauci today. Dan, finish your story about fighting with public works. So I've been in my house for almost a year now and my kids, you know, walk to school and they like to scoot and like ride their bikes and stuff. And at the top of my street, you turn left.
01:38
And it's a pretty busy street. Like cars go pretty fast, like 40 miles an hour or what on that street. And there's three lots, I don't know why, but there's three lots that just have no curving or sidewalk on them. And so it's like, the sidewalk is on my street, you round the corner, then there's like 30 feet of dirt, then there's another sidewalk, and then there's another like 60 feet of dirt. And I don't know why they just never did
02:08
curbing and sidewalk there. my daughter- Who's responsible for it? Is the city or the- Unless they're doing a major renovation or new construction, the city's responsible. Got So, cause like I had to do curbing and sidewalk for my place and you had to figure it But I was doing, you know, a major construction project. So, so the other day or a couple of weeks ago, my daughter was scooting and she had to like, she had to scoot on.
02:34
What do mean by scooting? Scooting, on a little scooter. She likes to scoot around. Oh, so it's not a bicycle? No. Oh, okay. So you can't go on a dirt path in a scooter. So she like goes onto the street. She almost got hit by a car. So I called Public Works and I was like, I wanted to submit a ticket. And so I called Public Works and I was like, hey, you know, I wanted to, I gave them the addresses of, they were like, oh, we already have a ticket in for there.
03:01
for those addresses for the sidewalk. Oh, great, do have a timeline on when you might get to it? They're like, oh no, we don't have a timeline. But I can see the ticket was submitted over a year ago. I was like, over a year ago, I was like, how do you not have a timeline? I was like, I see you replacing all of these other sidewalks that have granite curbing and concrete already. I was like, maybe you don't think you should prioritize.
03:26
like areas that don't have any sidewalks at all on major busy roads. On a pretty busy street that like kids walk on to get to school, like which is right down the street. And they were like, oh, I can't give you a timeline. Sometimes these things take a couple of years. And I was like, this is crazy. So I reached out to my local city counselor to see if he could help me. He actually called me like 20 minutes after I emailed him. yeah, and he was like, oh, I'll reach out to...
03:53
commissioner of public works and see if he can give me an idea on timeline or why there's no curbing there already. Originally the guy on the phone tried to tell me, he was like, well, it's kind of the responsibility of the people who built those houses, the curbing and sidewalk. And I was like, dude, those houses are a hundred years old. I was like, what are you talking about? There's probably no curbing there to begin with. And then don't tell me, like, it's like, he's trying to bullshit with me. Yeah.
04:22
Because clearly the street was done, the street was obviously has been done multiple times since then. Paved. Yeah. And new curbs. So where does it stand? As of now, I'm to hear back from the head, the commissioner of Public Works to see when they can get to it. I'll give you one back. So in the city of Boston, if you finish a condo project, your buyers typically get like what we call a tax holiday. So you have an artificially low tax bill. Let's say that you were developing
04:51
what was previously vacant land, and you finish a six unit building, there's usually a period of time between closing and the next tax cycle, whereby you're still paying your split six ways, you're paying one tax bill for essentially vacant land. it's sort of like bank error in user's favor. Well, not in Newton. Newton- I would say also in not most municipalities, I'd argue that. I think Boston.
05:17
is unique in that way. guess so because so Newton, finished, I finished those townhouses like a year ago and the tax bill finally caught up and it included like a retroactive tax bill from the time of attaining certificate of occupancy through that updated bill to reflect six condominiums. Interesting. Yeah. So I had this conversation with the tax assessor there who was actually a gentleman. He was really nice guy, but we certainly saw this differently. I said,
05:44
Look, didn't have, you can't tax six individual condominiums until such time as I filed the declaration of trust and a manager deed. This is a six unit building. was like, if you want to do a look back at CFO, can perhaps bill me for a six unit multifamily building, but you cannot bill for six condominiums unless I actually registered condominiums. What was his argument? So did you get that bill or did it get passed on to the buyers? It went to my buyers and like,
06:13
Frankly, I'm all closed out. Like say like pound sand, sorry. Did they reach out to you? that what happened? Yeah. Yeah. That's how this came to be. It's kind of obnoxious. So did you have a tax letter agreement at closing? Yeah. Basically saying like, until these are individually assessed, you've got that condition you spoke of, but it didn't really last long. Like not similar to Boston. You know? Yeah. What did they say? What did the assessor say? He just agreed to disagree. You can file an appeal.
06:41
You wouldn't be the first one you'll lose. So did he cite any specific thing? Cause the reason I asked is because when we were doing Lynn, we ended up getting a pretty substantial assessment increase based on percentage of completion. They, they, think every municipality in Massachusetts is allowed to follow one of two standards and Lynn chooses the more aggressive one. the second you start improving a lot, even if it's not.
07:08
usable, occupable, regardless of CO, they can increase your assessment. And to your point about Boston, they choose not to do it. And I think it's probably a smart idea to avoid litigation and unnecessary abatements. So, I mean, that's for what it's worth, but that's something out there. The interesting thing about Boston, or I guess anywhere where there's a lag time is you'd have no idea how many buyers, lenders, improperly escrow.
07:38
taxes for the entire parcel because the lenders for whatever reason, I mean, maybe this doesn't happen as often as it does, but we used to see this all the time. Like, oops, this lender paid the full tax bill and then this lender paid the full tax bill. Now you've got to request a rebate from the assessor or from the tax collector because of the double payment and that whole process is a mess. it's- Yeah, good luck getting money back. You can get it back, but it's more like-
08:06
Now you got to get the lenders to figure things out and redo everybody's escrow accounts. It's a pain in the ass and there's no good way to kind of get people in front of that unless they've got good representation. of assessors, we're fighting the city of Lynn right now. have, when are you going? In September, I'm going to appear before the appellate tax board. He appealed it to the state. So on more grounds.
08:32
Do have to hire a special attorney who does tax abatements? No, they allow multiple paths and it depends on dollar amounts. And so we're not talking about a huge assessed value amount, but it's based on the commercial portion of the assessment. So obviously I disagree with the assessment and the abatement that was provided. Okay. Give them a little backstory, because they kind of were playing some games with the values and... Yeah, mean, listen, again, I'm not going on public record before.
09:02
All right. Any hearing. Well, you know, we have filed abatements and we have you specialized law firms that specifically do this type of work. And they'll, they'll sometimes do the first part like on a retainer, like they'll file the thing for you and then to take it further that you decide. There's some firms that they'll look at parcel property prices versus assess data. Cause this happened to us in Bill Rica at one time.
09:30
where we purchased it below the assessed value because it needed so many improvements and the assessed value had gotten out of control, presumably because maybe entry wasn't allowed and they had to make some assumptions anyway. They called and they said, hey, it looks like you're getting over-assessed by X number of dollars. We'll file an abatement for you. But they do it again on contingency and a percentage and all that. So one argument we've made in the past is like, sometimes you are developing, they can land into a multifamily asset. Fine, good, great, grand.
09:59
But you know, maybe that vacant land was a parking lot or maybe instead of vacant land, it was a commercial building and you've now torn it down and you have a two year build. And our arguments have been that during that period, you can't tax it as like a, profitable parking lot or a commercial retail strip mall because it's not, we demoed it. Look at the building permit, you know, 18 months ago, it's, it's just.
10:27
A wood frame building. What do you think the value of a wood frame building with no heating and cooling is? So we've had some success there. And the other takeaway is don't file your master deed and declaration of trust until you are ready to close. why not? Because you will be triggering as far as multifamily goes, you will trigger a higher tax bill. Like being taxed as a six unit building is one thing being taxed as six individual condominiums.
10:56
is another and that is to say a more expensive tax bill. Yeah. Yeah. Yeah. You're usually waiting anyway, cause you have to get as built and. Yeah. I've also. divert your builder's policy to a condo policy and all Like your surveys and all that stuff. So usually you're kind of doing all that towards the tail end of the project. Yeah. I've also seen, what was I going to say?
11:24
I totally lost my train of thought. That's all right. That's okay. I'll give you one other on the change of use. had that parcel in Dorchester that we got a single family approved on and they had previously classified it as unusable land. And then when the ZBA appeal was approved, it was changed in the subsequent tax bill to develop a parcel, right? Which came with a higher assessed value. But then when there was an appeal,
11:52
It was essentially not usable land again. So we had to file an abatement for that. uh, I mean, not big dollars, just, was on the principle of it. It's also interesting how the assessing office can classify something as perhaps undevelopable land, but the zoning code or the last known long form, which establishes occupancy might say something else. You could be taxed as a two family, whereas the building department has it as a single family or vice versa. Yeah.
12:20
I don't know how the assessor's office can classify land when it's kind of based on zoning. It's not really assessing. It's not their kind of purview. It's weird. It's weird. But we're dealing with an assessing issue in, we own a six unit building in Bridgewater and on the back of the lot on the assessor's database, like the GIS viewer,
12:48
It shows that there's a, what is it, a drainage easement or drainage? Well, this is this is on title, not assessing. It's on the GIS though, the assessors. I know you get it. Yeah. Yeah. It's not really an assessing thing. It doesn't impact the value. But it's on their maps. All right, so gone. So what is it, a drainage? It's an alleged easement. But it's not an easement. say there's something For drainage or something. They're saying there's like a, sort of drainage. It's like a 10 foot wide by so many feet long. is. It's on title.
13:17
But it appeared out of nowhere. It's not on title. It is on title as a recorded document in the chain of title. It's not. Children. Okay. It's not there. Everyone, welcome to a day in the life of Dan and Ray. It's on the GIS map. We found a survey that was done 20 years ago and it was on the survey. We had our attorney do a title search for the last 75 years, couldn't find it. It wasn't anywhere.
13:47
It wasn't on any title. Couldn't find the creation. It wasn't on the deed. wasn't, they couldn't even find a record of any type of drainage, easement or anything. Sorry, it was a recorded plan. So I don't know if that considers it to be title text. So I called the water department and I was like, do you have this on record? They were like, we don't have any record of this either. And I was like, well, how did it end up on the assessor's database on the GIS viewer? And they were like, we have no idea.
14:15
And I was like, well, uh, isn't it your responsibility? how do we get this removed? just find out where it came from. The woman couldn't give me an answer. And so I guess how does that work? Like, do we, like if our attorney can't find anything and our surveyor can't physically find anything or find anything like, like recorded or a record of it, do we petition the city just to remove it?
14:39
And your concern is that some future buyer is gonna look up the GIS No, the concern is that we were looking to develop the parts and it impedes into some of our parking. I see. And I wanna make sure that we can put something over it. if it doesn't exist, then it's like, ah. Yeah. Right. Can't find out where it came from, shows up randomly on a plan. I don't know where that surveyor got it from. Right. He probably just took it from the GIS view.
15:09
Well, we don't know what happened. didn't, yeah. So it's like title stuff and plans. It's all weird. Yeah, it's obnoxious. And it's like the records are so sketchy when you get further and further back, right? So, and the plan, like we found the original layout of the streets, but obviously they're way different than what they are now. Oh, right. Before it was like subdivided and chopped up. Yeah. existed then. We had like 1960s and then we had 2004 and something like.
15:36
And there's a big mystery block in between. It's so weird. literally nothing's on title. Nothing's on title, see? So I was right. Yeah, I know. I'm just saying. Tell the viewers I was right. I guess I call the plans part of the title, but it's probably, I don't know. And you need an attorney for that. Get an attorney, folks. So we're trying to figure out how we can get that removed because if our surveyor doesn't put it on his as-built, or sorry, existing condition survey, which we're having done now,
16:05
I guess it doesn't exist. It doesn't. Yeah. I feel like it was reserved for future use at one point, but never actually got implemented because there's nothing physically there on site. It's not like there's a storm drain or something below. Public works has no clue what's going on. So yeah, there's nothing there. we'll see what happens. know what we can do? We can just drill 20 feet down and see what we hit. Do some test vores right over the easement. See if we hit anything. Any other tax tips for our viewers here?
16:35
I don't know. Yeah, I would say just stay on top of things and don't be afraid to challenge at your property card. So a property card is something that you can usually get online or go into the assessor's office. But like, for example, I found that the property card showed that I had air conditioning in a rental property I own that didn't have air conditioning. It wasn't a big thing, but you can see a scenario where maybe it says that you have an extra bedroom.
17:03
or if you're buying a house, might, it's always a catch-22. It's like, tax card says it's only a two bedroom. It's actually a three. Do I want to raise my hand? My taxes will go up, but when I go to sell it, it might make the next buyer a little bit more comfortable. So, And sometimes assessors will actually, so I'll give you some stuff. Usually every five years, there's like a full revaluation of the whole municipality.
17:31
And everybody, especially on Facebook, loves to get like riled up that, oh my God, my taxes are going up. They're just changing parts of the fraction. They're increasing the denominator, if you will. So you've got a whole budget that the municipality has to spend and that's governed one way. And then you've got the total assessed value of all property below it. And then they take that and divide it. And then that creates what's called the mill rate. So typically on revaluations,
17:58
When there's a whole town-wide revaluation, most people will see their assessed values go up. However, they'll also see the mill rate go down. And the only thing that will cause their taxes to go higher would be whether or not their property is more valuable based on the revaluation compared to other properties. like, let's say you're in an area that got redeveloped and that- Wait, is this the reason that assessed values, would you argue that assessed values don't tie to actual sale values and market value?
18:27
They're supposed to, that is the purpose of the revaluation. I believe most places will try and stay anywhere between 90 % and 110 % of- I thought you just said that. And what I've always heard is that they're basically trying to just cover the town's budget and they will stretch, push or pull the assessed values of each respective home to make that budget work.
18:53
Is that what I just heard you say? No, no, let's pretend that's true, right? Let's pretend they increase everybody's value 50%. It just decreases the mill rate. What is the mill rate, am I following? It's the budget divided by all assessed taxable rate is what they charge you per $1,000. Oh, I see. Correct, sorry. Yeah. So if the total value of all the properties increases, you've got a larger denominator. So the...
19:20
the resultant fraction or decimal or whatever it is, usually it's like $11, $10, $20 per thousand, that changes, it'll go down, it'll drop. It's why if you look up historical tax, assessing mill rates and tax rates, whatever they call it, you'll see big changes like every five years. Because they did a full reassess. I feel that to your point, Mark, I feel that the assessed value, I don't know.
19:48
The assess value to me does not correlate or tie to the actual value of the building or parcel or whatever, because I've seen it go both ways. I've seen an assess value at X, but the building or parcel sells for way below the assess value. But I've also seen an assess value at X and it sells for way above.
20:16
I don't know what- No, it's like Zestimate. Exactly. But I think a lot of sellers will harp on the assessed value and be like, but the assessed value is $2 million, why is my place only 1.3? So I feel that they use that, just like the Zestimate, they use that as kind of a guiding principle as to what their place is worth. Well, yeah, I agree with you that similar to Zestimates or Zestimates or whatever, they-
20:42
have that mentality that you gotta get over. I feel like that's gotten better over time. There's been enough disclosures and people have realized that, you know, it's just a number. It's not, you gotta go by comps. Well, they'll harp on it if it's in their favor. Otherwise, they'll throw it out. Yeah, of course. Yeah. But I think- because they're gonna be like, well, why have I been paying taxes on assessed value of $2 million when you're telling me I can only sell for 1.3? Well, that's on them to have filed an abatement and most people don't realize that. I'll them the last one. Well, hold on. I was gonna say, so-
21:12
So assessors are doing current use. They don't consider future use. No, of course not. And so if something sells for more than the assessed value, let's say significantly more, it's because presumably someone sees a redevelopment opportunity and that's why you'll have that differentiation. But I will also say from an investor standpoint, when you're underwriting acquisitions, please always consider your purchase price will be used immediately prior to revaluations.
21:41
within the next fiscal year to reassess your property. So when some brokers out there peddling an OM that says the taxes are 50,000 a year, but you're going to buy it for double the assessed value, double your tax value, please. that's a good point. I'll give you one more. This was a friend of mine who had a cesspool rather than being connected to city sewer. And his water and sewer bill from city of Boston reflected water and sewer. And for years he had been paying the sewer.
22:10
And he didn't, he wrote them a letter explaining the situation and included some bills from the past. And they immediately called him and offered to settle this and they cut him a decent sized check. Yeah. So that's another good one. he didn't want it. didn't want it. Like they didn't want him to litigate. Yeah. They were completely wrong. It's like you can't charge someone for sewer usage if they're on a cesspool. Yeah. That's a, yeah. And then a little nuanced one, your town allows it is you can get a deduct meter for, similar to that.
22:40
Let's say you have an irrigation system and you're on town water, you can get a separate meter that tracks how much water is just tied to irrigation. So that portion of your water usage is not tied back to sewer. Yeah, that's, that's true. And Newton, only allow it at five, four units or less for whatever reason, a five unit building, they won't give you the separate irrigation meter. So go figure. Crazy. Yeah, just had this. There's a lot of little things. of weird nuances and certain municipalities.
23:08
Do you ever do one other tax thing? I know we were kind of keep harping on it, but have you ever done cost segregation studies on your stuff? Yes. Yeah. That is amazing tax benefit. Especially if you're holding the building. Yeah. I don't know if you would do it on a development play. you do it on? No, you can't it on a condo play. It's not gonna right. It's a long-term hold. Yeah. Yeah. But yes, that's another tax strategy where you can accelerate the depreciation of an asset and take it.
23:38
upfront versus over 27 and a half years. Exactly. that way you can offset a lot of your gains. Yeah. I mean, the government would say everything pretty much depreciates at the same rate over 27 and a half years, but you know, bring an engineer and say, this roof has got six years on it. You know, the electrical system is going to be need to be replaced in 10 and they can break out those costs and accelerate the depreciation of those various assets. No, obviously when you go to sell, got to have that
24:08
you know, depreciation recapture. Yeah, right. And if you do, if you might get two cost segregation studies, you might have one at the start when you purchase it. And if you're going to demo a lot, they'll immediately take the portion of the building that you've just thrown out and they'll immediately accelerate that too. That's like a one time thing. Yeah, that's a one time thing. Cool. All right, guys. hey, that was...
24:32
Make sure you consult with a professional attorney, lawyers, Accountants all of the above. All right. Thanks for listening, rating, subscribing. We'll see you on the next one. Later. Cheers. Bye.