What Investors Need to Know About Commercial Property Taxes
4 min read
Commercial real estate (CRE) investments offer significant opportunities for financial growth, but navigating the intricacies of property taxes is essential for maximizing returns. Understanding the nuances of commercial property taxes can help investors avoid unexpected expenses and make informed decisions.
This article will explore the key aspects of commercial property taxes and how they differ from residential taxes.
Commercial property taxes are calculated based on the assessed value of the property and the local tax rate. This assessed value is typically determined by the local government, which evaluates factors such as the property’s size, location, condition, and income-generating potential. The municipality sets the tax rate, which can vary significantly depending on the jurisdiction and local budgets.
Unlike residential property taxes, commercial property taxes are often higher due to the larger-scale nature of the properties and the revenue-generating potential they represent.
Several factors can influence how much an investor pays in commercial property taxes:
Property Value: A higher property value typically leads to higher taxes.
Location: Tax rates vary widely by region, city, and neighbourhood.
Zoning and Land Use: Different commercial property types, such as retail, office space, or industrial buildings, may be subject to different tax rates depending on how they’re zoned and used.
Local Tax Policies: Municipalities may offer tax incentives, such as abatements or credits, for certain types of commercial properties, like those involved in redevelopment or sustainable initiatives.
Assessments are a critical part of the tax process. These evaluations estimate the fair market value of a property and play a significant role in determining the annual tax liability. However, not all assessments are accurate. Many property owners find that their properties need to be more self-assessed, which can lead to higher tax bills.
Understanding how property taxes affect your overall return on investment (ROI) is important. High property taxes can significantly reduce your net operating income (NOI), which in turn impacts the property's overall profitability.
Commercial property taxes are a critical aspect of any real estate investment. By understanding the factors that influence tax rates, investors can better manage their tax liability and improve their overall returns. As always, consulting with tax professionals specializing in commercial real estate can help investors navigate the complexities of the tax landscape and make informed decisions.
References
All about real estate investment in Toronto (full guide). Buttonwood Property Management. (2023a, May 5). https://buttonwood.ca/real-estate-investment-toronto/
Prendergast, S. (n.d.). Ontario commerical real estate will pay higher property taxes in 2024: Altus Group insights. Ontario Commerical real estate will pay higher property taxes in 2024 | Altus Group Insights. https://www.altusgroup.com/insights/ontario-commercial-real-estate-will-pay-higher-property-taxes-in-2024/?utm_source=google&utm_medium=organic
Property tax. ontario.ca. (n.d.-c). https://www.ontario.ca/page/property-tax-0
About Royal LePage Commercial Westhaven Toronto
Our commercial real estate industry and segment expertise coupled with Royal LePage’s national platform and integrated systems provides best-in-class real estate strategies and a competitive advantage that can’t be beat.
We help businesses identify opportunities and maximize their return on investment with actionable goals, centralized support services and a strong commitment to customer success. Our national partnerships help us establish, guide and execute successful business investments.
We offer commercial real estate agents a professional environment, focused 100% on commercial real estate. Agents can expect unlimited market boundaries to build their business without the interference of a heavy corporate structure. In addition, agents will be able to access Royal LePage’s national referral network of over 18,000 agents to develop more business in their target markets with incoming leads generated daily. The brokerage provides agents a suite of services including marketing, promotional, networking and professional development needs.
Innovation and service excellence have developed and propelled the Royal LePage brand since 1913. When you join Royal LePage Commercial Toronto brokerage, you have the backing of one of the most powerful commercial real estate services company in Canada—Bridgemarq Real Estate Services Inc. (formally Brookfield Real Estate Services Inc.). Bridgemarq is a leading provider of services to real estate brokers and agents. They are an affiliate of Brookfield Business Partners, a business services and industrials company focused on owning and operating high-quality businesses and is listed on the New York and Toronto stock exchanges.