Does Investing in Capital Expenditures Add Value to Property, or Just Increase Taxes?
By David Chitlik Vice President - Hospitality Tax, Altus Group | June 10, 2018
Co-authored by Renea Linton, Director - Hospitality Tax, Altus Group
Real estate tax is one of the top three expenditures for property owners, and it can be the most difficult to understand. Owners know that capital expenditures (Cap Ex) influence property valuation, which in turn can have a big impact on taxes. However, the perception of added value can also play a role in the tax assessment.
For example, some renovations don't increase the value of a property; they simply maintain it. Unfortunately tax assessors may perceive any renovation as increasing a property's value, which would then justify higher taxes. Ensuring the assessor's perception of increase is a valid one, therefore, helps ensure that the tax is calculated fairly.
This is the first of two articles that explore the essential, complex relationship between Cap Ex, property value, and tax.
A Primary Driver of Cap Ex: Brand Standards
How much should an owner spend to maintain or upgrade a property? A large part of that decision depends on brand standards, franchise offerings, and management and franchise agreements-as well as the normal wear and tear of a property.