Our in-depth interview with CEO Michael Wyatt of the Michael Wyatt Consulting Firm in Corona, CA continues…
Property Tax Transfer: Are there other essential benefits to using trust loans, with special Proposition 58 benefits?
Michael Wyatt: Well… going back to Commercial Loan Corporation… Their loans to trusts give my clients several invaluable benefits. Their terms can be a lot more flexible than an institutional lender like Wells Fargo or Bank of America. Also, Commercial Loan Corp is self funded, and that’s basically why they can extend easier terms to clients.
Property Tax Transfer: And compliance issues?
Michael Wyatt: Compliance for both commercial and residential property owners is far less strict. Commercial Loan Corp doesn’t charge any fees up-front, that’s another great benefit. Plus, they don’t require paying interest on their trust loan in advance. Not only that, there is never a “due-on-sale” clause… that requires the mortgage to be repaid in full when sold; or that all or some of the interest owed must be paid up-front to secure the mortgage. No “alienation clause”… in the event of a property transfer, stating that the borrower has to pay back the mortgage in full before the borrower can transfer the property to another person. There is none of that.
Property Tax Transfer: That is impressive. We understand that using their loan-to-trust process is far less expensive – and much faster.
Michael Wyatt: No question about it. The speed of their trust loans is much faster, typically five to seven days instead of two or three weeks. And if you sold a property outright, without using a trust loan, you have closing costs, legal fees; a commission; etc. It gets very expensive. Going with a firm like Commercial Loan Corp – all costs are offset, unless you plan to keep a property for 2 or 3 years or less. Then it doesn’t make sense. But generally you’re looking at keeping that property for seven or more years, as a rule.
Property Tax Transfer: Didn’t you work for the Orange County Tax Assessor’s office for many years prior to opening up your own firm to help clients with real estate and property tax issues?
Michael Wyatt: Yes, that’s correct. I worked for the Orange County Assessors office for 25 years – working on the more complex industrial and commercial cases. I eventually became a manager reviewing ten Appraisers dealing with CA property tax law… until 2010. But it was mostly all pretty normal, average cases.
Property Tax Transfer: During all that time with the Orange County Assessor’s office, does anything stand out, looking back?
Michael Wyatt: Interestingly enough, we worked on the largest Great Park deal, which Lennar Homes purchased from the United States Navy. We actually ended up discounting the pricing on account of contamination. Coincidentally, my supervisor ended up being my partner in our current firm. By and large, most of the deals I managed were very ordinary.
Property Tax Transfer: By and large, who are your clientele?
Michael Wyatt: Most of my business, with property owners, comes from real estate attorneys… In fact, we’ve been approved by the California Bar to teach attorneys about Proposition 13 and SBE “share and share alike” – And the attorneys pre-qualify our clients. They get the value proposition right away, without much effort.
Property Tax Transfer: At the root of it, what do you think brought about California Proposition 13 – inheriting property taxes, at a low base, from parents?
Michael Wyatt: Let me tell you… During the time I worked for the Orange County Assessors office – Howard Jarvis, originator of the Proposition 13 property tax measure, was one of the largest apartment building owners in California… Many people don’t know this. And he saw first-hand that landlords don’t move. Citizens move – every 7, 8 years. So landlords benefited even more from Proposition 13 tax relief than the consumers! And it did benefit consumer of course, and still does. But this did help landlords even more so, and helped to keep rents low.
Property Tax Transfer: The Split-Roll commercial & business property tax – will it pass?
Michael Wyatt: The California Split-Roll tax on commercial real estate will not pass.
Property Tax Transfer: You truly believe that? Commercial property owners will continue inheriting property taxes at a low rate; they’ll keep paying low property taxes every year, continuing to avoid property tax reassessment…
Michael Wyatt: Absolutely. Because all the big money people and power brokers in California, in Los Angeles, in the entertainment industry, in other big time industries, don’t want it. If it passed, shopping center owners and store owners would have to increase their prices on goods and services. No one in leading positions in the business world wants that. However, John Q. Public doesn’t understand that. Big donors do understand it, and they affect the process. So the Split-Roll tax will not even get to a vote.
Property Tax Transfer: Really.
Michael Wyatt: Really. It’s not even going to get to a vote.
Property Tax Transfer: Not even get to a ballot? That’s incredible. Let me ask you something… Don’t consumers even suspect that if the Split-Roll tax passed, there is no more inheriting property taxes from parents at nice low rates… No more cheap rent… All the goods and services they’re used to would go up, as landlords (owners of business and commercial properties), will be paying much higher property taxes, and will be forced to increase their tenants’ rent?
Michael Wyatt: No. Consumers typically don’t analyze these issues far enough out to see what the fiscal affect will be on them. But, even so – the public is still 99% in favor of leaving Proposition 13 in place. Despite all the misinformation in the media.