Question for people that deal with ground up development or significant value add redevelopment-
How do you guys underwrite the increase in real estate taxes based on reassessed value? I understand that in practice there is a formal process of submitting a report detailing out your costs of construction, which then the assessor typically utilizes the Cost Approach to determine the new value of your building. And I know this will vary by market (and state, specifically California given Prop 13) but is there any general rule of thumb to follow?
For a simplistic example, let’s say you purchase vacant land for $30 million. You have to go through an entitlement process, so for the first 2 years the lot stays vacant. At the end of year 2, you succeed in getting the lot re-entitled for your business plan. Year 3 you spend $20 million in hard costs & $10 million in soft costs.
Any insight would be appreciated.
For a quick sanity check look online for the taxes of buildings comparable to yours upon completion. To sleep well you need a tax attorney to do a proper assessment.
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