Comments (9)

Jun 11, 2019

what do you mean? how to model/proforma the future tax expenses? Or look up a tax bill for a currently standing class A apartment?

Either way -- I would start by looking at the local county's tax assessor website. There, you will find all the info you need (millage rates for the current year, prior rates, assessment %'s, and any other peculiar items that you need to know). Also, as long as you have the address and a tax bill has been issued, you can find the tax bills for other locations to help you better gauge the valuation methods/approaches used for any asset you may be considering.

Depending on the size of your shop and the amount of hair that comes with your county's tax bills, using a tax specialist is usually a good idea (Ryan, for example, is a shop many MF companies use).

Jun 11, 2019

Model future taxes for a development that's in the process of being built right now. I'm familiar with looking up taxes on CADs but I'm unsure how to model them out for a future development

Jun 11, 2019
bigreguy:

Model future taxes for a development that's in the process of being built right now. I'm familiar with looking up taxes on CADs but I'm unsure how to model them out for a future development

Comps/Talk to your Tax Adviser. Or is this a homework assignment type thing?

Jun 11, 2019

Will look into comps, thanks. This is for an actual model.

Jun 12, 2019

Take the projected NOI less Taxes & apply an assessor's loaded cap rate to get an assessed value. Then multiply by millage rate.

Some more clarity on "assessor's loaded cap rate": Say you believe a market cap is 5%, an assessor is likely not going to pick it up at market, but maybe with a 50-100 bps spread. After that you'll add in your tax millage rate into that assessor cap rate (say $1.25/$100 assessed [1.25%]). So all in we'll take the NOI less taxes and apply a 6.75-7.25% cap to get your assessed value.

The jurisdictions that I am familiar with use asking rents then apply a market vacancy rate and a market operating expense percentage to get their NOI before taxes. So you can backwards solve to figure out the assessor's cap rate if you look up comp's assessed values and asking rents.

If you're developing a new project, I'd use a cost based approach until you hit stabilization.

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Jun 11, 2019

completely dependent on jurisdiction. some areas model on comparative construction value/completion cost, some model on income approach, some on sales approach, all depends.

you might want to consider reaching out to a tax consultant like Ryan LLC. They commission tax reports with detailed explanations for like $700.

Jun 11, 2019

If you've already hired a management co. (hope you have by now) they should have a tax guy on staff to help with proforma expenses.

Jun 12, 2019

it depends on the local market. i would recommend understanding how taxes work at the local county level. usually it's based on a mileage rate and value. your value can be construction cost or stabilized value. taxes are a local issue, not a national issue. the cost/valuation of the asset will determine your tax number. similar to insurance (it can be a high or low number depending on the construction type, age of asset, etc.). do your homework so you don't get smoked by taxes! also, you can pull some some OMs for new construction to understand expenses at your local market. good luck!

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Jun 12, 2019
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