Property tax-Mill rates for MF investing

13 Replies

Suppose I'm evaluating a deal and the in-place mill rate is 2.489%. Am I simply going to multiply that by my purchase price in order to calculate my property taxes?

I ask because the broker proforma indicates the following: "Current RE taxes based on actual assessment times the in-place mill rate of 2.489%. Pro forma taxes are adjusted on current revenue to 80% of the sales price. 

Shouldn't they be multiplying mill rate by 100% of the sales price? I don't get it. Thanks for your help!

Texas is a non-disclosure state so the county doesn't really know what you bought something for. Generally you're buying for a good bit over the current taxed rate but you can usually fight that down to about 80-90%. Right now they are being very aggressive with taxes, especially Tarrant County, so I would suggest you underwrite based off of 85% of purchase price. You could use 100% if you want but you probably don't need to and it would mean you'd lose out on deals because you estimated too high operating expense.

@Chihiro Kurokawa it depends on the county you buy at. Some of them like Dallas/Tarrant/Collin counties in Texas are VERY aggressive and will go after you to the full extent, some will be less aggressive and will aim at 75% or 80%. 

We use 90% of the purchase price times the actual property mill rate in our underwriting. 

Thank you @Michael Le and @Joseph Gozlan ! Joseph, I heard you on a recent podcast, I can't remember which one but kudos to you on your successes. I'm working hard to get there. 

Originally posted by @Chihiro Kurokawa :

Thank you @Michael Le and @Joseph Gozlan! Joseph, I heard you on a recent podcast, I can't remember which one but kudos to you on your successes. I'm working hard to get there. 

Thanks @Chihiro Kurokawa if there is any way I can help, feel free to reach out to me.

@Jeff Greenberg I experienced that on the purchase of my personal home; with Zillow and Redfin, non-disclosure doesn't really exist anymore. 

However with commercial properties that seems to be a disingenuous tactic - just assess a ridiculous amount so that the transaction price will simply reveal itself... 

We've been using 92-95% of mill rate for our underwriting--particularly in Tarrant and Bexar county. Have you guys been getting it closer to 85% when its all said and done? We haven't been so lucky, or need to find a new firm to protest for us. 

Andrew Campbell

@Joseph Gozlan ok, thanks! I’ve been using 100% because I had my home we bought last year assessed from 65k to 207k, and the service I hired (supposed to be the biggest and most successful in Houston) said sorry they couldn’t get the value changed. 

Daniel J.

    Originally posted by @Daniel J. :

    @Joseph Gozlan ok, thanks! I’ve been using 100% because I had my home we bought last year assessed from 65k to 207k, and the service I hired (supposed to be the biggest and most successful in Houston) said sorry they couldn’t get the value changed. 

     Sounds like you got one hell of deal :-)

    We do our own protest when it comes to SFRs. We only use the 3rd party for the MF properties because these guys know the county people for years and have formed a relationship with them.

    @Joseph Gozlan Well we paid $210 haha! Though we did get $25k from the seller to do electrical work. It was valued that way because it had only one owner since 65 and it was over65 and homesteaded.

    Ok thanks!

    Daniel J.

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