Calculating taxes for multi family

5 Replies

Hello Everyone,
I am trying to calculate my expenses for a complex I am looking at. I went to the county to see what the current taxes are. I then found the millage rate and roughly estimated what my taxes would be based on the purchase price if I were to buy . Both numbers are very close. Shouldn’t my taxes on the purchase price side be much higher ?

Yes but Tax assessments on Multis can be all over the place.  For Underwriting purposes I would suggest using 75-80% purchase price as the new assessed value.  Calculate millage off of the new assessed value.  In Florida the appraisers office can use up to 100 percent, but they typically don’t go to 100% on Multis.  

Brent is right on. Not familiar with Florida, but in Texas, we will fluctuate between 80-90% depending on the market we're in. For instance, in Houston we usually use 90% of the purchase price to estimate taxes. 

I have a different take on it.  You'd better know what your appraisal district is doing right now and not just go with rules of thumb.

In my market if you go with 75-80% of purchase for the new assessed value you are going to get your *** handed to you.  Always be conservative when underwriting a deal, if you were too high then you are happy, if you are too low and could wipe out a deal.

A 120 unit property I bought a couple years back actually reassessed at above purchase price.  Assessors are getting very good at deriving value.  We of course contested and go it lowered  but even the lowered amount was ~ 93% of purchase price.

BE CONSERVATIVE, please.

I agree with @Bruce Petersen on this one.  Taxation is very localized.  I would speak to some local attorneys that deal with multifamily real estate taxation/appeals, property managers, and/or a property tax consultant.  They should be able to give you the lay of the land and what to expect.  In my local market, some municipalities are extremely aggressive on re-assessments and will go to 100 percent of sales price.  You can appeal but it's tough to tell how much, if any, your assessment will be reduced. 

@Bruce Petersen is speaking truth.  We are underwriting to 95% of PP on our deals, and in most of our counties would be thrilled with anything less than that.  Assessors are being very aggressive, so you should be very conservative. 

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.