Updated about 5 years ago on . Most recent reply
Adjusting cap rate for tax basis
When underwriting multifamily deals, I frequently hear people say "cap rate is xx when adjusted for property tax". Can someone expand on how this works and why it should be adjusted this way?
In projections, we usually add .1 to .2 to exit cap per year held. Should it be based on the current T12 purchase cap rate? Or the "tax adjusted purchase cap"?