How Do You Underwrite with Ongoing State-wide Property Reassessments?

Question

I'm working on buying my first property and I'm having difficulty forecasting whether or not different multi-family properties will be good cash-flowing properties or not.

The State of Vermont (where I live) is known to be a rough market to invest and live in because property here is relatively expensive for the average Joe vs income; not to mention the various and creative ways Vermont finds the means to tax you. Property taxes are really high just on their own. In the last year or so, the State of Vermont has launched a massive, state-wide property reassessment mandate so all cities, towns, etc. are required to reassess properties across the board.

Now, I'm still learning all the lingo with regard to how taxes are determined and such and there are quite a few areas in Vermont that look like they're going to have their already high taxes double or nearly double (good luck Killington!). In my hometown, the "common level of appraisal" (CLA) is around 57%... so the property in my hometown is UNDERvalued by nearly 43%. Once assessments have been finalized, it's going to be a punch in the face across the board.

My question is this...

What are some strategies the veterans of the group have employed to deal with the scenario I'm describing?

When I'm underwriting, the taxes from the past few years will now be highly inaccurate rolling forward... but there's no real way to tell how the properties will be reassessed because it'll depend alot on subjective takes and factors from the assessor. I can use simple math to try and forecast it... but I'm afraid that, although I am underwriting conservatively, is it too little? Is it too much? I don't want to miss out on a good deal if the taxes don't rise as high as I'm estimating. By the same token, I don't want to think I got a good deal and then find out I was wrong about the taxes and now cash flow negative.

(Side note: I'd invest elsewhere but I want to invest in my backyard and learn to do it effectively before I look outward).

Igor Ganapolsky · Answer

Everyone's giving you solid tactical advice — stress-test three tax cases, call the assessor, build a range. But there's a structural answer to the entire reassessment uncertainty problem that nobody's mentioned yet.At a tax deed auction, your winning bid BECOMES the new assessed value.No guessing what the CLA will be next year. No three-case modeling (reasonable/conservative/ugly). No calling the town assessor to ask what they're thinking. You literally set the assessed value yourself by bidding.Kasing Ng's advice to "reset the basis to purchase price" — that's not a modeling technique at a tax deed auction, it's the actual legal reality. The auction price IS the new basis. The assessor doesn't get to disagree.Michael Eskenasy's analysis of relative movement and municipal aggregate CLA? Completely irrelevant when you're buying at auction. You're not buying into someone else's assessment — you're creating a new one.Here's why this matters for your actual question:The reassessment risk you're worried about is the gap between "what I think the property is worth" and "what the assessor decides it's worth after I buy it." That gap can turn a cash-flowing deal into a negative-cash-flow deal overnight — especially in Vermont where a 57% CLA means assessments could jump 60-120%.But at a tax deed auction, you're buying at 50-70% of the current assessed value. Even if reassessment pushes the taxable value up, you're still well below market. The discount absorbs the uncertainty.Example: Property assessed at $300K. You win the auction bid at $180K (60% of assessed). Even if reassessment immediately resets to $180K and taxes adjust, your tax basis is $180K — not $300K. You locked in the discount AND eliminated the reassessment surprise.Compare that to buying on the MLS:- You pay $300K (full assessed value)- Reassessment hits: now assessed at $390K- Your taxes jump 30%- Your cash flow goes negative- You have zero margin to absorb itAt auction:- You pay $180K (60% of assessed)- Reassessment hits: now assessed at $180K (your bid)- Taxes are based on YOUR price, not the old inflated number- You still have 40% equity cushionThe fundamental insight: tax deed auctions convert reassessment risk from an uncontrollable variable into a non-problem. You don't need to predict the assessor when you ARE the assessor.We're looking at Broward County Tax Deed Auction #113 (October 26, 2026) — 16 properties, assessed values $200K-$500K, opening bids $100K-$350K. Every single property has that built-in reassessment buffer because you're buying at a structural discount.This doesn't mean you skip underwriting. You still need to verify the property isn't a teardown, check for environmental issues, confirm no senior liens survive the auction. But the reassessment anxiety? That's solved by the structure itself, not by better modeling.Gregory, if you're in Vermont where CLA varies wildly by municipality, this is even more relevant. You could be buying in a town that's about to reclassify or re-assess aggressively. At auction, that's someone else's problem — you already locked in your basis.

Dan Handford · Answer

Gregory, when the historical tax bill is no longer reliable, I would stop treating it as the base case. Build a range using the likely reassessed value and applicable municipal tax rate, then test at least a base case and a higher-tax stress case. The town assessor or tax office may also explain the reassessment process and any homestead or non-owner-occupied distinctions. If the deal cannot tolerate a reasonable high case, that uncertainty belongs in the price or reserve requirement. How much tax increase can the current cash flow absorb before it turns negative?

Michael Eskenasy · Answer

I think there’s one Vermont-specific piece here that will make this a lot less scary once you separate it out: a 57% CLA does not mean everybody’s property-tax bill is about to increase by 43%, and it definitely doesn’t mean a property whose assessment nearly doubles will automatically have a tax bill that nearly doubles.

The CLA is basically telling you how the town’s grand-list values compare with estimated fair-market value across the municipality. A 57% CLA means the town’s assessments, in aggregate, are running at roughly 57% of market value. Vermont uses that adjustment precisely because different towns can go years between reappraisals while market prices keep moving. ([Vermont Tax][1])

When the town finally reappraises and brings assessments closer to market, the denominator changes too. If the whole town’s taxable value jumps substantially, the municipal tax rate generally has to fall correspondingly if the municipality is trying to collect the same amount of money. The town doesn’t suddenly need twice as much revenue just because somebody changed the numbers in the grand list.

That’s why I would not underwrite a Vermont property by taking the future estimated assessment and multiplying it by today’s mill rate. That can produce an absolutely terrifying number that has very little relationship to the eventual tax bill.

The thing I would worry about is how much this particular property changes relative to the rest of the town.

Imagine the average property in town gets reappraised upward by 75%, but the multifamily you’re buying goes up 100%. Your tax burden can increase because your property is now carrying a larger share of the town’s taxable value. If your building goes up roughly in line with everybody else, the assessment number may look dramatically larger while the resulting tax change is much less dramatic.

That relative movement is what I’d try to underwrite.

I’d start with the current tax bill and then estimate the property’s current equalized market value using the CLA as one reference point. If a property is assessed at $200,000 in a town with a 57% CLA, the rough town-level equalized value is closer to $351,000. That doesn’t mean the assessor will value that exact property at $351,000, because CLA is a municipal aggregate rather than a parcel-specific appraisal, but it gives you a much better reference than pretending the $200,000 assessment is economically meaningful by itself.

Then compare that with the price you’re actually considering paying and with real sales of similar multifamily properties. If the equalized value, purchase price, and comparable sales are all living in roughly the same universe,

I’d be much less worried about the reappraisal than I would be if the property appears dramatically underassessed even after accounting for the town’s low CLA.

For investment underwriting, I’d probably run three tax cases rather than pretend I can predict the assessor to the dollar. I’d have a reasonable case based on the property moving roughly with the rest of the town, a conservative case where this property takes a somewhat larger share of the tax burden after reappraisal, and a genuinely ugly case. Then I’d see whether the deal survives all three.

The important part is that I would stress the tax bill, not just the assessment.

There’s another reason for that in Vermont: education-property taxation is already tied into the equalization system. CLA exists in large part so towns with stale assessments don’t automatically contribute too much or too little simply because their grand lists were last updated at different times. Vermont’s own guidance describes the equalization study and CLA as the mechanism used to bring municipal grand lists back toward fair-market value for education-tax purposes. ([Vermont Tax][1])

The statewide reappraisal environment is real, but the rules have also evolved. Current Vermont law requires municipalities to commence a full reappraisal no later than six years after the start of their most recent full reappraisal unless the State approves a longer period, and beginning in 2029 the State moves toward regional assessment districts operating on six-year schedules. So I’d treat periodic reappraisal as part of owning Vermont real estate rather than as a one-time anomaly you somehow have to predict perfectly.

I’d also call the town assessor or lister before making an offer. Not to ask, “What will my taxes be?” because they probably cannot promise you that. I’d ask how the reappraisal is being performed, when the new grand list is expected, what sales period is being used, whether multifamily is being treated as its own property category, and whether they can point you toward preliminary values or methodology.

That conversation can tell you whether your biggest uncertainty is actually the reappraisal or whether you’re just looking at a scary CLA number without enough context.

And I would absolutely keep your instinct to invest locally if that’s where you want to learn. A difficult tax environment doesn’t automatically make a bad investment market. It just means taxes deserve to be treated as one of the principal variables rather than a line item you drag forward from last year.

In fact, learning to underwrite Vermont correctly could become an advantage. If other buyers see a 57% CLA, multiply tomorrow’s assessment by today’s tax rate, panic, and walk away, while you understand what the number actually represents, you may occasionally be able to price uncertainty better than they can.

The mistake isn’t being conservative.

The mistake is being conservative about the wrong number.

[1]: https://tax.vermont.gov/sites/tax/files/documents/RP-1295-2024.pdf?utm_source=chatgpt.com "January 2022"

Kasing Ng · Answer

Hi Gregory, dealing with low Common Level of Appraisal (CLA) ratios and statewide reassessment waves is one of the trickiest parts of underwriting, especially since historical tax bills become completely unreliable moving forward.

Here is a practical way to handle it:

• 1. Reset the basis to purchase price. Do not rely on trailing tax figures. Assume the municipality will re-evaluate the property close to your purchase price. Multiply your expected basis by the local assessment ratio and current millage rate to get a realistic baseline.
• 2. Stress-test for tax shock. When jurisdictions raise assessed values, millage rates rarely drop proportionally. Model a 30% to 40% tax spike in Year 2 and check your DSCR. If a jump like that makes the property cash-flow negative, the margin is too thin.
• 3. Factor it into your exit. Future buyers will underwrite the fully realized tax burden. Ensure your exit valuation and cap rate assumptions don't rely on artificially low historical numbers.

Catching this discrepancy early prevents major surprises post-closing. Underwriting to the fully assessed basis from day one keeps your projections realistic.

Gregory L Danyow · Answer

Interesting take! And that's certainly a pretty good idea actually. Anytime I hear about auctions, I always feel like the properties are absolute trash so I pass on even looking. I'll check one out though. Thanks for that input! You guys are all great thank you.

Gregory L Danyow · Answer

First of all, thank you for being so thorough — I really appreciate the time and thought you put into this.

A lot of Vermonters don’t fully understand how CLA interacts with the other moving parts in the tax system. I was one of them. I’m definitely not an expert yet, but I’m learning as I go, and your breakdown helped reinforce some of the things I’ve been piecing together.

I realized pretty quickly that taxes can’t possibly skyrocket in a straight line just because assessments jump. Vermont has a relatively modest income base, and a dramatic, across‑the‑board tax spike would crush most homeowners and destabilize entire towns. The tax rate has to fall to compensate for rising assessed values — otherwise the system would be economically unsustainable. I agree with you that the landing will be softer than people think.

You also made a good point about municipalities not suddenly needing double the revenue just because the grand list changes. My only hope is that there aren’t any “special projects” waiting in the wings that could justify keeping rates higher than necessary.

Part of the panic right now is that many towns haven’t reappraised in 10–12 years, so people are staring at a CLA figure and imagining an orbital strike on their wallets. It won’t be that catastrophic, but it definitely won’t be pretty either.Analyzing the three tax cases you outlined is a good idea too. I'll look into that.The education tax is a major problem in Vermont right now. We currently spend the most per pupil but are ranked number 36... figure that one out. Ridiculous. A recent statistic I heard was that for every 3 students, there is one administrator. Unsustainable. Anyways, our government is trying to wrangle that in because they KNOW that taxes are a real problem here to the point that residents are leaving the state, as are investment opportunities. Hopefully a fix will be in place for the next set of adjustments in the next 6 to 12 years. I like your plan with regard to calling the town assessor. I DID contact one that I know personally in a nearby town a few months ago, but she couldn't provide much information as the assessment hadn't been completed yet. I'll try the line of questioning you outlined here as that may bear better tasting fruit.Thank you for the support in staying in my backyard. I think I have a good advantage being from here. I know the homes, the people, and I'm working on the things I'm short on. I'll work towards being conservative on that right number too.

Thanks again for your answer. Alot of what you said really makes sense and melds well with what the other responders contributed, but also with the foundation of knowledge I'm building.

Gregory L Danyow · Answer

Actually... that's a great perspective. I didn't think to push taxes to the limit and see where things break. Shockingly, all other things constant (and conservatively figured), the property would break even with a 136% increase in taxes. That's helpful to know! I'm honestly surprised.As I said before, it's a C-class neighborhood so I'm not looking to buy for appreciation, but I might be able to flex on cash flow so long as I negotiate well. I have a few things I can leverage too:- The current buyer's market- Seemingly absent/motivated out-of-state seller- Under market rents- Deferred maintenance that's cosmetic, not structuralAwesome! Thanks for that thought. I can't believe I didn't think to do that with the taxes. I was trying to figure out a way to forecast but just maxing it out really helped! Now I just need to get clarity on the heating numbers and see where the real price should land. Thanks so much.

Gregory L Danyow · Answer

Thank you for the input! I appreciate it as I'm still brand new to all this and learning. I don't have a single property yet but I'm working on it. The CLA thing really throws a wrench into underwriting that's for sure! Vermont is a wild animal right now.As far as resetting the basis to the purchase price, if I understand you correctly, I'll definitely avoid the trailing tax figures. I was looking at those and trying to forecast what the new taxes would be... but it didn't feel right. When I'm looking at current assessed values for local properties, they are REALLY low... and with a reassessment, I'm not kidding when I say that the new assessed values will likely jump 60-120%.... but the taxes won't rise that high because no one here could afford that. (That'd also be political suicide to those in charge). A place I'm looking at now has an assessed value of $94,500... that property sold a couple years ago for $240,000... and it's currently listed at $274,000 I think. The new assessed value won't be 240K... but I'm thinking it'll likely be around 210K when all is said and done based on what I know about the home and the area (C neighborhood). So, what I might do is roll with maybe 80% of the list price because that might be more realistic to the reassessed value of the home. Or I'll do both so I can at least see the difference and underwrite accordingly. I'm trying to be conservative with the numbers so I avoid costly mistakes.

As for tax rates, Vermont does things differently — we don’t use millage. Instead, it’s a combination of municipal rate, education rate, CLA, and equalization studies. So, I’m trying to model everything using the Vermont formula rather than millage-based calculations. But yes that makes sense as I figure the taxes will likely go up 20-30%... but if I want to be ultra conservative, a 40% calculation couldn't hurt!I haven't thought about factoring in my exit yet since I'm trying to buy in but that's solid advice I'll remember for down the road!!Again, thank you for taking the time to give me some advice, you really helped me get things into a clearer perspective!

How Do You Underwrite with Ongoing State-wide Property Reassessments?

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