Commercial Real Estate --Property Taxes and how to avoid the hike after acquisition

[Trent Williford]

I am confused. I just started learning how to underwrite commercial real estate deals. The property that I was interested in last sold in 2019 for 2.5M and the property taxes have stayed relatively the same since. However, now the building is for sale and the asking price is 5M. When I use the Hamilton County Auditor's site to recalculate property tax, it tells me that the taxes are going to go from the current $66,000 to $126,000. Therefore, the overall cash on cash return, with that big jump in taxes, is very low. Ohio is a full disclosure state, so how are these investors telling me to not account for a hike in property tax when underwriting? What am I not understanding? I'm being told that if you make a new LLC and then sell the LLC to the new property owner, the property tax won't be reassessed, but with the City of Columbus Schools case, I just think it's inevitable that the taxes will be reassessed. Therefore, I account for the actual property tax on what the building is going to sell at when underwriting.

Anyone else in Ohio that can help me understand? 

[Chris Seveney]

@Trent Williford

Don’t listen to investors telling you not to account for it - but you need to determine if that number is correct and if it will increase by that much.