Underwriting Taxes When Buying New Multifamily Development

[Matt B.]

I am curious how others are going about this from an acquisition standpoint.

I realize most buyers are buying existing, usually value add properties. And estimating taxes on existing, older assets is pretty straightforward compared to a new project that is not yet complete or stabilized. 

Whats the best way to go about this when 2 or 3 years ago it was simply dirt.  And now its a multimillion dollar asset.  

Whats the best way to approach this to ensure you are at least in a tolerable range when estimating the taxes for UW purposes.

[Greg Kasmer]

Matt - In most counties the assessed value is multiplied by some tax rate to actually give you the overall taxes due from a monetary standpoint. Now, the trick is how to determine the potential assessed value of the property. The approach to determine assessed values vary by county, but usually are some percentage of the overall actual property value. (sometimes this translation from actual value to assessed value is called a "conversion ratio" or "Common Level Ratio"). So, I would suggest you research the conversion or common level ratio in the county where this land is developed and then do you best to determine the actual future value of the property. With those estimates in mind, I would then call the county assessor office and ask to speak to them about this "example" to understand how they would assess the value. Surprising enough, most assessor offices are fairly open to discussions if you approach it with an "teach/educate me" perspective. Good Luck!