Listing A Property - Do I use Pro Forma or Actual assumptions???

[Ken Martin]

Hi All, I purchased a 5 unit property in SW Michigan about a year ago. I bought the property from the bank for very cheap, but now that I've done renovations, raised rents, billed back utilities, and have the property filled out, the cashflow is great, and the property is worth materially more than when I bought it. My question is this... when i'm listing the property to sell (I want to sell this property, and buyer a larger one), do I use my current tax rate and insurance costs? OR do I use estimated pro forma insurance and tax costs on the potential sale price that will be materially higher than what I bought the property for? The difference in those two inputs in my expenses materially impacts the NOI, and therefore the amount I can justify listing the property for.

For example, if I bought the property for $80k, but now it's doing $28k in NOI, and I want to list it at a 10cap , the difference in tax and insurance between a $80k property and a $280k property is pretty material. If I plug in the higher tax and insurance rates based on a $280k value, it really eats into the NOI and cuts the value of the property by about $70k. 

How do I account for this when determining how much to list the building for? 

[Josh J.]

List the property based on 12 month forward NOI and don't readjust taxes or insurance. That's not your responsibility.

Not to sound like an unscrupulous jerk, but you're trying to sell this at the max value so you can 1031 into the next deal. 

Don't miss out on the chance to have someone overpay for your property because they're underwriting the deal assuming NOI is X when Y1 NOI will turn out to be .8X when it's all said and done.