How To Calculate Real Estate Tax on Commercial Assets

[Trevor West]

My partners and I are looking to close on a commercial residential property (20-60 units) before the end of the year.

I would like advice on how to calculate the anticipated property/real estate tax once we take over the property. 

I found this example:

If the town your property operates in has a $12 tax rate for every $1,000 in assessed value, the taxes you could expect to pay would be determined as follows:

$1,250,000/$1,000 = $1,250

$1,250 * $12 = $15,000 in expected taxes

Looking for someone to course correct if necessary. Thank you

[Mack Benson]

A lot of OM's will list the mil rate for the county/property and you can usually back into the property tax amount when you go to the counties website and pull the current tax statement. On the statement they typically have the assessed value and the taxes due, the only thing you are missing is the percent of the assessed value used to calculate the taxes. 

The typical equation is going to be: Taxes = Assessed Value x Mil Rate x A Certain Percent 

In my market, the counties use an easier method, it is 1.7%-2% of the total assessed value of the property and they recalculate at a sale, or during the next year cycle. Either way I assume that the taxes will go up at the earliest point possible after the sale. The evaluation notices for the next year go out in November and the tax notices go out for this year in March with taxes due in May and October. A sale in October could have a change in taxes the following year so that is what I assume for my underwriting. 

I fully agree that you should contact the county assessors office. Every time I have done that, the assessor is happy to talk and answer all my questions. One thing they have said is that they are glad I called before buying the property because a lot of new owners get sticker shock when their property taxes go up after a purchase. I figure the county assessors office may be a good group to get into good graces with so I have made it a habit to reach out whenever I have questions.