Property taxes are one of the biggest expenses commercial real estate investors need to get right when underwriting a deal. In this episode of the Ironclad Underwriting Podcast, Jason Williams and Frank Patalano break down how property taxes are assessed, why tax projections can change dramatically after a purchase, and why investors need to understand their local tax rules before closing.

The conversation covers everything from protesting tax assessments and understanding millage rates to navigating nondisclosure states like Texas. Jason and Frank also discuss how to build realistic tax assumptions into your underwriting and use sensitivity analysis to understand how changes in assessed value could affect a deal.

Topics Covered

• Why property taxes and insurance are two of the most important expenses to get right
• How property assessments and tax rates work\
• Understanding millage rates and percentage tax rates
• When and how investors can protest property taxes
• Using comparable properties and property documentation when protesting an assessment
• How commercial property taxes can differ from residential taxes
• The challenges of underwriting properties in nondisclosure states
• Why investors should not blindly rely on the seller’s T12 for property tax assumptions
• How a purchase can potentially cause a major increase in a property’s tax assessment
• Using sensitivity analysis to determine how changes in tax assessments impact a deal
• The importance of understanding your personal and investors’ risk tolerance
• Why working with a tax advisor who understands your local market can be valuable

Quotes

• “Taxes are probably this and insurance are the two you want to get right because they have the biggest impact.”
• Your purchase price is your assessor’s favorite comp. Unless you’re in a disclosure state.”

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🎧 Connect with Frank:

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