Looking at a Park for sale with a current assessed value based on a 10MM valuation. Sale price is north of 25MM at a 5 Cap.
If the assessed value in now based on this new purchase price, this will affectively raise tax bill by $500K, which computes to a $20MM Deduction in value, using the marketed cap rate of a 5 Cap.
The same situation keeps coming up on deals we’re looking at, where the park hasn’t sold in the last 20+ years and the new appraised value based on purchase price will effectively cause the taxes to rise between 3 to 10 times the existing bill.
This is irrelevant of wether or not the adjustment happens year of purchase or 2 years later.(Some brokers like to use this as justification for not accounting for this in their OM Proforma)
Wondering if anyone has experience with this kind of thing and how to underwrite for this scenario?
Obviously the solutions will vary from county to county based on how aggressive the assessors (or school boards) are.
You all must come across this on a pretty regular basis, and would love your approach.