How to factor tax increase after rehabbing building

Financing, Hard Money Lenders, Private Money
1

Hi,

I am analyzing a property which is currently an abandoned factory. We are looking into turning it into a 52 unit apartment building, how could I best factor the new tax numbers?

2

You best bet is to go talk to the county or city assessor. You need to bring your conversion cost estimates and perhaps even some evidence of market value. Though the assessor may compute his or her own value, it will be good to compare. Based on this, the assessor should be able to give you an idea about future property taxes.

3

Have you had phase one and phase two environmental site assessments done?
Do these before you purchase.

These will let you know of any potential environmental hazards that might have to be mitigated before the property becomes residential. (ie. that corner of the property where we buried all those drums of used solvents in 1964. That are now contaminating the water supply.)

To answer your question, look at other properties in that county that are similar to what you intend to build and see what they appraise at.

4

Hi,

You know the least of your worries will be taxes as you have to re-zone the property from commercial to residential and get a density approval for the number of units, be sure you meet with the city officials prior to purchase and run through your plan in theoretical form as you will have months and months of just your applications and approvals process before developing blue prints and applying for permits.

Pete is absolutely right about the environmental site assessments which include lead based paint, asbestos and leaded pipe fittings and you probable want a structural engineers review with that considering your changing the buildings use and live loads. You also need to be aware of parking requirements as an existing building is grandfathered but re-zoning and new permitting trigger fire / life / safety requirements and parking / handicapped requirements not required of the property before.

You will now need to create a fire burn through rating between floors and units and need to include fire dampers, stand pipe and sprinklers for multiple floors and units, etc. Although a building may look like a great conversion candidate city, county and state requirements along with cost’s can negate the profitable ability to convert.

           GR