More than YES. You need to calculate what the future property tax will be after you buy a property and make sure the NOI is reduced by the amount you will have to pay. For example, in California, the property tax is based on the last purchase price plus a very small annual increment. So, for properties that have not sold for many (20) years, the property tax can easily double upon purchase. Further, on a NNN (Triple Net) deal on a fast food property, I was scammed by the real agent who delayed giving me a copy of the lease. A NNN deal means the tenant will pay the property tax, etc. But the lease anticipated the property tax going up upon a sale, so it had a ceiling on the amount the tenant would have to pay for the annual property tax! That meant the owner would have to pay the excess property tax out-of-pocket; every year! That little detail changed the property from a normal cap using the existing property tax amount to a negative NOI and therefore a negative cap rate for a buyer.
Oct 26, 2012