With the much anticipated resurrection of hotel and resort transactions seemingly upon us, those who were involved in the hot market of 2006 and 2007 will recall that assessors tend to use a sale price as the market price for property tax purposes.
Most buyers use operating pro forma to assist with pricing decisions. These projections use assumptions about income, variable and fixed costs, including property taxes. All too often, pro forma property tax estimates are based on last year’s property taxes growing at the expected inflation rates. The disastrous impact of such estimates come post acquisition when the hotel fails to achieve pro forma because real estate taxes have increased dramatically beyond the pro forma assumption.
To avoid property tax surprises, Paradigm Tax Group suggests hotel buyers’ due diligence checklist should include three items regarding property taxes… Read More