Loading the Cap Rate

[jb2010]

When is it appropriate to "load" the cap rate when doing an income analysis?

 

[john snyder]

By loading the rate are you referring to an ad valorem problem?

jbs

 

[jb2010]

Just want to compute the value of an income producing office building. There's only one tenant and the tenant pays the property tax (along with all the other operating expenses).

 

[Dennis J. Black ASA IFAS]

If you want to determine the value why not hire an appraiser? You see we have specialized training. Think of it this way. You have teeth. You brush your teeth and inspect them on a regular basis. You know about your teeth, but that does not make you a dentist.

 

[Michigan CG]

When tenants pay all expenses it is common for them to also pay the property taxes.

 

[PropertyEconomics]

Im still scratching my head at "loading" a cap rate. The poster really hasnt described what it is they are asking ... impossible to answer.

 

[Michigan CG]

I think he wants to lower/raise the cap rate depending on who pays property taxes.

 

[Mountain Man]

I don't understand what you mean by "loading" the cap rate. Leases can be net, gross, or modified gross... and you have to verify your rent comps to make adjustments. Once you make proper adjustments to the rent comps, and know a market rent, you can develop a "real" cap rate without playing funny money games.

 

[jb2010]

Timothy Evans has it right. That's what I'm asking.

 

[Dennis J. Black ASA IFAS]

Well if that is what you are asking here is the answer. NEVER. Who pays the taxes effects NOI, not the rate.

Maybe we can be more helpful if you tell us why you are asking. Are you a finance student? Are you considering buying an investment property? The more we know, the more guidance we can provide.