# Property-tax sensitivity

Canonical: https://chicagocommercialfunding.com/tools/property-tax-sensitivity/

Translate an owner-borne tax increase into NOI and value exposure.

## Model inputs and hypothetical defaults

- Current annual NOI after property tax ($): 240000
- Current annual property tax ($): 80000
- Tax increase (%): 25
- Assumed cap rate (%): 7

## How the model works

NOI reduction = current tax × increase %. Illustrative value change = owner-borne NOI reduction ÷ assumed cap rate.

## Worked illustration

A 25% increase on an $80,000 bill adds $20,000 in expense. At a constant 7% cap rate, the modeled value reduction is $285,714.29.

## This is a burden sensitivity, not a tax estimate

Enter the current annual economic tax expense and an assumed percentage increase. The calculator treats the entire increase as an owner-borne recurring expense. It does not predict an assessment, equalization factor, taxing-district rate, appeal or incentive. Obtain the subject parcel’s actual records and a defensible forward estimate before using a scenario in an acquisition.

Use a consistent investment valuation convention. This model starts with NOI after property-tax expense and a user-selected capitalization rate. An assessment method that excludes tax from operating costs and uses a tax-loaded cap rate is a different convention. Mixing that numerator and denominator with these outputs would misstate value.

## Trace recoveries and timing separately

If leases permit collection of some increase, calculate the collectible reimbursement and reduce the owner’s net burden in a separate model. A contractual right is different from timely cash receipt. Cap limits, vacancy, disputed charges, tenant credit and base-year rules can keep part of the expense with ownership. Increased tenant occupancy costs can also affect renewals even when current reimbursements are collectible.

The value output holds every other assumption constant. It is not an appraisal or an assertion that the market will maintain the selected rate. A higher tax bill can coincide with rent changes, capital needs or a different risk premium. Test those combinations, then examine payment dates and lender escrows to establish liquidity. Do not count the same bill and escrow funding as two operating tax expenses.

## Limitations

No automatic sale-price reassessment rule is assumed. Tenant recoveries, appeals, exemptions and incentive eligibility are not modeled.

The canonical HTML page provides the interactive calculator. Inputs stay in the browser; hypothetical defaults are not current financing terms. Distinguish operating income, debt service, capital expenditures and investor distributions.

## Research and related reading

- [Source material](https://www.cookcountyassessoril.gov/commercial/how-commercial-properties-are-valued)
- [Underwrite reassessment uncertainty](https://chicagocommercialfunding.com/guides/underwriting-commercial-property-tax-reassessment-risk/)
- [Separate assessments from bills](https://chicagocommercialfunding.com/guides/cook-county-assessment-versus-property-tax-bills/)