Property Tax Forecasting: Projecting Your Future Property Tax Liability

Real estate taxes often make up the largest non-financing expense for property owners. For this reason, many investors benefit from real estate tax expense forecasting, or the accurate prediction of property taxes extending into future years. Allobar Strategies has developed a proprietary method of forecasting real estate taxes, with special emphasis on predicting future tax rates for municipalities in Massachusetts.

Allobar’s approach to property tax projections is unique in two major ways. First, we have an economist on our staff for the specific purpose of projecting tax rates.  Second, we use multiple complementary approaches, and tested them in several Massachusetts markets, including the City of Boston.  Using multiple approaches allows us to handicap the accuracy of our work, as any one forecasting model may work quite well in one circumstance or geography, but fall short in another. This approach is similar to that used by accountants in business modeling and appraisers, who apply several approaches.  Using several approaches creates a value range, which then may then be reconciled by giving greater weight to the most relevant and practical approach for that specific assignment. 

In a relatively stable real estate market, our proprietary methodology can predict tax rates three years into the future within fifteen (15%) accuracy ninety percent (90%) of the time.  Periods of increased market volatility generally will cause this accuracy to decline, but even during turbulent times, such as the 2008/2009 “Great Recession,” our methodology predicts tax rates within fifteen percent (15%) accuracy sixty percent (60%) of the time.  

If you are interested in taking advantage of this service, please contact us for more information.

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