Standalone Commercial Appraisal Software
for Real Estate Professionals

The COMPLETE Software Solution

Learn More About Commercial Complete
Product Overview
Main Features
View sample reports and narrative appraisals
What to Expect
Powerful, flexible, integrated database
Store your data on our Cloud
Watch a Commercial Complete video
Unsolicited comments from our clients
Bank Evaluators, Assessors, Tax Reps and Brokers
We Understand Income Analysis
Reliable Income Analysis Software
Commercial Appraisal Software
Commercial Complete
Real Estate Income Analysis Software
Investment Analyst
The Assessor' Method
Loading the Cap Rate

Ad Valorem Taxes and Loading the Cap Rate

Assessors often are required to add an additional factor to the Capitalization Rate to account for Ad Valorem real estate taxes.   Appraisers also use this method to estimate the real estate taxes for new commercial construction.

When the Cap Rate is developed in this manner, real estate taxes are removed from the Income Statement and from the Net Income that will be capitalized.  Many jurisdictions require that the Assessed Value of the subject be established in this way.  The theory is based upon the premise that Ad Valorem taxes are determined by the value of the property.  Therefore, it would not be proper to include an estimate of taxes in the Net Income that we use to estimate the subject's value.

The method used to estimate value by excluding certain items from Net Income is often called loading the Cap Rate.  This method assumes a direct relationship between the excluded item (usually real estate taxes) and value. For example, if the real estate tax expense is 3% of the subject's value, then we could add 3% to the Capitalization Rate and exclude this expense from Net Income.

Development of the capitalization rate using the Mortgage Equity Technique is built into both Commercial Complete and Investment Analyst.

Both Commercial Complete and Investment Analyst have the capability of adding load factors to the caprate for ad valorem taxes and/or other purposes.



Net Income Before R.E.Taxes $29,250
R.E. Taxes -6,750
Net Income $22,500
Capitalization Rate (assumed) 10%
R.E. Taxes as % of Value 3%

Value Calculation - including R E taxes in Net Income

Value (22,500 / .10) $225,000
R.E. Taxes (225,000 x .03) $6,700

Value Calculation - Loading the Cap Rate

Value (29,250 / .13) $225,000
R.E. Taxes (225,000 x .03) $6,700

This example shows that both methods produce the same value and taxes.  They are mathematically equivalent.

Other Topics

Integrated Standalone Software
Learn More about Commercial Complete

Click Here to learn more about Commercial Complete

Financial Masterplan, Inc.

The information contained herein is copyrighted by Financial Masterplan, Inc. No portion may be reproduced without the express written consent of Financial Masterplan, Inc. If you have purchased Investment Analyst, you may use portions of the information contained herein in your narratives with proper attribution to Financial Masterplan, Inc. and only under "fair use" guidelines.

For more information about copyrights and "fair use", we refer you to the U.S. Copyright Office web site at

Commercial Real Estate Software, Narrative Appraisals, Income Analysis, Cost Analysis