What is a mill rate in multifamily investing?

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A mill rate, also known as the millage rate or simply "mil," is a term used in property taxation, including in multifamily investing. It refers to the rate at which property taxes are assessed on a property's assessed value. The mill rate is usually expressed as a dollar amount per $1,000 of assessed property value. It is an important factor in determining the property taxes a multifamily investor will need to pay, which, in turn, impacts the overall operating expenses and net operating income of the property.

To calculate the annual property tax for a multifamily property, you would need the assessed property value and the mill rate. Here's how the calculation works:

Find the Assessed Property Value: The assessed value is determined by the local tax assessor, who typically evaluates the property based on market value, location, size, age, and other factors. This value may differ from the actual market value of the property.

Determine the Mill Rate: The mill rate is set by the local taxing authority, such as the city, county, or school district. It is usually expressed in mills, where one mill is equal to $1 per $1,000 of assessed property value. The mill rate can vary depending on the jurisdiction and may change year to year.

Calculate the Annual Property Tax: Multiply the assessed property value by the mill rate, and then divide the result by 1,000.

Annual Property Tax = (Assessed Property Value x Mill Rate) / 1,000

For example, if a multifamily property has an assessed value of $1,000,000 and the mill rate is 25 mills, the annual property tax would be:

Annual Property Tax = ($1,000,000 x 25) / 1,000
Annual Property Tax = $25,000

Understanding the mill rate and its impact on property taxes is essential for multifamily investors, as property taxes are a significant operating expense that can affect cash flow and the overall return on investment.

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I hope that helps and good luck with your investing!


Benjamin Z Miller
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