Bid Accuracy

Our thorough tax modeling produces projections with low margin of errors. This allows our clients to bid with confidence, increase their deal success rate, and gain a strategic competitive advantage.

HOW SLIGHT MARGIN OF ERRORS GREATLY AFFECTS IRR

MARGIN OF ERROR

RESULTS to IRR

MARGIN OF ERROR

RESULTS to IRR

5% deviation in tax projection
accuracy results in 50 BPS to
the IRR

Typical industry margin of errors
are in excess of 10-15%

1. Based on $20M Purchase Price, OM 55%, Hold Period 5 Years, LTV 65%, Fixed Interest Rate 5%, Exit Cap Rate 7%, Deal IRR 17.5%, Deal Profit $8,322,679

Inaccurate tax forecasts will result in inaccurate IRR projections and therefore, will result in poor bidding results. Overestimation of property taxes will lead to underbidding and loss of the deal. The opportunity cost associated with this loss is equal to the deal profits, or in this example, $8,322,649.

Underestimation of property taxes will result in overbidding. In this example, if the projected taxes are underestimated by 10%, the investor will win the deal, but will have paid $565,271 more for the asset than it is really worth. This puts a great deal of strain on the asset management team on day one to balance the budget and meet investor expectations.