Assessed value is the value the county assessor assigns to a property for property tax purposes. Under California Prop 13, assessed value grows at max 2% annually unless a reassessment triggers.
Property tax equals 1% of assessed value (plus local assessments). Assessed value typically starts at purchase price for the current owner (base year value) and grows at 2% max per year. Market value and assessed value can diverge dramatically over long holds.
For LA multifamily sellers who've held pre-2010, assessed value is often dramatically below market value — the Prop 13 protection. At sale, the buyer's basis resets to purchase price, roughly doubling or tripling the property tax going forward. This is the hidden cost of LA multifamily for new buyers.
From the Sterman LA Multifamily Glossary — defined the way a broker with $1.41 billion across 254 closed transactions actually uses these terms.
Michael Sterman, Senior Managing Director Investments, Marcus & Millichap.
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