Cut it!

Property taxes rarely go down and by being diligent, you have a powerful way to keep this particular expense in check.

By ANYA SMELEK, The Ambrose Group

Property tax. It is one of your largest line-item expenses and with the right information you have the capability to significantly lower your annual property taxes. On average, county assessors in the Houston MSA have increased multifamily real estate valuations by 20% per year in the last four years. Values have doubled in the last five years alone. By protesting your taxes, you can utilize these savings to reinvest into your property.

Due to the sheer volume of properties within a county, assessor offices have no choice but to use a technique called “Mass Appraisal.” This valuation method uses data collected in large quantities to derive assessed value trends that can be applied to property types within a submarket. Property owners are subjected to being taxed like every property in the county and not on an individual basis. Furthermore, due to the amount of parcels in a county, tax law permits appraisers to visit your property once every three years. This level of detail may disregard important pieces of information about your property that could warrant a lower tax bill.

Here are some tips that can help you stay on top of your appeal and bring the best case forward when protesting your property taxes.

Connect with your agent:

If you do not have an agent, consider finding one. If you do have an agent, stay in constant communication with them. Provide them with the documentation or information they are asking for and if you have not heard from them before your protest deadline, reconnect with them to ensure everyone is on the same page. By being aggressive, you or your agent can reduce the value of your property.

Have the documents needed to lower your value at the ARB (Appraisal Review Board) and know what those numbers mean:

Rent roll – With your rent roll you can prove that the assessed value of your property is lower than the county value. If your rents have not outpaced expenses, you have a solid argument for lowering your taxes through your income and equity evidence.

Profit/loss statement – We all know that expenses have gone up, insurance has risen and if your bottom line has gone down, you have considerations for lowering your assessed value.

Damages – Provide pictures and proof of any damages your property or units have sustained. Don’t overlook receiving bids for deferred maintenance and certainly bring them to the Appraisal Review Board.

Vacancies – Are there any empty units? This proof can help lower your value due to your property not being fully occupied.

Sales Contract – Did you recently purchase a property? If the sales price of your newly-acquired multifamily community is lower than the county’s assessed value, that is a strong case to lower your tax liability. If the opposite scenario presents itself, then it would be prudent to keep this information at the bottom of your desk drawer.

Comparable sales:

Finding other properties that are similar to yours and showing those comparable sales to lower your value isn’t enough to fight the county. Be cognizant of your property’s class rating per the county’s appraisal district. If your multifamily property is rated a B, finding a C-rated property in proximity will not be considered. Your comparable sales need to have the same rating as your property for the evidence to be adequate.

Know your deadlines:

Counties will mail out a value notice in March or April and you will have until May 15 to officially protest. Your agent will take care of this step. Be aware that failing to file a protest prevents you from having a change to reduce your property taxes.

Some counties send out their values after April and this gives you 30 days after receiving your notice to file a protest. This will be stated clearly on your notice. Your hearing with the Appraisal Review Board will determine your property’s tax liability; however, if you are not satisfied with the outcome, there is the option to file for arbitration or litigation. The county will send a final notice of value with an updated assessed value. Upon receiving this notice, you have 60 days to file for arbitration or litigation. This additional option enables you to present your case with an arbitrator or attorney, which are highly specialized professionals in real estate valuations and state tax codes. Don’t know which one to file for? See below.

Arbitration or Litigation:

If your property is valued at less than $5 million, you can elect to go to arbitration. If your multifamily property is valued more than $5 million, you proceed to litigation. Arbitration will include compliance, case preparation and presentation. Litigation will involve the same aspects, while adding attorney involvement for you and the county.

Public data:

Although the State of Texas is a non-disclosure state, be careful to keep your property and its sale information off real estate websites. Encourage your broker and the seller’s broker to keep your transaction information confidential. You do not want to give the county any more data than they need when it comes to valuing your property. Don’t forget about your deeds – you can request that the details of your deed not be displayed to the public.

Property taxes rarely go down and by being diligent, you have a powerful way to keep this particular expense in check. Going up against the county may seem daunting or cumbersome, and you may have to devote time you do not have to this topic, but it will be well worth it when you keep your hard-earned income.

Anya Smelek is the Marketing & Business Development Manager at The Ambrose Group. With 30 years of experience, The Ambrose Group has become a leader in the valuation of real estate, engineered Cost Segregations and tax consulting services. For more information, visit www.theambrosegroup.com.