How are you guys effectively challenging commercial property tax hikes?

Question

Hi all, I was wondering as a commercial property owner how to effectively challenge or reduce property tax hikes?

Some of the strategies I've used in the past are:

-comparable sales data nearby

-take pictures to show damage or deteriorating conditions of the property

-show low rental income or conditions if applicable

Any advice would be appreciated. Thanks,

Account Closed · Answer

In addition to being part of a few syndication deals in the Houston and dallas area, ill just speak anecdotally: Its very hit or miss and really depends who you get to review the case. You can do all you mentioned above but you cant eliminate some of the luck factor involved.

Sohail Bas · Answer

Account Closed thank you for the information.

Account Closed · Answer

Here are some additional strategies you might find helpful:

• Review Assessment Details: Carefully review the assessment details provided by the assessor's office. Ensure that all information about your property, such as square footage, building features, amenities, and any relevant factors, is accurate. If you find discrepancies, provide evidence to support corrections.
• Document Improvements and Depreciation: Highlight any improvements you've made to the property since the last assessment. Documenting upgrades, renovations, or investments in maintenance can provide evidence to support a lower valuation. Similarly, if the property has experienced depreciation due to age or wear and tear, provide evidence of this deterioration.
• Income and Expense Analysis: Prepare a detailed income and expense analysis to demonstrate the property's financial performance. If rental income is low compared to market rates, provide documentation to support this claim. Similarly, if the property has incurred significant expenses, such as maintenance or repairs, provide evidence to justify a lower valuation.
• Market Trends and Comparables: Gather market data and comparable sales or lease information for similar commercial properties in your area. Presenting evidence of recent sales or lease agreements can help demonstrate the property's fair market value and justify a lower assessment.
• Engage a Property Tax Consultant: Consider hiring a property tax consultant or attorney specializing in property tax appeals. These professionals can provide expert guidance, conduct a thorough assessment of your property's valuation, and represent you in negotiations or appeals with the assessor's office or assessment appeals board.
• Attend Assessment Hearings: If your jurisdiction offers assessment appeal hearings, attend these hearings to present your case in person. Be prepared to provide evidence supporting your arguments and respond to any questions from the assessor or assessment appeals board.
• Stay Informed about Local Tax Policies: Keep abreast of local tax policies, assessment methodologies, and any changes to property tax laws or regulations that may affect your property's valuation. Understanding the assessment process and applicable regulations can help you navigate the appeal process more effectively.

Sohail Bas · Answer

Oh man that's crazy to think "we were not taxed enough". Do you mainly have residential tenants or commercial tenants @John McKee?

John McKee · Answer

tax bills and insurance bills are getting out of hand.  Apparently I just missed a small window to argue my tax bill for another 8 months.  I will have to spend some time debating these as tenants can't afford these increases.  I guess $20 cheesburgers will be the norm in this country between tax hikes, insurance and overall inflation.  I spoke to one assessor and he told me to be as prepared as possible because it could backfire as well....meaning you were not taxed enough.

Bruce Lynn · Answer

@Sohail Bas   I'm not in that space, but look often.  DFW has to be one of the hottest markets in the national for industrial space, if not the hottest.  Values up, deliveries up HUGE in 2023, low vacancy.  Not sure about rent bumps.   When the value goes up, the tax appraisals go up.  Never feels good, probably never what anyone estimated, but that is the life of a CRE these days.  Higher taxes, higher insurance, higher interest rates.   Maybe if you have big vacancy or have an odd building that rents at lower rates or your leases covers all expenses vs NNN or something like that, maybe you can fight for lower value....but my guess if for most industrial/warehouse investors, 2023 and maybe even 2024 are going to be tough years to fight in DFW.  Hire the professional fighter for the best chance to win.  You can of course do it yourself, but I think hiring expertise who has lots of experience talking to the appraisers, working for other investors, and potentially going in front of the board and potentially arbitrators is probably money well spent.

Lucia Rushton · Answer

@Bruce Lynn i also think all residential owners and investors should also protest. Part of the problem we are encountering right now is people have not and therefore those over inflated values are now the norm.

As always just my thoughts and not written by Ai.

Bruce Lynn · Answer

I think the savvy CRE owners challenge every year.  Sometimes you win, sometimes you don't.

You also have to be willing to go to arbitration.  Sometimes just the mere filing of arbitration gets you a good settlement offer, because they're scared of risking the dice with arbitration.  Depending on what you have you may also want to hire a professional to fight for you.

In my opinion if you have not fought for reductions before, this is the year to do it...and probably next year too.  Get that value down.