$100 Is Worth It - Property Tax Appeal
Updated: Mar 31
Reduce expenses by appealing your assessed values annually. Find your local partners that can help appeal your assessments to capture the potential your property has for a higher NOI. Remember, every $100 earned or saved in NOI translates to roughly $1,428 in value.
Property taxes are one of the largest re-occurring expenses for an investment. 5-10% or more of annual budgets are taken up by property taxes. Taxes are such a fact-of-life that it's easy to forget that a reduction in a tax bill is possible.
Where to start
Check with your property manager to see if this is a service they can provide. Fortunately, many property managers already add value for their clients by including this in their package of services. If they are unable to provide the service, that's okay.
Reach out to your local commercial real estate broker or real estate attorney to see who can provide the services if your property management company cannot offer the service. Some attorneys, brokers, and separate vendors offer the service for a fee or a percentage fee of the reduce tax bill amount.
I would consider the last resort to be for the reader to appeal the property assessment themselves. Outsourcing to a specialist is the preferred method since the opportunity to appeal in most cases is a short window once every year. A specialist in the field will be able to know what evidence will suffice to really squeeze every opportunity out to save money.
Why would the government agree to a lower tax bill?
The first and foremost is if it's because they or a computer made a mistake. Municipalities might easily correct the mistake or it can be painful depending on where the property is. That's why having the evidence in a concise and organized manner will help prove the new value and makes the process much smoother.
The market and valuations change on a daily basis. The government is conveniently slow to incorporate market corrections into assessments. So slow that assessed values never seem to go down even during a downturn. A property owner has the right to appeal their assessment so take the steps to be taxed at an appropriate assessment.
When might it not make sense to appeal?
When the tax assessor's office appears to be undervaluing your property. Sometimes the rate is so low and the growth rate is such a slow enough rate, there might not be any room to improve. If it isn't broke, don't try to fix it.
The best time to appeal
After recent sales in the area help justify a lower assessed valuation
Drop in the market
Reduce property tax bills, increase the cash flow, and increase the value of the property for your next sale. The amount of potential will vary but remember that every $100 earned or saved in NOI translates to roughly $1,428 in value. Make sure to check out the other posts in this $100 Is Worth It series.
Jake Ammon is a commercial real estate broker who specializes in office and industrial sales and leasing. Contact Jake at Jake@acrei.com or 904.834.9809.