Equal and Uniform Approach offers assessed value at 79% of recent sales price
Property Tax laws in the State of Texas can offer very unique challenges for owners of investment properties. Texas has no state income tax so property taxes are relied upon more heavily to generate revenues for the governing authorities. Add to this fact that underlying valuations get reassessed every year, and you have a nearly perpetual state of property owners engaged in dealing with property taxes. It’s not unheard of for tax burdens to double in just a few short years. When added to some of the highest tax rates in the country, this causes great challenges for owners to bring stability to unpredictable cash flows.
I can hear you now, “Gee… thanks for pointing out the problem! Now, what is the solution?!”
Due to the volatile nature of annual reassessments, property taxes can be quite dissimilar on similar properties within a given market and asset class. “So what?!” You might ask, “Who cares?” Well, the State Legislature cares and offered a Taxpayer’s Bill of Rights many years ago that says, among other things, that property taxes must be assessed in an Equal and Uniform manner. This provides a great opportunity for property owners to reduce their assessed values, but only if they understand the nuances of navigating through a somewhat arbitrary mass appraisal methodology.
Recently, Pinnacle Property Group assisted Partnered Property Acquisitions Group, an Austin-based multifamily investor, in receiving a valuation at 79% of purchase price. PPA Group acquired a 300-unit, Class-B apartment complex in late 2015. After Pinnacle’s analysis determined the subject property was unfairly assessed in relation to its competitive peer group, Pinnacle convinced the county appraisal review board to reduce the 2016 assessed value from over $20.5M to below $17M, a nearly $4M (20%) reduction in assessed value. The reduction on this single property will save PPA Group nearly $120,000 in taxes for 2016! Most importantly, it will allow the property to remain competitive in the marketplace, offering value to local residents, while also providing superior performance to investors.
To learn more about employing this strategy to reduce your values on newly-acquired properties or assets you have owned for several years, contact Tim Nichols, VP of Business Development at Pinnacle Property Group.