When I was first investing in buy and holds, I was new to the game and tried my best to play by the rules. A good example? I just went and paid my property taxes quarter after quarter. I didn’t question it, of course—I didn’t know much about the nuances of investing in those early days, but I did know I needed to pay my property tax bills. Who wants a tax lien right out of the gate?
But what I didn’t know—but wish I had—is that, while property taxes are a necessary evil, they aren’t cast in stone. This isn’t a car payment or a mortgage payment. You don’t simply divvy up the costs and write the check every few months. Instead, you need to really look at your property tax payment, and figure out what you’re paying relative to other comparable properties in the area. If there seems to be a big difference—you’re paying a ton versus your neighbor’s tax bill—then you can take action and appeal or grieve your property taxes.
What Appeals Entail
While you can’t challenge the facts of your investment property—the mill rate for your municipality, for example—you can challenge how your taxes were determined. Because taxes tend to be based on the lowest recorded value for that property, it’s easy to find yourself overpaying if that number is off.
And that’s exactly what you’re appealing in the process—how property taxes were calculated. Your job during the appeal process is to show that your investment property has a lower value than was used to calculate its taxes. There’s no need for an attorney or a real estate agent or appraiser—all you need to do in most cases is file an appeal with images and other documents supporting your claim. Damage, for example, is good to show, as are areas that require significant maintenance or other work. All of this can indicate a property has a lower-than-billed value—and that can help you bring down that property’s taxes.
But it isn’t just damage and distress that can change a property’s value. When markets dip, homes naturally lose value over time. While it’s not an ideal scenario, if the market you’re buying in isn’t doing as well as it once was, there’s a good chance your investment property is overvalued, at least from a tax perspective. That can be a slam dunk as far as appealing taxes are concerned.
The Steps In An Appeal Process
So you’ve got a property and the taxes are a bit out of whack. Now what? First step: identify the appraiser for your immediate area. Usually, a quick Google search or call to your district office will turn up the right person.
Once you find the right appraiser, they’ll be able to walk you through what’s next. Can you complete your appeal online or via email? Do you need to mail or fax your appeal? File it in person? Something else? The appeal itself will include some basic information that supports the fact that your property is overvalued. During part two—when you’re actually called in—you’ll meet with the appraiser and go through your appeal, and bring your supporting documents along.
So that brings us to the second step: the in-person meeting. Remember those comps you collected? Pack them up along with supporting materials—again, the photos of damage and distress and other documents that lend credence to your appeal. You’ll bring all of this with you to your appeal, once scheduled, and will walk the appraiser through your assessment of the property and the value associated.
The actual face-to-face part of the appeal is fairly straightforward. Usually, the appraiser will lob a few questions your way to try and determine where your property should fall, value-wise. Be sure to answer succinctly, directly and honestly—lying to the appraiser won’t go well and, besides, it’s just not good business. And we’re in the business of good business, right?
During this process, you’ll also want to reiterate extenuating circumstances—the property sat vacant for years, for example, or the market’s taken a considerable dip since the last assessment. This will help support your appeal and shine an extra bright light on some of the factors your appraiser may or may not be aware of.
Hiring a Tax Grievance Pro
The alternative? Hire a professional to appeal your property taxes. I’ve worked with a number of these experts and, more often than not, they get the job done. There are agencies that specifically handle property tax grievances, plus many accountants whose staff can assist with the process. Usually, they’ll take 50% of your property tax savings for the first year. For example, if they get your property taxes down $900, they’ll take $450 for their services as a one-time fee. It’s a hefty price but, going forward, you’ll get the full $900 savings, in this case.
What else is great about hiring a professional is that, typically, they can manage multiple appeals at once. So if you’ve got five or six properties that all need to be grieved, for example, your designated pro can go in and walk the appraiser through each of them one by one, and bang out all of your appeals in the same day.
What To Know Going In
In the end, the assessor has the final say in whether your property taxes change at all. If they see a significant difference between a property’s value and the value on file, you’ll likely be in good shape to get the adjustment. If the value seems in line or is a little off, they probably won’t go through all the motions just to save you a couple of dollars—the value needs to represent a significant departure from what’s on file.
You’ll usually walk out of your appeal knowing if it was approved or not. Sometimes it can take a few days or weeks but, more often than not, you’ll get an answer on the spot. The revised property tax amount will appear on your next bill and be prorated on your current bill.
A lot of real estate investors I know avoid this process at all costs—and I’ll never understand that. I get that, if you have several properties to flip each month, you may not have the extra hours to pull together all the documents on all the houses. And that’s OK—look at the comps and see what property taxes are the most off and focus on those. Finding one property in the mix and grieving those taxes can save you hundreds or even thousands of dollars each year—well worth the time investment.
This is just one of the many things I’d file under “things I wish I knew my FIRST day on the job.” It’s, truly, been that much of a money saver/value booster for me, my business and hundreds of investment properties I’ve had in and out of my portfolio over the years. And, done right, it can be that powerful for you, too.
We’ll talk about this and other money savers at the Nick Vertucci Real Estate Academy (NVREA) so, if you’ve got questions, don’t worry—we’ll go through them all one by one. Check out my site to see when we’re enrolling next, or when my team and I will be heading to your area for our mini workshops and seminars. They’re a great way to get a taste for what’s new and upcoming at NVREA, and gain some serious real estate investing skills in the process.