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Multifamily Property Taxes - What You Need To Know

Cantrell McCulloch Blog

Multifamily Property Taxes – What You Need To Know

Accompanying higher multifamily and commercial real estate prices are rapidly increasing property tax valuations. Multifamily owners and investors alike should be prepared for such increases, and be ready to contest over-assessments. There are also a myriad of property tax issues associated with the development, purchase or sale of multifamily properties. Below are some compelling statistics regarding multifamily property valuations, along with some things to consider when protesting multifamily property taxes.

  • 2017 tax assessment values continued to escalate 10-15% on average with some property values 20%+.
  • Further aggressive value increases anticipated to subside in most counties with the possible exception of Dallas County because of upcoming to 2018 comptroller’s value study and the fact that cap rates used by DCAD were relatively high in 2017, particularly for Class C properties.
  • Taxing entities are beginning to feel pressure to lower tax rates with some minimal decreases seen last year and more expected in 2017 (tax rates will be determined no later than end of September to allow tax bills to be mailed in October). Overall expected impact of -.5% to -1% total tax rate reduction with some rates decreasing as much as 2% to 3%.
  • Assessment values post sale continue to be a key determinant when evaluating prospective properties. Value ranges between 50-85% are typical first year after sale and median value of the comparable properties adjusted for rents is the methodology used for successful Equal and Uniform protests.
  • Binding arbitration continues to be used more frequently versus litigation due to minimal cost along with smoother process that often establishes the final value more timely than litigation. Effective as of September 1, 2017, the Texas legislature increased the arbitration value threshold to $5 million from the previous cap of $3 million.

Additionally, here are some ways to assist your Property Tax Consultant to achieve the best possible results:

  • Provide requested data as soon as possible once year end P & L’s are completed. Don’t wait until preliminary notice values are released May 1st to contact your tax consultant.
  • Take photos and provide bids and reports whenever deferred maintenance items are needed. Remember, the appraised value is effective as of January 1st.
  • Communicate issues that may not be apparent simply by reviewing your financials.
  • Make sure your consultant always checks comparable property values and reviews your property based on fair and equal, not just how the property is performing.

CMI assumes responsibility for the entire property tax appeal process, including strategic planning, research, case preparation, expert witness testimony, litigation support and all communication with assessors, appeal boards and courts.  CONTACT US today to discuss your property tax consulting neesds, we welcome the opportunity to work with you and help ease your tax burden.