How to Protest Houston Property Taxes on my First CRE Purchse
I recently purchased approx 4acres with an office building with 50k sf. I'm 38, didn't have a mentor or help. Went in on my own with conventional financing and closed in 3 weeks. 

I need help in managing or protesting property taxes. I can't afford this high of a bill immediately.

What methods are there to protest it.

Building was built in 1967. Taxes due by 1/22/22. One of the taxing entities is the water dist, and the bill is $22k. The overall annual tax liability is approx $60k if I aggregate the different taxing authorities.

Please help and thanks.
[{"id": "hrvgh2z", "text": "You didn\u2019t plan for this?", "replies": [{"id": "hrvhquk", "text": "Clearly I didn't. Is it manageable, yes. \n\nI'm inexperienced and need to know what my options are to fight the bill or atleast get it lowered or delayed. Hence why I'm here.\n\nI have cash flow, and have personal savings. I'm not trying to dip into that. I also don't think the amount I'm paying to these entities is adequate based on what they provide.", "replies": [{"id": "hrvs5ls", "text": "You did this too your self and clearly have the attitude from the responses I\u2019m reading that you don\u2019t need help.  You got yourself in the situation and from your responses you can get yourself out of the situation.  Frankly, you should have had the plan before the purchase offer was even sent to the other party.", "replies": [{"id": "hrvt53l", "text": "Again the question was, how would one protest and fight property taxes? I specifically said I'm new to CRE.  Income from the derivatives space where the stakes are much higher and riskier. \n\nThis wasn't meant for you all to take cheap shots at me. That just motivates me more to succeed yet at another obstacle.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hrvii33", "text": "If your purchase price is lower than the assessed FMV then that\u2019s a start. Or you can show that the property isn\u2019t stabilized. If it is stabilized you should have enough in rent to cover the RET. Or check the leases to see if there is tenant obligation.", "replies": [{"id": "hrvjnv5", "text": "Purchase price $3, appraisal dist values it at $2.2. I overplayed just to get the property. It has tenants. Nothing in the lease has tenant obligation towards taxes.\n\nProperty definitely isn't stabilized. How can I pursue this angle successfully? \n\nI also want to push for historical rights through the state level. But thats further out and will take time.\n\nThanks for your response.", "replies": [{"id": "hrvk7eh", "text": "Figure out the stabilized MV then figure out the present value of the cost of stabilization and deduct it. As far as prior year appeals go most jurisdictions don\u2019t do in unless there\u2019s a physical error with the property description/act of god/portion was not subject to tax due to religious,charitable, school use.", "replies": [{"id": "hrvvv8r", "text": "This is good information. Thanks", "replies": [], "depth": 4}], "depth": 3}, {"id": "hrycfrf", "text": "So you paid $3M and you are going to try to convince the tax authority it\u2019s worth less?   Not going to happen.  Your sale justifies the price unfortunately.  \n\nI feel bad for you don\u2019t get me wrong, but you are in a bad position on this.  \n\nALWAYS underwrite on taxes based on your sale price.  Anything else is foolish.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hrvj5kt", "text": "There are property tax law firms in Texas that will protest the taxes for you. They don\u2019t get paid unless they get your property taxes lowered. They take 30-40% of the savings as pay.", "replies": [{"id": "hrvjuyn", "text": "I'm a do it your self kind of guy. With no CRE experience.\n\nIs this something I can do? What methods or angles do they use to fight it?", "replies": [{"id": "hrvklox", "text": "Maybe it might be best just to hire this out considering you aren\u2019t well versed in this aspect. Perhaps the \u201cI got to do it myself\u201d mindset is what got you in this tricky situation in the first place?", "replies": [{"id": "hrvle01", "text": "My do it my self attitude made me a multi millionaire before 30. Again, the tax bill doesn't scare me, it's the discrepancy in what I'm paying, and what it's truly worth.\n\nI bought the neglected asset a few months ago. I've had to inherit 50% occupied building with tenants paying under market. Simultaneously, I've increased occupancy  by 11% in 5 months at higher rates and competing with Class B rates.\n\nMine is a class C building from the late 60's that isn't worthy of this tax bill. I purchased it bc I can see the value I can add and get it to a Class B.", "replies": [], "depth": 4}, {"id": "hrvludr", "text": "Also, I get satisfaction in learning the process by doing it on my own. I pursued this property without going the syndication route, without a broker, or partner. I'm glad i did it on my own and learned the process, ins/outs of closing in a limited time frame with attorneys and big brokerages. \n\nSo doing it on my own has added a lot of value to me personally.", "replies": [{"id": "hrvpo0j", "text": "Something tells me that doing it without brokers, financiers, investors, or consultants is the reason you\u2019re stuck with a $60k tax bill that you can\u2019t afford.  \n\nI became a millionaire with 60+ units at 23, but I did that through partnerships, mentorships, and working with people far more experienced than I am.  The people telling you to hire this problem out are giving you sound advice.  Doing things yourself may have made you some money, but if you can\u2019t avoid or afford a $60k tax bill that was right in front of you, you need to start being experienced people on board that can help direct your respectable drive.  Right now, that\u2019s going to look like hiring a property tax law firm to help you protest the tax.\n\nI can respect wanting to do it yourself, but someone who\u2019s best idea is to ask Reddit about their $60,000 tax problem is not someone that\u2019s going to be able to fix this correctly by themselves.  The professionals will save you more than they cost you and will provide far more meaningful advice than anyone on this platform will.", "replies": [{"id": "hrvshg5", "text": "Thats good! I'm sure you learned a wealth of information through the process. \n\nYou because millionaire with units which weren't liquid. I had liquid hard cash. Theres a big difference! \n\nMy question wasn't to instigate who had bigger pockets, but to start a conversation on tax strategies. Reddit was just a source to see what others have done. Your response immediately shunned my success which says a lot about you as a person. \n\nMy initial post might have indicated that I can't afford the bill. The issue is that I don't agree with the taxable values or the taxing authority \n\nCRE is a long term asset. I made my wealth in trading energy commodities (oil/natgas). I'm just diversifying my holdings into CRE and developing apartment complexes this year. \n\nAgain, I'm doing this alone.", "replies": [{"id": "hrvtl7l", "text": "I don\u2019t think there\u2019s really a question of who has bigger pockets considering you can\u2019t even afford a $60,000 tax bill.  You literally said, \u201cI can\u2019t afford this high of a bill immediately.\u201d  \n\nDon\u2019t misrepresent the nature of your problem because you feel threatened by someone you don\u2019t even know; you won\u2019t get any meaningful advice doing that, not to mention it\u2019s embarrassing.\n\nConsult with tax experts.  As I stated before, someone who\u2019s best idea is to ask Reddit is not someone that can solve this on their own before the 22nd.", "replies": [{"id": "hrvubin", "text": "I heard this same tonality when many said I had no chance of closing in less than 30d. Closed in 15d to be exact. I was the attorney, negotiator, and closer. I might have paid $500k too much, but I think it was worth it bc I believed in the value add proposition I brought, and bc prior management and ownership was absentee and negligent. I paid up just to get it and allow the seller to know I meant business.\n\nI am very liquid. I'm glad you caught on to the contradictory verbiage I put in there intentionally. The premise of this post was how to lower and protest taxes.\n\nYou have a hard time focusing on the main subject from what I can see. \n\nThe property isn't stabilized. I've single handedly added to the cash flow by keeping everything in house. From property management, marketing, structuring leases, to janitorial. I have been very profitable with this acquisition. But again, the question was which methods have people employed to lower taxes successfully?\n\nThanks to those with positive responses.", "replies": [{"id": "hrvuqfj", "text": "Closing in less than 30 days isn\u2019t a feat.  For perspective, I closed my last commercial deal in 4 days.\n\nI don\u2019t mean this in a demeaning manner, but you seem very inexperienced.  You may have \u201csaved\u201d money by doing all of this work yourself, but continuing to work like this will cost you much more than it will save you.  \n\nAnd I have not got off topic.  As I have stated three times now, consult with tax experts.", "replies": [{"id": "hrvvii0", "text": "A very generic answer that lacks substance and depth. Clearly this doesn't add value.\n\nI'm asking for granular information. There was a response above that mentioned something about stabilization and current market value less the expense of having it stabilized. That was good!\n\nIf you don't know, then just say so. I like to know everything about my assets. Whether I'm trading crude oil and jet fuel based on demand metrics from airlines, or an office building i bought. I want to know the inner workings. That's what makes you and I different, vastly different. You out source everything and I want to know why the HVAC needs to be upgraded and which circuit bares most of the work. It seems as though your thinking scrapes the surface level of many topics.\n\nI'd like to be the informed client that goes to a tax specialist being informed, vs blindly going in there as a weak uninformed consumer. This will also foster respect for the tax specialist.", "replies": [{"id": "hrvxy84", "text": "Your question alone displays your ignorance.\n\nYour tax options vary depending on where you are, how long you\u2019ve owned the property, the use of the property, what incentives you qualified for, which incentives exist in your area, whether or not you own the property outright or have financed it, whether or not you owner occupy the property, how much you\u2019ve put in to increasing the property\u2019s value.  \n\nYou shared virtually no information with us and asked for an informed answer.  That\u2019s how I know you\u2019re ignorant and that\u2019s why the only meaningful information anyone can give you is to TALK TO A PROFESSIONAL.  If you don\u2019t know what data is pertinent to share, then you definitely are hopelessly out of your depth.  Even the most basic and important information, what country, state, and city your in, was left out of your post.  For all you know, the person that answered your question in a way you believe was \u201chelpful\u201d wasn\u2019t even offering advice that works in your country.  You are hopelessly ignorant and your ignorance is why I\u2019m telling you that you need legal tax counsel.  You have no idea what you\u2019re doing.\n\nIt\u2019s great that you want to know the inner workings, but instead of talking to people and making informed decisions like I do, you make stupid decisions and then ask people on Reddit how to fix it.  \n\nIt\u2019s far better to ask and learn first than move out of ignorance and ask for help cleaning up your mess afterwards.\n\nIf you want us to inform you on what to say to a tax specialist to give them the false impression you know what you\u2019re talking about, you can ask for that, but that\u2019s not what you asked for.  You said that you can\u2019t afford a $60k tax bill, you have no idea what methods there are to protest it and you have 13 days until you\u2019re screwed.  The only real advice anyone can give you is GO TALK TO A TAX EXPERT because you have no idea what you\u2019re doing, we don\u2019t even know what country you\u2019re asking help from, and you\u2019re out of time.  For all you know it will take 2 weeks for them to even process your request and by then it\u2019s too late.  \n\nYou don\u2019t have the money to pay it, you don\u2019t know how to contest it, you don\u2019t share any relevant information and you reject the one piece of advice that has been most consistently offered, which is to go get REAL help.  \n\nI can\u2019t help you.  I likely could have given you some of my tips and tricks, but they don\u2019t work if you only have 13 days and no cash.  \n\nI bought 61 units last year.  I know what I\u2019m talking about, so unless you want to learn the hard way, which for some reason it sounds like you really enjoy, be smart and do what you should have done months ago.  Hire professional help.  You clearly need it.", "replies": [{"id": "hrvyxaq", "text": "Property is in Houston, Texas. Owner occupied, bank financed, during closing the prior owners tax liability was netted into the final closing amount. Meaning their tax liability was excluded from their final settlement amount.\n\nI have the cash to pay for it, but why not protest it if thats an option. I don't like the way the city is run by liberal politicians, nor do I agree with the tax valuations.\n\nRealistically I don't think there's much I can do about last years tax liability, but I need to plan for the coming year. \n\n$60k is a drop in the bucket (bc ibhave it), but I still need to focus on reducing that amount since the building doesn't warrant that. Who doesn't like to save money?\n\nThere are a myriad of questions I have bc I am new.", "replies": [{"id": "hrw141n", "text": "That information is helpful, but those questions will still be best suited for a tax professional that specializes in this.  I wouldn\u2019t pay the tax if you plan on contesting it, and if you plan on contesting it you need to get the ball rolling.", "replies": [{"id": "hrw1ia6", "text": "Thanks for the information. I've been swamped with running my business, along with managing this new acquisition. For your holdings, do you handle everything your self or do you leverage the tax specialist?\n\nThis is a new and fascinating business, which ill continue to grow but getting the building to a healthy occupancy rate and learning the behavior of the building has taken up most of my time.", "replies": [], "depth": 14}], "depth": 13}], "depth": 12}], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "hrwfnb7", "text": "DIY 50k sf?", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hrw0zao", "text": "The protest deadline has most likely already passed.\n\nIs the assessed value significantly higher than the purchase price at which you acquired the property?\n\nMost likely, the tax rate is the tax rate and there isn't much you can do about that.", "replies": [{"id": "hrw1s52", "text": "Assessed value is 2.2\nLand 1.3\nImproved .9\n\nI paid 3 - yes I paid a bit more but it had established tenants and healthy cash flow. My business was in the building as well. Thus for 5yrs I was in the building as a tenant.\n\nHonestly I need to supress that tax bill. Someone said don't pay it yet, some have said there isn't much I can do.", "replies": [{"id": "hrw38cg", "text": "The government is going to take the position that the property is worth whatever you paid. Trying to get the assessed value lowered is not going to go anywhere, and you run the risk of the assessed value going up based on looking at your purchase transaction.", "replies": [{"id": "hrwtmh6", "text": "This is a very good answer.\n\nDoes this also affect comps of buildings around mine? Majority are class A buildings in Houstons sub market which is minutes from the medical center here.\n\nI think you nailed it by looking at the risk I face by fighting the tax bill and bringing the purchase price into the conversation.\n\nTo counter that argument - just bc I paid X amount, doesn't mean that's what it's worth.\n\nIs the assessed value an accurate valuation of what it should be taxed at? Who determines this? Surely I don't think the appraisal dist employs ppl that are experts in valuation. Its a very arbitrary number.\n\nJust bc the got states the assessed value doesn't mean its right.", "replies": [{"id": "hrx0it5", "text": "You need to pay the taxes.  Not sure there's any way around paying the bill due in 2 weeks.   Texas is a non disclosure state so you might be able to get around the assessor telling you the assessment is right because of what you just paid.  As someone who has done property tax appraisal work, no I don't think assessments are 100% accurate, but it's also definitely not arbitrary.  The appraisal district 100% employs people well versed in valuation, especially in a major market like Houston.  It's very naive to think the taxing jurisdiction in a major American city is going to have no idea what they're doing, the number isn't arbitrary.\n\nIf you were in any other state I'd say go find 3 recent comps similar to your building and bring it to the assessor.  You're in Texas, so finding comps is going to be hard, and you're not a real estate professional, so you don't have access to comp searches, and you don't seem to want to pay anyone for help, so I'm at a loss.  You're other route might be to go to the assessor with the buildings 2021 financials, get a cap rate based on the assessed value, and argue that point, but I'm not sure that's going to get you anywhere.\n\nLastly, based on the numbers you're throwing around, if you paid $3 mil and \"might have overpaid by $500k\" that's 25% over.  That's insanely off the mark in CRE.  A good MAI appraiser would have charged you $6k-$8k for an appraisal.  Spending $6k to save $500k is the best ROI you're going to get.  Doing things yourself is a great way to learn, but to me it seems you're being penny smart and pound foolish.", "replies": [], "depth": 5}, {"id": "hrxyex3", "text": "Comparable sales approach is not usually used for commercial real estate.\n\nWhat an arm's length buyer is willing to pay to buy the property is the definition of what the property is worth.\n\nSince you paid approximately 35% more than the assessed value, the assessed value is obviously inaccurate but the error is in your favor.", "replies": [{"id": "hry1f59", "text": "In a property tax appeal the sales comparison approach is 100% going to be used as part of the appeal.  Yea, you should have a dcf as well, but then you're just really arguing over pricing, which again you're going to need to point to pricing at recent sales.  I've written appraisals for tax appeals at a previous job.  I've seen the tax consultants work for appeals at my current job.  If OPs building is assessed at a drastically different PSF than recent sales, OP at least has something to argue.", "replies": [{"id": "hryi95y", "text": "Thank you for your response.\n\nI'd like to dig in deeper into this methodology. I see where you're going with this, but can't quite wrap my head around it", "replies": [], "depth": 7}], "depth": 6}, {"id": "hryhrl5", "text": "Thank you for your response. \n\nSince the assessed value is lower, its best to stay with that value vs protesting for a lower valuation, right?", "replies": [{"id": "hryp96b", "text": "You'd be protesting the assessed value, so yes if you want to lower your taxes, you need to get the assessment lower.    To get the assessor to lower your taxes, you need to prove your assessment is too high.  Since you just paid well over the assessment for the property, and assuming that the assessed value is the market value, that transaction is the best data point for the assessor, but is not a good data point for you.  So you'd have to find other evidence.  And be aware, if the assessor realizes you're the new owner, protesting the taxes, but are not using the actual price you just paid as evidence the assessment is wrong, they're going to assume you paid more than it's assessed at.\n\nAs someone else suggested, there are firms that will appeal the taxes for you and keep part of the savings.  I actually think that's a terrible idea since appraisals are only going to run you $6k max.  Get an appraisal.  I cannot stress enough how disadvantaged you are in terms of being new to CRE, with no access to resources, in a state where sales information is already very difficult to find, and trying to figure it out on Reddit vs paying ppl to do this.  You have a $3 million asset.  $6k for an appraisal to figure out the taxes is a rounding error in the scheme of things.  \n\nCompletely unrelated, but you should REALLY hire an accountant, get a purchase price allocation done, and make sure you are taking the maximum advantage of depreciation.  You will 100% need to hire a professional for that.", "replies": [{"id": "hrztgti", "text": "This was a great response!", "replies": [], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hrwavqt", "text": "Buys property... Doesn't take taxes into account...", "replies": [{"id": "hrwsi7y", "text": "Drops in the bucket for me. \n\nRealize this - most ppl in in real estate get into it bc they have no other options to earn a respectable living. This includes brokers, leasing agents, PM, etc...\n\nYou fail to realize that I trade commodities. I'm VERY liquid. In my world if you aren't hard money from the moment you roll out of bed at 5am and know what the consumers of the world are thinking then you're ill informed as a trader. \n\nDo you seriously think I bought it blindly not thinking about taxes?\n\nMy position is to protest taxes, and or bite the bullet and pay. \n\nMy question was - how would I go about it and which angles should I pay attention to. Which strategies have investors used. \n\nIf someone asked me a question about the oil and gas markets, I'd openly help them out. Clearly just a handful of people here have had productive answers - thank you.", "replies": [{"id": "hrzprgn", "text": "Hahahahaha. \n\nI\u2019ll take cognitive dissonance for $200, Alex.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hrwfkxg", "text": "That\u2019s what you get for living in a high tax mismanaged blue state", "replies": [{"id": "hrwswdm", "text": "Although social liberalism has shown traction amongst the Hispanic demographics, Texas will always be a red state.\n\nDo you know truly know the relationship between colors and party affiliation?", "replies": [], "depth": 2}], "depth": 1}, {"id": "hrx6no0", "text": "Asks for advice and then doesn't like the advice and decides he's smarter than everyone. \n\nSounds like the seller made out nicely on a sale to a schmuck.", "replies": [{"id": "hrx7mlh", "text": "I did pretty well my friend. I don't appreciate the name calling. I trade commoditie, my business alone does very well. Plus the current rent roll from current tenants generates positive cash flow.\n\nI never said I didn't like the advice. I appreciate everyone's contribution \ud83d\ude03", "replies": [{"id": "hrx8s8k", "text": "I'm not your friend.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "hryp18o", "text": "Harris County is among the most aggressive property tax jurisdictions in the country. Normally, in other markets, we will underwrite a 80-85% of purchase price hit year one or two depending on the closing date timing or the re-assessment schedule.\n\nIn Dallas, Houston, Austin and increasingly San Antonio we underwrite an immediate year 1 hit at 100% of purchase price. The valuation typically meet or exceed those targets, even when we try to hide the price, ask our vendors not to publish the price or disclose to CoStar. They find out.\n\nWe have had success protesting using Covid era historicals in other markets, but protesting our 2020 acquisitions to Harris County proved fruitless. They are very aggressive and utilize property taxes to fund most of the public services since there is no state wide income tax.\n\nAs a side note I am in the camp of hiring a third party, but we  have close to 700 units in Houston with another 300 or so under contract and simply have other things to attend to. But congrats to you being a solopreneur, taking down your 50k* sf and doing it all by yourself. I've seen some tips and white papers provided on attorney sites to self protest. You may have better luck searching those out if you havent done so already.\n\n(*edited)", "replies": [{"id": "hrysc74", "text": "Thank you for your answer and guidance. I need to surround my self around a group of seasoned veterans to gan this sort of knowledge. I'm doing everything on my own at this point. From PM, to structuring leases, to figuring out what my competition is doing. Along with being side by side with HVAC techs and plumbers to really get a feel for how the building operates.\n\n*50k sf \ud83d\ude03", "replies": [], "depth": 2}], "depth": 1}]