How to Successfully Protest your Property Values to Increase Cash Flow
By Mike Hanna, Managing Partner, Investmark Mortgage LLC
It’s springtime, which means you’ve likely received your Notice of Appraised Value on your rental homes for the current year.
We’ve all heard that housing values are rising, but that doesn’t necessarily mean that real estate investors should pay more in property taxes.
A successful protest of your property’s assessed value could save you thousands of dollars a year.
Here’s a primer on how to protest your taxes.
- Know your tax season. In most states, appraisal districts send out an appraised value statement in April and you have until May 31 to set a date to protest the value.
- Go online and learn the process. Most appraisal districts, you must make an appointment to meet an appraiser in person, although some districts allow you to protest online.
- Have these items ready before meeting with the appraiser for a property purchased between January 1 and June 30 of the current tax year:
- Settlement statement (HUD-1) from the closing. This shows the appraiser what you paid for the property.
- Photos of the property that the appraiser can keep on file. Be sure to include photos of the property in the condition before improvements. These will help illustrate why you were able to buy the property at a reduced price.
- Estimates of the work to be performed will show what improvements were needed to get the property in livable condition.
- Sold comparables in the area. You will need this for a good understanding of what similar property is worth in the same neighborhood. If you don’t know how to find this, ask a real estate agent or an appraiser for help. Be sure to show “comps” for sold properties, not active listings or pending sales.
Your goal at the protest appointment will be to get the assessed value lowered to the purchase price. Don’t talk too much. The appraiser already knows why you are there. Merely stating that you want the appraised value lowered to a specific amount due to condition should suffice along with submitting your HUD-1, “before” photos and repair estimates.
In most cases, the appraiser will lower the valuation, although perhaps not to the purchase price. Typically you should take what you can get. However, if you don’t feel like you were treated fairly, you can refuse to sign the adjusted value form and go before a review board. In many states, this is a separate hearing before two or three appraisers.
You can also protest your assessed value for property that was purchased in a previous year. In this case, the settlement statement won’t be of much value and if the property is in good condition. In this scenario, sold comparables (comps) will be the best tool for protesting your assessed value.
When gathering comps, use comps that sold for a lower value in the same condition as your property.
Appraisal districts must provide you with the data they used to assess your value. Most have this online and you will need a PIN provided on your Notice of Appraised Value to access it. This information can help you prepare your protest. You may find that the comps they used are in different subdivisions, older or newer homes, or built with different materials.
There’s also the possibility of protesting a property that you buy in the second half of the year, after the May 31 deadline.
As real estate investors, we want to maximize our returns. Even successfully protesting just one property can make a huge difference in your cash flow.
For more information about how B2R can help you obtain rental property financing to grow your business, just call 800-227-8107 or visit www.b2rfinance.com/borrowers and follow us on Twitter @B2RFinance.
LEGAL DISCLAIMER: Any and all advice contained herein is not intended as a legal opinion or as legal, tax or investment advice. Any investor or potential investor is encouraged to seek his/her own legal and tax advice.
The information on this page is provided for informational purposes only and does not constitute investment, real estate, or legal advice. This information should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. No representations or warranties whatsoever, express or implied, are given as to the accuracy or applicability of the information contained herein. The information may be modified or rendered incorrect by changes in the marketplace or developments in the law, or for any other reason, and may not be applicable to any individual reader’s facts and circumstances.