All Forum Posts by: Derrek H.

Quote from @John Michaels:

I came across this BP thread listing the Top 10 Real Estate Markets for Cash Flow in 2024
https://www.biggerpockets.com/blog/best-real-estate-markets-...

However, it didn't mention some of the markets I see talked about the most like
Ohio and Tennessee etc  I don't see anyone talking about McAllen or Idessa Texas.
What am I missing? Would you agree with this list ? It was printed in January.

McAllen, Texas
Odessa, Texas
Corpus Christi, Texas
El Paso, Texas
Decatur, Illinois
Fayetteville, North Carolina
Mobile, Alabama
Lubbock, Texas
Rochester, New York
Flint, Michigan

Texas can be good to find better value for properties than other parts of the country. I bought in the Rio Grande Valley, where McAllen, TX is in. However, be aware that for investors (who do not live in the property as their primary residence), there is NO LIMIT to how much your property appraised value, and therefore your property taxes, can increase from year to year! (If you live in the property so that you can claim the Homestead Exemption, your property appraisal can "only" go up a max of 10% per year. But if is a rental, there is no limit to the increase.)

I bought a 4 plex in 2023 and the appraisal district valued it around $407k. This year the valued it at $490k!! Nothing has changed about my property - I made no improvements - that caused it to increase 20% in value in 1 year! A 20% increase in property taxes (or anything higher than 5%) can really screw up your multi-year pro-forma and your projected returns.

In Texas, you are allowed to protest the value the appraisal district appraises your property at. And it can be definitely worth it, IF you win. I paid about $10,000 in property taxes last year. Now I am looking at $12,000. So I will definitely try to protest the appraisal increase. And there are professional tax protesting companies in Texas. They are usually paid a fee of 25%, 30%, or 35% on the taxes they save you, IF they are able to achieve a property value reduction. 

In my example, I paid $10,000 on a property valued (by the appraisal district) at $407,000. $10,000/$407,000 = 2.46% tax rate (approx).  This year my property is valued by the appraisal district at $490,000. $490,000 x 2.46% = $12,054 potential property tax bill. Let's assume the tax protester I hire charges 30% on any tax savings achieved, AND they are able to lower my appraised value. Let's say they convince the appraisal district to lower the value from $490,000 to $445,000. They knocked $45,000 off my value. $45,000 x 2.46% = $1107 in tax savings. I would have to pay the protester $1107 x 30% = $332.10. This does help, but my property taxes still went up more than 9%!  ($445,000-407,000)/407,000 = 9.3% increase. 

I also don't think it's common to convince the appraisal district that your property did not appreciate at all, unless you can back it up with pictures that your property was damaged or is in worse shape that it was the year before. The best I've seen anecdotally is just to limit the increase to 10%, but again, many other states limit the increase to 5% or less. So 10% is still high, IMO.

So I'm not saying McAllen and the Rio Grande Valley aren't good places to invest. But just be aware that the property taxes are hard to control, and you would want to fight them every year (b/c the appraisal district will likely increase your property valuation every year). Good luck!

@Rhett Tullis, thanks for sharing that additional info. I have had the similar thought that even if I could persuade the county appraiser/appraisal review board that my property value increased less than 5% (which is likely challenging given that prices have gone up in the last 2 yrs and my property was just recently built), the likely savings would be pretty small.

I realize that there is much more incentive to protest tax values in Texas, b/c they do not have a 5% limit on taxable real estate value increase. That is probably also why I could find several tax protest companies for 1-4 unit properties in Texas, but I could not find one (for 1-4 unit residential) in Oklahoma. Thanks!

Quote from @Rhett Tullis:

It does not hurt to try.  for larger commercial there is an attorney in town that specializes in this and does a pretty good job for a relatively low cost.  If nothing else it makes them think next year when the evaluate your property and see if they want to deal with you again.

 Thank you, Rhett! I see that you are a property manager. Do you manage residential, 1-4 unit properties, and if so, do your owners protest their valuations? If you own 1-4 unit properties yourself, mind if I ask if you protest those valuations?  Thanks!

Hi BiggerPockets Community,

Question: Is it worthwhile to protest property taxes in Oklahoma for non-homestead, 1-4 unit properties (ie, small residential properties) only if you can limit the increase in taxable value to less than 5%? (I have an SFR rental in Oklahoma.)

I know that taxable real estate values for investment property (AKA non-homestead property) in Oklahoma are limited to a 5% increase per year, which essentially limits the property tax bill increase to 5%. (Please correct me if this is wrong.)

Assuming that non-homestead property taxes cannot go up by more than 5%, does that also mean that in order for a taxable property value protest to reduce your tax bill, you would need to convince the tax assessor/appraisal review board to agree to a new taxable value that is less than 5% higher than your previous value?  

For example, assume my house was assessed at $100,000 in 2022 and my property taxes were $1368. (I am using a fake house value to make this clear. But my Assessment Percentage is actually 12%, and my millage rate is actually 114.94 per 1000.)  $100,000 x 12% Assessment Percentage = $12,000. $12,000 x .11494 = $1379.28 in taxes. (My millage rate is 114.94 per thousand, which equals 114.94/1000, which equals .11494.)  

Then in 2023, the fair market value is determined to be $120,000 (a 20% increase). However, b/c taxable property value can only increase by 5%, my taxable property value (AKA assessed value) can only increase to $100,000 x 1.05 = $105,000. So $105,000 x 12% x .11494 = $1448.244. (Assume that the millage rate stays at 114.94/1000.)   To confirm, ($1448.244 - 1379.28)/1379.28 = .05 = 5%.

Using this example, it seems worthwhile to protest my fair market value only if I can get it to be less than $105,000. If not, then it seems there would be no change in my actual taxes. Is this logic correct?

Put another way, is there any benefit, perhaps in the future, to protesting the fair market value even if you can't get it down under $105,000, but can get it down to $110,000 (which is less than the $120,00 value the tax assessor determined the 2nd year)?

Thank you in advance for your help!

Quote from @Ethan G.:

Quote from @Ronald Rohde:

Quote from @Derrek H.:

Quote from @Ronald Rohde:

We just accepted a settlement for reduction of $42k on a $500k property. Well worth it 

 Hi Ronald Rohde, I know this post was from 4 years ago, but curious to know if you used a tax protest company and who it was? Thank you!

 Wow, I have to think. I'd say O Connor does a ton, if it was $500k i'd say it really doesn't matter. Just look for the lowest percent charged, and get someone with a later hearing date. Those have better comps of prior reductions.

 I have used both O'Connor and Bettencourt.  Their pricing models slightly different.  Bettencourt was able to get some results, O'Connor none (but this is my own personal experience only).

 Hi Ethan, thanks for letting me know about Bettencourt. I will check them out.

Quote from @Ronald Rohde:

Quote from @Derrek H.:

Quote from @Ronald Rohde:

We just accepted a settlement for reduction of $42k on a $500k property. Well worth it 

 Hi Ronald Rohde, I know this post was from 4 years ago, but curious to know if you used a tax protest company and who it was? Thank you!

 Wow, I have to think. I'd say O Connor does a ton, if it was $500k i'd say it really doesn't matter. Just look for the lowest percent charged, and get someone with a later hearing date. Those have better comps of prior reductions.

 Thanks for your reply, Ronald! My research this week has shown that for residential properties, the fee ranges from a low of 25% of the tax savings to 40%. (I'll likely work with someone charging only 25%.)  Thanks also for the tip about finding a company with a later hearing date to have more time to see more prior reductions. That is really helpful!

Quote from @Ronald Rohde:

We just accepted a settlement for reduction of $42k on a $500k property. Well worth it 

 Hi Ronald Rohde, I know this post was from 4 years ago, but curious to know if you used a tax protest company and who it was? Thank you!

@Joe Hammel, thanks for the details. Those are very helpful.

Question: have you ever had challenges with tenants damaging the property in C+ and B- neighborhoods?  Or do you just make sure you have extra money budgeted in for repairs?

Also, is the landlord required by local laws to pay for snow removal. And legally required or not, how much per month do you budget for snow removal?

Quote from @Lee Ripma:

I have a hard time beating the Kansas City MSA in terms of price to rent ratios, cash flow and appreciation, and being landlord friendly. Started investing here from CA and never looked back

Intriguing - I've looked at Kansas City pre-pandemic. But I couldn't get a good sense of the long term RE appreciation rates. I am also looking to invest outside of CA. If you have any data or weblinks on appreciation that can be shared on the Kansas City MSA can be shared, I'd greatly appreciate it! 

@James York - Thanks for sharing and validating that you are doing this strategy as well. And thanks for explaining that it is to eliminate the typical refinance seasoning period!

@Syed H. - Thanks for letting us know that there are banks that do not require seasoning periods! Do those banks typically have higher interest rates than banks who sell their loans to Fannie and Freddie (who thus have to follow the 6 mo seasoning period, which I believe is imposed by Fannie and Freddie)?

@Simon S Marthinsen - Thanks for clarifying that this strategy was done to avoid the seasoning period with his credit union! I think I missed that part, lol.

@Dan V. - Thanks for clarifying that this was done to avoid the seasoning period with his bank. Thanks also for pointing out this might cost more in the end due to CPA and LLC fees and higher property taxes. I certainly saw that by selling at a higher price (to himself essentially), he would be raising his property taxes substantially and right away.