How Do You Estimate Property Taxes for Your Commercial Property?

For business owners, budgeting and financial strategy are a top activity at the beginning of the year, and often every quarter. As part of this process, it is important to include the cost of taxes in your budget planning. When it comes to commercial property, many are looking for a good way to project what their property tax liability will be for the next year. It is tricky to estimate property taxes without knowing what might impact your property in the upcoming year, and while there is no silver bullet or crystal ball, we have a few tips for you to keep in mind as you escrow internally for your future tax payments.

Track Impacts on Your Property as They Happen

A lot of planning for the year means tracking things as they are happening that might impact your tax bill. Be aware it might impact you, and budget for the possibility. These items may include:

Income Increase: Income-producing properties such as shopping centers/hotels/apartment complexes are subject to increasing revenues. When NOI (Net Operating Income) is increasing, it is great for business, but save for a potential tax increase. An increasing income, means an increased property value, making it important to be aware so that IF it does it doesn’t shock you.

Additions: If you’ve added square footage, you’ve likely increased revenue and property value. And taxes. Make sure you plan for it. This can be especially tricky when investing in an addition as you do need to allocate a budget for the increase in taxes.

Recently Purchased Property: If you’ve just purchased the property the year before and what you paid for the property is more than what the property was previously assessed at, you could be looking at a large increase in property taxes. Your purchase price could impact the newly assessed value.

Change in Vacancies: The quickest way to add value is to buy a high-vacancy building and do things to get tenants. A new management company, more marketing, or TLC on deferred maintenance can help you fill empty spaces, increasing the income produced by the property and potentially increasing the value and taxes. 

Increased Rental Rates: If you increase rental rates where tenants have been there a long time, you may drive up the value of your commercial property.  It is not a guarantee to happen right away, in fact, it might take a few years, but eventually, your value and taxes will increase. 

Be Aware of Temporary Spikes

It is important to plan for the cost of temporary spikes in revenue at your property. An example of this is when hotel owners at the end of 2017 saw a huge spike in revenue due to displaced families after Hurricane Harvey. The increase in 2017 meant they had to pay more in 2018 even though revenues dropped back down in 2018.

We urge you to stay cognizant of changes to your property every year, so you can plan for your property taxes. If you do get a valuation that is not accurate, we would be pleased to help you protest your property taxes. Just make sure you reach out to us before the May 15th deadline. 281-880-6500

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How is Commercial Property Tax Calculated?

In Houston and all of Texas, property taxes are high compared to other states. The reason for our high property taxes is that it is the main source of funding for local services such as schools, emergency services, and municipal utilities. Without a state income tax, revenue has to be higher from other sources.

To calculate commercial property taxes there is a step-by-step process that must take place first:

  • The county appraisal district determines the current value of each property every year.
  • Exemptions are subtracted. (Exemptions are offered to charities and for solar or wind energy devices. The majority of commercial properties do NOT qualify for any exemptions.)
  • Tax rates are then set by the various local taxing entities such as school districts, cities, counties, and others during publicly held meetings.
  • Your tax is calculated and you receive your tax bill – usually between October and December. (You could receive several bills, as each taxing jurisdiction may bill you individually. The possibilities include the school district, the county, and the municipality.)
  • Tax payments are due in January.

Calculating Your Commercial Property Tax Rate

To calculate your commercial property tax gather your assessed property value, exemptions, and local tax rates.

To get the number, first subtract your exemptions from the full assessed property value.

Then use the tax rate percentage and the remaining property value to calculate your tax bill.

If a property is worth $125,000. Has a $25,000 exemption. And the total tax rate is 1.5% the property owner will have to pay $1,500.

$125,000 – $25,000 = $100,000. 1.5% of $100,000 is $1,500.

The accurate valuation of your commercial property value is the most important part of ensuring you pay a fair tax bill. Once the property value is assessed each year, you have until May 15th to file an appeal if you feel the assessment is inaccurate.

Our team offers expert advice and will even handle your commercial property tax protest for you! Call today to ensure your case is filed before the May 15th deadline. 281-880-6500

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How do I Protest My Property Taxes in Harris County?

If you have just received your 2019 commercial property tax bill or property valuation, you may feel sticker shock. With Houston’s growing economy, property valuations and taxes are going up with it. This might leave you wondering how you can lower your property taxes to avoid a similar shock in the future. With a quick online search, you likely have discovered that protesting your property taxes or appealing your valuation is an excellent tactic to ensure fair taxation – but how do you get started?

Option 1: File an appeal with your local appraisal district by the May 15th deadline. This is the best option because NOT all properties will qualify for option two – which means you could be out of luck if you wait.

Option 2: If you miss the deadline you can file a Correction Appeal which is a more complicated process.

Both options above can be completed by the property owner or by a hired tax consultant.

How to Protest Commercial Property Taxes

How to protest my property taxes

To protest your property taxes directly go to the HCAD website (or your local appraisal district if you’re outside of Harris County) and file your appeal before the May 15th deadline.

Once you have filed for an appeal, you will need to do some homework to prepare for your review board hearing.

  • Gather documentation to support the claim that your commercial property valuation was unfairly high. This can include receipts, photos, and other business documentation supporting the lower value.
  • Investigate and collect evidence of the value of comparable properties.

Attend your scheduled appraisal review board hearing to present your documentation. Your new valuation will be determined on the same day as your hearing.

Commercial Property Tax Consultants

If you’re like most business owners, you have your strengths and weaknesses all combined with heavy demands for your time. By hiring a professional property tax consultant, you’ll save time while benefiting from expertise in all things property taxes.

By simply filling out one quick form and answering a few follow-up questions afterward, you can trust the matter will be handled with the utmost care and thoroughness. Our team will investigate the property value, gather evidence, and attend your appeal hearing on your behalf. With over 40 years of combined experience assessing property values and providing appropriate evidence to prove when valuations are inaccurate, our commercial property tax experts are your best choice for protesting your Houston property valuation.

If you missed the deadline but still would like to protest your property valuation, we urge you to choose a consultant. The correction appeal process is much more complex and a tax consultant is your best option.

We are confident we can help. Call today to get started. 281-880-6500

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How to Lower My Commercial Property Taxes in Houston

Commercial property taxes can be the largest cost associated with owning and occupying commercial real estate. It is important for every commercial property owner to be aware of their ability to effectively lower what they pay each year with a little bit of strategic effort. Follow these tips to keep your commercial property taxes fair!

Houston Property Taxes

Know what you’re paying.

Check to see what you are paying and take note of it every single year. Knowing what you pay and what your valuation is, is the first step in deciding if you have some work to do to lower your commercial property tax expenses.

Check for accuracy.

Check the local appraisal district’s description of your property for accuracy. If it is over-blown, it may be time to appeal your property value.

Pay your taxes on time in full to avoid late fees.

Just like any bill in your life. If you pay it before it is due, you avoid unnecessary expenses.

Track changes.

Changes at your property make a big impact on the value. Whether changes are renovations, repairs, or damages, take pictures with a date stamp. Just by pulling a permit, you could see your valuation rise. If your property was damaged it could be seriously over-valued by the appraisal district, and your proof of those issues is crucial to lowering your valuation.

Keep detailed records.

Keep records of everything related to your property value including assessments, income-earned, vacancies, or local economic events. Property values can ebb and flow due to a large variety of local and state-wide factors. Any little thing can play a part, so keep it all in a file as it happens.

Know your market.

Take note of current average rental rates for similar properties. This information can be extremely valuable if you decide to protest your commercial property valuation.

Keep detailed expense records.

Track operations costs for your building. Relevant to the value of your property, if operating costs are higher than expected, your value would be lower. The evidence of this fact could be crucial in a property tax appeal arbitration.

Protest your Houston property valuation.

Appeal your property valuation every year. It might sound like a huge hassle, but the appraisal boards have too many properties to keep track of the subtle nuances of changing values that are hyper-local or the result of an unseen change. By following the steps above, you’ll be in great shape for appealing your value – just be sure to file by May 15th each year.

Work with a property tax consultant.

The best way to ensure timely filing and maximum results are by hiring a tax consultant who specialized in property tax appeals. If you choose Property Consulting Group, we’ll use our combined real estate and property tax knowledge to gather all the most important information about your property to get your valuation changed to a fair number – effectively lowering your tax burden.

Call today to learn more. There is no need to wait until valuations come out, we can get you on the roster to appeal your property taxes now! 281-880-6500

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Case Study: Harris County Commercial Property Owner Saves $185,000 with Commercial Property Tax Appeal

Every business has a need to spend less money and earn more. While some expenses fall in the category of “you have to spend money to make money,” others just feel like a waste. When it comes to property taxes, spending more certainly doesn’t earn you more, so it is essential to be sure you only pay a fair share of taxes based on fair property valuation. We advise most commercial property owners to protest their property valuation on an annual basis to avoid paying more than necessary. The efforts can save a business big, especially in a year where valuations increase substantially year-over-year.

In the Houston market, the thriving economy has property values on the rise. The continued rise in property values has some property owners facing larger tax bills every year. At the end of 2018, we heard from such a property owner who had just received a very large tax bill. A mix up with a different tax consultant meant a tax appeal had not been filed when it should have been.

120% Increase in Taxes in One Year!

The HCAD valued the property in question at a 120% increase over 2017. This meant the business owner was facing a tax bill that was 120% higher in just one year. The surprise hit them hard as they were unaware of the proposed increase to their assessment.

In addition to coming up with a large amount of capital to pay the bill, the business owners would have had to raise costs for tenants to cover it. The increase would have been problematic for many of the tenants and could have potentially caused lost revenue.

After our initial meeting, we were able to file a correction appeal on behalf of the property owners.

What is a Correction Appeal?

A correction appeal is a process by which a property valuation can be appealed after the May protest deadline. A correction appeal is more complex because the rules and criteria are more rigid than a normal property tax appeal making it difficult to navigate. The deadline for a correction appeal is the tax delinquency date which falls around February 1 of the following year.

Our staff of property tax experts were able to attend the hearing on behalf of the client. We were able to get their tax bill lowered by $185,000.

Every property is different, and every case is different. This property is quite large and faced a huge increase in valuation, making the numbers quite dramatic. But any savings in your commercial property tax bill provides more capital that can be used to invest in your business. As the Houston real estate market continues to thrive, more commercial properties will be facing large valuation increases. Make sure your property value increase is fair by engaging with a property tax consultant before the May 15th property tax protest deadline.

Call today to get on our schedule for next year! 281-880-6500

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Why are Property Taxes so High in Texas?

If you’re new to Texas or have owned commercial property in other states, you might be wondering, “Why are property taxes so high in Texas?” As state and local tax rates and rules can vary widely across the country, there are many factors of causation for every locale.

In Texas, we have the luxury of NOT paying state income taxes.

Without state income tax as revenue to fund services, the state does lean more heavily on property taxes. While you may enjoy a larger paycheck at the end of the week than friends and family in other states, you may pay more in property taxes.

In Texas, we DON’T have gambling.

Almost everyone knows that in Nevada there is no state income tax. So you are probably thinking, well, why are my commercial property taxes higher here than they would be in Nevada? Simple, we don’t have gambling here in Texas. Gambling creates a great deal of cash flow for government services in Nevada, so they don’t need to lean so much on property taxes.

In Texas, our economy is on the upswing and property values are rising.

If you feel like your property tax burden has been higher in recent years, you’d be right! With the rise in property values in this booming economy, your tax burden goes up too! As every property is assessed each year and you pay taxes on the full value of your property, many property owners are seeing their tax bills rise each and every year when the economy is thriving.

The good news is that local municipalities often lower tax rates when property values go up. But, with the speed at which values are rising, your total property tax bill is still likely to go up.

If you have any questions about your commercial property taxes or if you think your annual assessment is inaccurate, give us a call today. (281) 880-6500 We most likely can save you money with by protesting your valuation!

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Houston Property Tax Rates Are in Flux: What you Need to Know

UPDATE: 10/14/19

Two commissioners did not show up for the vote on the proposed tax rate increase. Furthermore, the 2019-2020 property tax rates for FOUR Houston area taxing entities have been finalized to a combined rate of $0.61170 per $100 valuation, which is decreased from the 2018-2019 combined rate of $0.62998. Rates are as follows:

  • Harris County: $0.40713
  • Flood Control District: $0.02792
  • Harris Health System: $0.16591
  • Port of Houston Authority: $0.01074

PUBLISHED: 10/2/19

You can’t turn on the news or open a newspaper lately without some news related to the Houston property tax rates. Rates are being decided on now, and the combined rates from the school district, county, and city will make up your final property tax burden.

Keep in mind; lowered tax rates do NOT necessarily mean a lower tax bill. With property values on the rise, you still could be paying more this year.

While not all rates have been finalized yet, there are a few things you need to know.

City of Houston Property Tax Rates 2019

There was a cap set in 2004, limiting property tax revenue growth to 4.5% OR the combined rates of population growth and inflation – whichever is lower. So, with values going up, the city has to lower the rates to stay under the cap. This year the city council did just that, cutting the rate for the fourth time in five years. The rate will now be $.56 for each $100 of taxable home value.

Houston Independent School District

The Houston ISD Board lowered the tax rate as well. The new tax rate for Houston ISD is $1.1367 per $100 of taxable value. The previous rate was $1.2067.

Harris County Property Taxes

Harris County is scheduled to vote on a proposed property tax hike. The proposal would take the rates from $.62998 to $.65260 per $100 of valuation. The final vote on the proposal is scheduled to take place on October 8th 2019. Some commissioners who are opposed may block the proposed increase by not showing up for the vote. With property values on the rise, the new tax rate could mean as much as a 10% increase in cost for some property owners.

While we all await the final property tax rates for the year, we encourage you to reach out to our team now if you feel your tax burden has been too high in recent years. One way to ensure fair taxation is to make sure your property valuation is as accurate as possible. If your valuation is higher than it should be, we are your best choice for a property tax appeal. Call today to learn more. 281-880-6500

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HCAD 2019 Houston Commercial Real Estate Market Update

The U.S. economy is in one of the longest expansion periods in history. The length of the expansion is causing some investors to be cautious in their nervousness on when the expansion will end, even though most think the expansion will continue for a while yet, but at a slower growth rate.

Greater Houston Growth

Greater Houston has the largest job growth of any U.S. Metro in the past year, coming in just behind the U.S. 3.7% unemployment rate with a 3.8% unemployment rate. Important sectors such as the office sector are just recovering from the last oil downturn driving that growth.

Blue collar jobs saw the most growth, leading the way in construction and manufacturing jobs. While the metrics look strong for continued growth, we do have some reasons to be concerned in Houston. Oil prices are uncertain, an impact we are all too familiar with. But, the trade war with China is causing more uncertainty as China is the 2nd largest trading partner for the Port of Houston, after Mexico.

Commercial land sales slowed in 2018. The HCAD report attributes this to investors focusing on developing previously acquired property as well as quality vacant land becoming more scarce. And the northwest area of Houston continues to lead in sales activity.

The Downtown Living Initiative Program continues to spark development too. Two new high-rise apartments, and a high-rise apartment rehab. Several mid-rise apartments were built as well.

Where is commercial real estate growing and how?

  • Galleria and Uptown: Mixed Use Development
  • Inner Loop: Transformation continues with ExxonMobil Research facility development, Shell Oil information center sold, Radom Capital & Triten Real Estate mixed use office and retail space, Caydon Property Group’s high rise, AECOM & PMRG’s high rise on Main in midtown, and Rice Management’s transformation of the midtown Sears building.
  • Northwest Quadrant: Continued growth is led by Springwoods Village and Aldine as the Grand Parkway continues to be the catalyst for growth.
  • Northeast Quadrant: Generation Park
  • Southeast Quadrant: Redevelopment of Baytown’s San Jacinto Mall
  • Southwest Quadrant: Marathon to move to CityCentre

Additional Houston Commercial Real Estate News

The office market is on the brink of recovery finally.

Apartments are back in an expansion phase.

Retail expansion seems to have peaked.

Warehouse expansion continues with no end in sight.

We encourage you to read the full 2019 Market Trends report for all the important details.

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Houston’s Real Estate Market Bounces Back

As business and property owners ride the waves of the Houston market, it is always great news to hear that a short-term struggle was just that, short-term.

Commercial Property Executive reports that Houston’s housing market proves to be resilient after natural disasters have affected portions of the greater Houston area. Construction remains active so rents are expected to rise by 2.3% in 2018! With Hurricane Harvey devastating the area just over a year ago, that is a fast bounce-back, welcome by all.

A few factors feeding the quick real estate recovery include employment growth of over 15,000 jobs, increasing growth of Houston as a distribution center placing warehouse space in high-demand, and the airport’s five-year two-billion-dollar capital improvement fund attracting more investors. With Amazon, Fed Ex, Ikea, and Best Buy adding distribution sites and re-building as well as large projects keeping the construction industry growing, Houston is expected to see rents improve.

When rents go up, property values should go up too! Remember to give us a call if your commercial property valuation is ever questionable.  (281) 880-6500

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I Filed My HCAD Property Tax Appeal Before the May 15th Deadline, Now What?

Filing your commercial property tax appeal before the May 15th deadline is the biggest hurdle you face as a property owner. Once we file this paperwork on your behalf, PCG will get to work on preparing your case for the Harris County Appraisal Review Board. Wondering what that process includes? Here is what our very important next steps look like:

Investigate the Fair Property Value

At PCG we dig in deep to find out what the value of your property appraisal should be. For most properties, we will look at property records, consider the fair market value and measure your property against comparable properties. We’ll visit the property in person if special conditions have occurred since our last visits, such as poor visibility, poor access or possible flooding so we can have first-hand knowledge of this change. When it comes to income-producing commercial properties, we also review the financials and perform an income analysis. One of the best ways to assess the value of a commercial property is to evaluate the income it generates.

Present Property Value Evidence to Appraisal Review Board

With all of our investigative work behind us, PCG is prepared to arrive at your Appraisal Review Board (ARB) hearing with evidence on hand. As the property owner, you don’t need to attend the hearing; PCG will handle everything for you. The entire hearing will last 15 minutes. We will split the time with the Harris County Appraiser as each of us to share our findings with a panel of three individuals who will hear the case. At the end of the hearing, the panel makes their determination and sets the new value for the year.

New Valuation Determined the Same Day

Since the ARB makes their determination at the end of the hearing, we will be able to input the information into our system the same day. The system refreshes each night which means you will know your new valuation the very next morning through our online client portal.

If you have any questions about your property tax protest, please call us at any time. 281-880-6500

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