Rental Property Tax Appeal & How to Lower Property Taxes

A penny saved is a penny earned right? I was able to earn a lot of pennies by figuring out how to lower property taxes with a rental property tax appeal. With my rental property tax appeal, I was able to save myself almost $1,500!

With investing, I try to come up with different ideas to help me make and save money. The more money we have in our pocket, the more properties we can buy. In this article, I will show you how to lower your property tax bill in 15 min.

 

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How I Made $1,444.62 from 15 With My Rental Property Tax Appeal!

Every time I receive my rental property tax bill, I get irritated at how much I have to pay the government for my property.  A few years ago, I decided to appeal the property value of each of my rental units to bring the value lower and pay less in property taxes.

I knew there was a way to how to lower your property tax and I just needed to figure it out.

After talking with the County Assessor on how to lower property tax on my properties, I learned how the taxes can be lowered with a rental property tax appeal.

Recently, I spent 15 minutes of my time appealing the property value of the three properties and received three tax refund checks for a total of $1,444.62! 

The appeals process for a rental property is a very easy thing to do and it can save you thousands of dollars.  If you have a property manager it is even easier because he will go to the hearing in your place and represent you and your property. 

For me to save $1,444.62, all I needed to do was fill out the rental property tax appeals form and mail it. Since I invest in rental properties, I have a lot of properties to pay taxes on!

 

How rental property tax appeal and tax process work

Every piece of real property is taxed by the tax collector of your local County government. Your taxes pay for many different things like schools and roads. Depending on which County and state you live in, the property tax percentage you pay on your property value will vary.

 

Counties Will Have Their Own Rental Property Tax Appeal Process

Depending on the County you are in, there are usually two different elected officials that oversee the tax process.  The majority of the time one is the Tax Collector and the other is the Assessor. 

The Tax Collector collects the taxes for your property and the Assessor assesses the value of your property to the current market value. The Tax Collector takes the assessed value from the Assessor and applies the tax rate for that specific County and calculates the total dollar amount you are to pay for your taxes.

The county tax rate depends on many different variables, but the main thing is to know that the tax rate is set for all properties.

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Rental Property Tax Appeal

What to look at in your Tax Bill

Here is an example of a tax bill that you may receive from the Fresno County Tax Collector.

The section of the tax bill I am most concerned about can be called by many different names.  “Appraised Value” “Assessed Value” or even “Full Value” like in the Fresno County tax bill. 

For illustration, lets look closer at the Fresno County tax bill.  There are two line items, when added together, equals the total assessed value or the “Net Taxable Value”.

1. Land:  This is the value of the land itself that the property sits on top of.  Imagine if this was just vacant land and there were no improvements built on to of it.  That value is the value as the land is in it's raw form.

2. Improvements: This value is for any improvements built on top of the land.  An improvement can be  any man made buildings, structures, etc. that improve upon the property. 

Net Taxable Value

The Net Taxable Value is the addition of these two values.  Mostly, what you want to appeal is the entire Net Taxable Value of the property because it is hard to argue what the Land is worth separate from the Improvements.

Knowing that you pay taxes on the assessed value of your property, you should always review and appeal your assessed value each year.

Naturally, if you pay less in taxes the income from your property goes up and you make more money. You should make this a priority, especially sense it only takes five minutes to do and you can save a substantial amount of money.

Every year I review my tax bill from the tax collector and review the assessed value of my property. In the counties that I invest in, these assessed values are actually online so it is quick and easy to review what the assessed value is.

Being an investor in a specific area, you should have a good handle on the market value of your rental property and know if your property is being over assessed.  Use your knowledge of the market value to see if you should appeal the assessed value to bring the tax bill lower.

 

Check Your Tax Bills Every Year

There are many times when a quick check of the assessed value for your property can dramatically increase your bottom line income because you can save a substantial amount of money in taxes.

For one county that I invest in, the cut off to appeal the property value of my property is the middle of February.

Before the deadline I reviewed all my properties and found the ones that are being assessed at a higher rate than the current market value. I found three that I knew I would be able to appeal and bring the value lower.

In the same place that you can look up the assessed value of your property online, you should also be able to find an appeal form that you can fill out and send in to the appeals board who will review your appeal.

I have done this many times in the past and have seen great decreases in my assessed value which lowered my total tax bill.

This year, I spent five minutes reviewing the properties, filling out the forms, and mailing them into the appeals board in hopes to lower my total assessed value and bring my tax bill down.

Now depending on the county you live in, you may need to have your appeal notarized which would take a few minutes of your time to go to a notary and have her notarize your appeal.

 

Information You Will Need

Parcel Number

This is different than the address of the property.  The parcel number is used by the County to identify the parcel location without and address.  The property address is given by the Post Office for the purposes of mail.  If a parcel did not have a mailbox because it was a vacant piece of land, it would not have a mailing address. 

The parcel number is independent of the address.  As always, depending on the county your property is in, it may be called by other names but basically is the unique identifier of the property location.

Current Assessed Value

This is the assessed value that the County Assessor has given your property.  There are many different ways this is calculated but all you need to know is this is the value you are going appeal.  If you can get this value lower, the Tax Collector will use the lower value for the calculation of the tax rate to get your total tax bill.

Current Comparable Sales

The comparable sales are other “like” properties in the area that have sold recently.  These properties can be used to compare the value with your property.  A “like” property would have the same square footage, bedrooms, bathrooms, lot size, etc. 

The more “like” the property is, the more likely the Appeals Board will accept your new valuation of the property. 

Hopefully, you will be able to find five or six properties in a 1 to 2 mile radius around your property with lower sales prices than your current “Net Taxable Value” or “Total Assessed Value”.

 

I know what you are thinking…

Like you, my mind goes to this thought: “The value of my home should be hire so I have more equity in the property.”  This is true, you want the value of your home to be higher than when you bought the property, but only when you “Sell” your property. 

Remember, you MAKE your money when you BUY the property and REALIZE the money when you SELL it.  Since this is a long term investment, your rental property will allow you to live off the cash it brings in every month. 

You don't need to worry about the actual assessed value of the home because you are not selling the property.  If you bought the property for monthly cash flow and as long as you have a positive cash flow, you don't need to worry about the value.

You will know when it is time to sell the property by the way the market moves. 

I personally wouldn't sell my income producing properties unless there was a substantial increase in the value of the property.  By substantial, I mean that the value of the property has doubled since I bought it.  I invest for monthly cash flow.  The appreciation on the property is icing on the cake!

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Back to the Appeal Process

So with my three appeal forms sent in one envelope to the appeals board, all I needed to do was wait until the hearing date for my appeal. When I received a letter of my appeal hearing date, I informed my property manager of the date and the specific information that I submitted with my form. 

This would be the comparable sales showing the basis for my appeal for a lower value. With this information my property manager then went to the hearing and acted in my stead before the Appeals Board. He didn’t have to do much other than be there and be ready to answer any questions that the appeals board may have.

Once the appeal hearing was finished it was time to wait to hear the decision of the appeals board. What is interesting is in this particular County, I did not receive any formal notice of the decision by the appeals board.

What I did receive though was much better. I knew my appeal was accepted when they sent me an envelope with three checks in my name with a refund of the total taxes that I paid in the current fiscal year.

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One Quick Though About Taxes

Even though I was appealing the tax value it was still my responsibility to pay the taxes that are currently assessed and build to my property. From the government standpoint, taxes are always due.  It is on YOU as the tax payer to know to pay your taxes. 

The government believes everybody must know that you have a tax bill if you own a piece of property. They don't care if you “Never Received It” and make sure to have you pay it because it’s on you to pay it no matter what. The government feels that they are doing you a service by giving you a bill. They don't really need to, it is a courtesy to you, the owner.  Even if you didn't get it, you should have known your bill was due and must be paid.

If you don’t pay your property taxes the government can take your property from you and auction it off to anyone. I ALWAYS pay my property taxes the day of the due date in order to not give the government any more time with my money than is necessary.

However though I do pay all my taxes because I don’t want any penalties nor do I want my property taken away.  I suggest paying the exact amount, not more or less on the due date.

 

How I Earned $1,444.62!

After five minutes of work, I lowered the assessed value on three of my properties because they were higher than the current market value.

By lowering those assessed values my total tax bill was dramatically lower. I got three checks with the difference between the original tax bill, that I paid, and the reassessed tax bill.

From now on, until another event that triggers a reassessment, this new assessed will be the assessed value of which the tax collector will use to calculate the total tax bill.

So not only did I get a refund from this fiscal year tax payment, each subsequent year until an event triggers a reassessment, I will continually have a lower tax bill because the assessed value stays at my appeal value.

Even though I made $1,444.62 from five minutes of work this year, next year I will save more money because the value of the property will be lower for the three homes!

 

New Lower Tax Payment

For the 2015 year, my first of two installments (tax payment) was a total of $3,380.25 my properties.  After the appeal, lowering the assessed value, and receiving a tax refund check, my second installment is a total of $2,497.44! 

That is a huge savings of $882.81 off my second installment.  I would normally have had to pay the full amount of $3,380.25 but now, the $882.81 is back in my pocket. 

Since I save money each month from my rentals and put the money into a separate account marked for paying taxes, I now have $882.81 extra in that account! 

I personally suggest saving for your taxes, insurance, and maintenance for your properties monthly so you have that money when it comes time to pay it.  It is always a bad day getting a tax bill or a major repair when you do not already have the money saved up ready when the problem occurs. 

Now that I have a new assessed value for my property, and I saved $881.82. The 15 minutes worth of work earned me $2,327.43 which I can spend buying another property which will make me more money!

A penny saved is definitely a penny earned!

 

Please leave me a comment below letting me know your thoughts!

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