By Barry Sharpe
Self-storage owners are always looking for some magic formula to make more money in their investments. Many look to refinancing, but too many miss out on the potential for reaping large property-tax refunds by simply filing a petition to reduce their tax assessment. It’s actually a foolproof move that can procure thousands of dollars with zero risk. Often, the only cost involved is a small filing fee. In many states, a property-tax agent can file the appeal, or the owner can do it himself.
Why do owners overlook this opportunity? Because they believe there isn’t much they can do to change their tax amount. However, this isn’t entirely true. Elected officials in each jurisdiction set their millage (tax) rate, which is multiplied by a property’s assessed value, to determine the tax due. But the value, which is set by the property assessor, can be reduced with a proper presentation by the facility owner. As the “expert” on the property, you’re its best advocate.
Being a Property Advocate
Self-storage owners or their property-tax agents can perform wonders in getting a property’s assessed value lowered, which translates to a lower tax bill. Typically, the advocate makes an appearance before a special magistrate to argue the taxable value of the property. This is different and typically much simpler than appearing before a judge. To obtain a comfort level, you can attend other people's petition hearings. All hearings are public, and anyone can just walk in and listen.
Questioning an assessment is part of the mass appeal process. The truth is, local officials expect to receive appeals, so property owners shouldn’t be shy. The assessor's office will even supply copies of the data it uses for appraising a property, including any sales comparables. It will actually provide the ammunition for you to use against it!
Once you have the information, you can dazzle the assessor's office with additional facts that refute the assessment. These might include rental concessions granted to attract new tenants, real estate broker commissions, the manager’s salary, and the length of time any storage units have been vacant. These are only some of the factors to help explain why the contract rental rates the municipality may use to estimate and establish the property value are different from the “effective” rental rates.
Additionally, assessors generally have no idea what each property looks like on the inside. They arrive at their values for local self-storage facilities using mass appraisal valuations. Providing photos as well as estimates of improvements that need to be made, including roof repairs, painting, replacing air-conditioning units, etc., will go a long way toward convincing the assessor’s office it has overvalued a property.
Ironically, a real estate broker can be helpful in the appeals process. His suggestion of things that can or should be done to improve the marketability of a commercial property are often helpful ammunition that can be used to argue for a value reduction. His list can also explain why a hypothetical purchaser would want a price credit at closing. These are things the assessor might not have been aware of in arriving at an assessment, which is often done by simply looking at aerial photos, advertised rental rates or the online sale price from the public records.
Becoming a Tax Pro
Once you go through the petition process the first time, you’re more likely to come back and do it again year after year, as the outcome can represent big refunds. In many cases, it’s actually fun to do, especially when a refund is granted without much effort.
Very few self-storage owners appeal their property-tax assessments, but you shouldn’t simply roll over and do nothing. Filing an appeal is a right afforded to every tax payer. The truth is, the odds are in your favor in obtaining at least a partial victory.
Barry Sharpe is a managing member and principal at Hialeah, Fla.-based Property Tax Appeal Group LLC, where he oversees every property-tax appeal case filed with the county's Valuation Adjustment Board on behalf of clients. Barry has done tax-assessment appeals for more than 30 years. He's also the owner of industrial and commercial properties, a real estate broker, and a licensed building contractor. To reach him, call 305.693.3500; e-mail [email protected].