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In commercial real estate, increasing NOI means tracking every expense. Yet many investors overlook the most significant opportunity for savings: Property tax appeals.
Recent data from Texas, one of the nation's fastest-growing CRE markets, shows how property tax protests can save big money and how much is lost by investors who don’t take action.
The Problem, and the Opportunity
Commercial property owners, particularly in high-growth markets like Texas, are increasingly facing assessment values that exceed actual market value. According to a recent analysis by Ownwell, a property tax consulting firm, Texas commercial property values increased by an average of 7.44% in a single year, with many assessments significantly exceeding actual market values.
This gap between assessed values and true market values represents millions in potential savings for CRE investors who know how to navigate the protest process effectively.
Across nine Texas counties in Ownwell's 2024 Multifamily Analysis, property owners who successfully protested their property taxes reduced their assessed valuations by nearly $357 million. Meanwhile, non-protestors lost out on a substantial $25.38 million in potential savings.
For commercial property investors, these numbers translate directly to the impact on the bottom line. Lower property tax assessments mean lower operating expenses, which directly increases NOI.
Who's Protesting, and Who’s Winning?
Ownwell’s data reveals interesting patterns about which property owners are most likely to protest their assessments and which counties offer the most favorable outcomes.
Millions Won, Millions Left on the Table
In some Texas counties, protest participation among multifamily property owners exceeds 90%, while in others, particularly among smaller properties, participation drops significantly. In Bexar County, for instance, only 40.88% of properties valued under $500,000 filed protests, compared to 98.35% of properties valued over $50 million.
This disparity suggests that larger, more sophisticated investors recognize the value of protesting assessments, while smaller property owners may lack awareness of the potential benefits or resources to navigate the process.
Where Protesters Are Winning
When we examine the data by county, the math behind successful protests becomes clear. In Dallas County, for example, protestors saved $84.7 million on their property tax bills in 2024 — the highest amount among all counties studied. The 904 property owners who didn't protest could have saved an additional $6.37 million.
In Harris County, which includes Houston, protestors saved $64.63 million, while the 2,944 properties that didn't protest missed out on approximately $1 million in potential savings.
Even in counties with fewer properties and lower overall savings, the per-property impact remains significant. In Williamson County, for instance, the 119 properties worth over $50 million that protested saved an average of $30,600 each on their tax bills.
The Correlation Between Property Value and Protest Participation
A clear pattern emerges across all counties studied: properties with higher market values are significantly more likely to protest their assessments.
This trend likely reflects several factors:
- Higher absolute dollar savings for more valuable properties
- Greater resources and sophistication among larger investors
- Better awareness of the protest process and its benefits
However, this pattern also highlights a missed opportunity for owners of smaller commercial properties, who could achieve meaningful returns by engaging in the protest process.
The Technology Advantage in Property Tax Appeals
The Data Revolution
Modern property tax consulting firms are bringing technological advantages to the traditionally relationship-driven appeal process. According to Ownwell's analysis, its platform aggregates data from over 150 public and private sources, including market comps and hyper-local property data.
This data-driven approach, combined with various valuation approaches by local property tax experts, appears to deliver superior results. The study notes that clients using such platforms often see 6-15% more in savings compared to other firms, with some cases as much as 31%.
Performance-Based Pricing Models
Meanwhile, the significant development in the property tax appeal space is the shift towards performance-based pricing models. Under this approach, property owners pay only if their taxes are successfully reduced, typically around 25% of realized savings.
This structure eliminates upfront costs and aligns incentives between property owners and tax consultants, making the decision to protest virtually risk-free from a financial perspective.
Conclusion
The data from Texas strongly suggests that protesting property tax assessments should be standard practice for CRE investors.
With potential savings reaching into the tens of millions of dollars across just nine counties, the opportunity cost of not protesting is simply too high to ignore. This is particularly true given the performance-based fee structures that eliminate financial risk.
As property values continue to increase and local governments seek additional revenue, the gap between assessed values and true market values is likely to grow. CRE investors who proactively manage their property tax expenses will maintain a significant competitive advantage in maximizing NOI and overall investment returns.
For those who haven't yet incorporated property tax protests into their investment strategy, the question isn't whether you can afford to protest, it's whether you can afford not to.
About Ownwell:
Ownwell helps property owners reduce expenses, primarily focusing on property tax savings. Using local experts and technology, they analyze properties to identify potential savings on taxes, insurance, utilities, and other costs. Their services cater to homeowners, real estate investors, and enterprises through a personalized property portal. To learn more about Ownwell, visit their website.
Disclaimer:
The views and opinions expressed in this blog post are provided for informational purposes only and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.
