Nothing other than perhaps online marketing has risen as fast for self storage owners as property tax.
And that number is much larger than the marketing cost.
I am convinced that when Property Valuation Administrators have their conventions as we do, they talk about self storage.
But seriously, our industry is definitely on their radar screens.
Every project we have been involved i9n has had at least two property assessment increases within the four to a five-year period we have been involved with them. Some have had up to three within five years.
What To Do
The good news is, at least for us, we have an action step we always take every time there is an assessment increase.
I do a few things well in life, but not many (ask my wife).
Fighting tax assessments, I don’t think, would be one of them.
What we do as a routine every time there is an assessment increase is to turn it over to someone whose business is to reduce it.
Yes, there are people that that is all they do.
Over my career, I have used many of them. I have found that in every market area or state, some professionals are familiar with the rules, the people, and the process of each municipality’s tax policies.
I believe these people are generally the best to use after much trial and error.
I will usually Google something like “property tax reduction consultants Atlanta, GA” or whatever location I am in, and then start interviewing.
I am especially interested if they have had any experience with self s storage before, although not necessarily a deal killer.
They will usually ask for documents such as P & L’s, Balance Sheets, capital improvements we have comp0leted, new construction cost, lease-up history, occupancy history, etc.
Then they will assess if they feel there is any reduction possible and how much (usually in the form of a range).
Cost Of Services
Usually, it will cost nothing upfront or very little.
We usually pay something like one-half of the first year’s tax reduction savings upon the successful conclusion of their negotiations with the taxing authorities.
So, if they successfully reduced what we were going to owe by, let’s say, $15,000, we would owe them $7,500 when we received the reassessed valuation.
Not all the consultants charge this way, but most do to some degree. The percentages may vary a little, or sometimes we pay a small fee upfront that will be credited to the final bill. But as a rule, this has been our average.
I like it because we are paying for results, and the consultants won’t waste time on an appeal they can’t win.
One out of five times when we contact a consultant, they will say it is a fair assessment, and they do not think they can help us. Most of the time, we do get some reduction.
Some have been quite dramatic.
Example of a Successful Appeal Success
This case may be extreme, but it is an example of what can happen.
We had a facility assessed at approximately $2.5 million when we purchased.
About 15 months later, we received a revised assessment of approximately $5.5 million, increasing our property tax liability by around $40,000 per year.
Ouch!
I ended up hiring someone who had previously worked at the Property Valuation Administration of that city.
He successfully reduced the assessment back to $3 million.
Then, because it was such a dramatic reduction, the PVA appealed its own decision. I didn’t even know that was possible, but at least in that city, they could.
And they did.
In the end, we negotiated a $3.5 assessment. The resulting tax increase was only about $13,400, and we gladly paid the $6,700 fee (plus an appreciation bonus).
Not all appeals are this successful.
But the majority of the time, if our consultants think there is a reduction to be had, we will get something.
There are few true win-wins in life, but I believe tax appeals are one of them.
Just make sure you are very aware of the usually short deadlines to appeal. Immediately find a property tax reduction consultant and start interviewing. Even do this ahead if you know and are expecting one, like after purchase or expansion.
There is usually a very short window to schedule an appeal, and if you miss, you have to wait another year. I have also made that mistake too. Don’t do what I did a couple of times.
Good luck and thrive in this fantastic business of self storage.
