North Texas multifamily property owners are in for a shock this appraisal season.
The region’s multifamily appraisals have shot up by breathtaking margins. Dallas County’s multifamily appraisals are up by an average of 46 percent, according to the Dallas Business Journal. To the north in Denton County, appraisals are up by an average of 64 percent, and in Tarrant County, which is most of the Fort Worth area, there was an average of 68 percent in notices of increase.
The rising taxes could take a bite out multifamily returns at a time when the market in Texas is hotter than ever, with apartment sales, new construction coming almost daily, especially in the state’s metros, Dallas-Fort Worth, Houston, Austin and San Antonio.
“It’s going to really slow the volume of transactions because the numbers just won’t pencil out,” says Mark Cantrell, president and co-founder of Cantrell McCulloch Incorporated, a property tax consulting firm. Increases have been so dramatic this year because it’s difficult for appraisal districts to keep up with market value and now they’re playing catch up, Contrell told the DBJ.
Many owners will protest their appraisals in an effort to reduce their property tax burdens, as will individual homeowners across the state, many of whom are transplants were drawn to the lone star state for its low taxes.
Dizzying appraisal increases and subsequent tax burdens— stacked on top of rising mortgage and insurance costs could chill the North Texas market.
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Two-thirds of the tax roll will increase by a minimum of about 10 percent, according to the DBJ. Though single-family residential makes up half of the overall tax roll—compared with multifamily share of 15 percent— their yearly tax increases are capped at 10 percent.
At the same time, multifamily owners are likely to see increases far beyond that this year.
On the whole, the tax hikes could put the brakes on the hot North Texas multifamily market.
“There’s been some panic-type reaction that we’ve seen, and understandably so,” Cantrell said. “It’s always busy right around the deadline, and this year we are just hearing from more of our clients that are really concerned.”
It will be a challenge for tax consultants to achieve reductions, but they’ll still happen.
“I think a lot of owners are going to be unhappy with the results,” says Cantrell. “Anytime you have an increase in your taxes more than 10 percent, that’s tough to swallow.”
[Dallas Business Journal] – Maddy Sperling