The Crotchety Old Men Podcast
Appealing your Property Tax: A Great Strategy to Maximize Returns with John Redmond
Unlock the secrets to trimming down those hefty commercial property tax bills with John Redmond, our Dallas-based property tax guru. In a riveting exchange, John, armed with an MBA in finance and a prestigious CCIM designation, shares his treasure trove of knowledge on navigating property tax appeals. He explains the assessment and appeals process, revealing why seeking professional advise is your golden ticket to ensuring you're not forking over more than what's due. It's a masterclass for property owners and investors keen on keeping their bottom line intact.
Unlock the secrets to trimming down those hefty commercial property tax bills with John Redmond, our Dallas-based property tax guru. In a riveting exchange, John, armed with an MBA in finance and a prestigious CCIM designation, shares his treasure trove of knowledge on navigating property tax appeals. He explains the assessment and appeals process, revealing why seeking professional advise is your golden ticket to ensuring you're not forking over more than what's due. It's a masterclass for property owners and investors keen on keeping their bottom line intact.
Hello, welcome again to another episode of the Crotchety O Men podcast. I'm Gary Smith, one of the co-hosts of the Crotchety O Men, and joining me in the studio today is my main man, george Crumley. Top of the day to you, trump.
Speaker 2:Smitty top of the day how you doing today.
Speaker 1:Man, I'm doing exceedingly well, exceedingly well.
Speaker 2:That means you got some good stuff for us today and for our audience.
Speaker 1:Yes indeed, yes indeed. I'm so excited about our guests that we have on the day. I'm trying to contain my composure here, and but you know, this guy here, man, I'm telling him he's going to drop a lot of pearls, a lot of wisdom, a lot of information. I just hope everybody's got their notepad ready and a fresh pencil, and have a pen too, because what he's going to share with you, you probably want to write it in stone. So, george, go ahead.
Speaker 2:I was just going to say. You know, smith, that's the whole focus here on the Crotchety O Men is, you know, to make sure that we can bring our audience a new and exciting guest and bring information here here again this year. We want to make sure that we're touching on subjects that you know can enlighten our audience and give them some some view into some of the other things that, financially, can you know can help them here again, interviewing successful businessmen of all colors that you know just kind of help us, you know, keep our audience informed as to what's going on. So yeah, without further ado, smith, let's go ahead and get into it.
Speaker 1:All right then. Well, it gives me great pleasure to introduce John Redmond Now. John Redmond is out of the Dallas Texas market. He's a property tax manager with the Altus Group, where he partners on major commercial real estate deals, working with retailers, owners, real estate investment trusts, and what I like about his background is that he is a he strategically is able to reduce tax liabilities as relates to commercial real estate. I know, not long ago in a previous episode, we talked about tax assessments and things like that as it related to residential real estate, but I thought it would be a good idea to have John come on and share with us some of the things that are probably go missing, especially in our business community as it relates to commercial real estate.
Speaker 1:Now, john has a really rich background. Not only is he a tax manager, if you will, but he's also a CCIM, and for those of you in commercial real estate or real estate period, you understand that that's a certified commercial investment member, and so that means that he's going to spend a lot of money, a lot of time getting the education, getting the knowledge, and so that he's able to deliver the results. John holds an MBA in finance, then he has a bachelor's degree in science and IT and business. He's a family man, he's dedicated to innovation and the real estate business and stuff, and so I could go on and on and on and talk about the things that John has done in his career. He and I befriended about 12 or 13 years ago and I tell you, every time I talk to John on the phone, I got a pencil and pad by my side as well. So without any further ado, man, let's welcome John Redmond. Take it away, john, how you doing.
Speaker 3:Thank you, Gear. Thank you, that was a great introduction. Had to pinch myself. I was like, is he talking about me? But yeah, thank you. First off, honored to be here. Thank you, guys for having me Full circle moment for me. Gary, as you said, we connected 13 years ago when I was I'm still young, but fresh in the game and just trying to figure out how I'm going to make it in the world of commercial real estate. You've always poured into me and I've enjoyed our conversations about life, not just real estate, about life. As you do with your podcast lessons. You always leave us with something to think about, fresh perspective. So definitely honored to be here.
Speaker 1:Hey man, hey man. Well, john, let's just step right and get right into it. Tell us about your day. I mean, what do you actually do it?
Speaker 3:So I'm a property tax consultant. So what property tax consultants do? We work with owners and investors to reduce the tax liability. So I work strictly in the commercial realm. I did listen to you guys podcast by residential I don't have the answer for that. But no, I work strictly on commercial properties. So, as you said, I'm based here in Texas and, as you know, here in Texas we don't have sales tax. You know Texas is real provisions but we do have really high property taxes. So Texas is pretty much the holy grail for property taxes in the US. There's more money to be made here in my field as being a consultant. So I work with the owners and investors reduce the tax liability. As you know, you get that annual tax bill every year and it becomes a bit much for owners to, you know, appeal the properties themselves.
Speaker 3:You know they don't they don't have the time more than likely and they may not have some of the expertise to reduce their value, so they will hire someone like me to come in. You know there's been around a block a few times and has the relationships to be an advocate for them so they don't pay more than a fair share in Texas.
Speaker 2:So let's talk a little bit about that process, john. So how does that work? I know from a residential perspective, like you said, you get you get that assessment every year and you know we use comparables to assess if that meets what our property or what we think the property property value is. Is that the same for commercial?
Speaker 3:Yeah, it's the same. So here in Texas you get the. The lean data is as of January 1. So typically the assessor they value their properties up until that day. Up until that point they use mass appraisal concepts to value. You know they're giving jurisdictions and they sent out appraisal notices with your new value for that, for that year Around April and May here in Texas. So from that day you have 30 days to appeal the property. You have to file the appeal, I'm sorry. And then from that, from that moment you have, you go to the board, which is which is the owner or the advocate for the owner, which would be me in this situation of the appraisal district, or assessor, and then a third party, three member panel that will decide what the value should be. And so we will use the.
Speaker 3:We use three approaches. The value here, as we all know, commercial properties or income produced an asset. So we would use the income approach. Some cases it may be a cost approach, whether you deal on hospitals or other or new construction. And then also here in Texas we have the equal and uniform provision, which is similar to set the sales comparison approach, but the equal and uniform provision means that my comparables, I'm not taxed on the price of a square foot, more More than them. So you would take the median and that answer. So we will use those three approaches, the value and Texas law states it's the lowest of those three. Wow, that's interesting interesting, george.
Speaker 1:Go ahead. What's your question? It?
Speaker 2:sounds a lot like the Residential process. I was, like I said, was fortunate to go through that process and like it's the same thing where you have the the yourself, the tax board and you'll have three members and I'm assuming those are three members from the community that are also your peers are like a real estate background.
Speaker 2:Typically, right name provides some types of classes so that they're stewed as far as what's going on. So let me ask you this what, what do you see as some of your, your big challenges? Because I would think from, if I'm trying to reduce, or the property tax on a very large building, that you know it's a lot different than a house. So Some, what are you some of your challenges in doing that and being successful?
Speaker 3:Some of the challenges are just come. Really, I Would say Getting the assessor to realize that their value is too high. That's the best, the biggest challenge Unlike residential, you know, with the income producing part it's a little bit more, it's a lot more gray area, you know. And and to answer your questions for more, we may argue cap rates, we may argue expense ratios, you know, and whatever the market is, the praiser district can be out of touch with it because you know their job is to Reflect the market and not predict the market. So they're using sales from the year prior.
Speaker 2:Yeah, I would think that I mean buildings don't Change ownership that often, so I would think that it would be Somewhat difficult to find a lot of comps. So yeah, you kind of going well, here in Texas we're blessed.
Speaker 3:So it's a lot of comps, it's a lot, it's a lot of transactions going on, stuff, a lot of properties trading hands and even now you're not like her, me and I currently economic climate. You know property to steal trading hands not as much as they were a couple years ago, but no, they still are. So you know it's not hard finding comps for sure it's just that you know what is the actual, what is the true cap rate?
Speaker 2:Okay, so right now I mean, we're talking at a pretty high level, so for our audience let's just kind of bring it down a little bit. Can you talk about maybe one of the successful deals, that that you were involved with and then you know, explain why it was successful? Because sometimes when you, when you bring the property tax down, you're not bringing it down by a lot, but you are successful in in showing the assessor that he had the wrong rate. So it doesn't have to be a huge deal. We kind of walked through a deal that you felt it was successful and you accomplished what you want to accomplish for the owner of the building.
Speaker 3:Oh, Sure, okay, so Early in my career and I'll take a step back so I have a really good understanding of how the appraisal district Prez of district assessor work, because that's actually why I started my career. I was there when I originally met. Gary reached out to him, so I know the nuts and bolts, how they operate. So early on in my career I was representing a owner of a vacant urgent care. The year prior it was a hundred percent occupied, which means tenant was their single tenant asset. And this year they they actually raised the value over the prior year. But this year the tenant had vacated and you know, originally they weren't trying to make any moves on the value, they were trying to argue that. You know they still thought the value was intact.
Speaker 3:When you and I both know that a commercial property is a company's property, if you don't have a tenant is producing zero income. You know at this, at this point, you just paying expenses. So I was able to go to the board here and, and you know, argue my case. You know Pretty couldn't dry case a. Hey, you know the value was X last year and you're trying to make it the exact same this year, but it has no tent so I was able to get a million dollar cut off the property value and that really helped out the owner.
Speaker 1:My goodness, a million dollars I hope they're all listening out there A million dollars, tax cut, tax break or tax reduction, I don't care what you call it, but it's a million dollars and congratulations on that, john, and I'm sure there's a lot of pearls and things that you learn from that transaction. My question here is that I know there's a Texas is fluid, very fluid in transaction volume, as you said. I mean, it's one of the hot beds of the United States, particularly as it relates to multifamily. You see so much multifamily chandex and there's a lot of retail to that end. But here's what I'm trying to shift the focus here.
Speaker 1:There's a lot of owners, your small owners, that own 20 units or less. Ok, those properties, primarily in the multifamily. Do those people miss these opportunities? I mean it seems like sometimes that the tax breaks and the CPAs and I know the lenders they're really dealing with those investors that's up here to 20,000, let's say to 30,000 height, if you will, above some of the smaller investors. And what I'm trying to get to, john, is this With those investors or property owners that have 20 units or less, are they missing something here? Should they be really in the market to appeal those taxes and things like that, because, to my knowledge, when you appeal taxes, you reduce your tax basis. Seems like the reverse of that should be that it adds to your bottom line, and so can you address that as far as the smaller business owners, compared to some of the major deals or larger deals that you've done? Yeah, absolutely.
Speaker 3:Yeah, as you said, a smaller, smaller investor, they're not. They may not typically be as sophisticated as some of my larger clients, whether it's a read or you know syndicators that have portfolios properties. You know those small investors, you know they may not more than likely they're out of town investors.
Speaker 3:And so they're not even sure about the actual tax appeal process.
Speaker 3:You know they purchased the asset, you know they're collecting on it, you know and their numbers are working and stuff.
Speaker 3:So, yeah, in my, in my former firm, I I've targeted a lot of small investors, because I will look at, I'll be running my equivalent uniform analysis, as I stated before, just to make sure that a competing property wasn't paying too much and what I would notice is the property would be way too high on the price per square foot.
Speaker 3:Now, here in Texas you can actually, you know, go out and get a little bit of a discount. You can actually, you know, go to the assessors website and see if it has a property tax consultant or not. So, from a marketing standpoint, I was able to, you know, reach out to them and say, hey, you know, compared to comparable properties, you're way too high. And most of them didn't even know that you can even hire a property tax consultant, because they may be in a state, you know, where they have a really low, you know, property I mean, I'm sorry tax rate and it's really no point of appealing. And so, yeah, to answer your question, yeah, there's definitely a lot of opportunities missed by the small investors, particularly the ones that are out of state.
Speaker 2:Interesting. So are there any incentives? I know obviously there's the incentive of not, of not or of seeing your property tax go down. But are there any other advantages to the actual building owner? Say, like on the residential side it freezes it for three years. Are there any advantages to that state?
Speaker 3:The main advantage is, like Gary said, you're saving money and, as we know, the taxes are the largest line night on our operating statement. So when, once I save you money, that that is going to, in return, increase your NOI and increase your value. We don't have. We don't have value freezes here in Texas, like other states, and like Gary said you know, like Gary said you know, since we have so many transactions here, you know they're raising value Couple years ago. They're raising values every single year. So you really have to appeal the property every single year.
Speaker 1:Sure, this is very good information, john, I am so glad that you're here today because we typically, when we think about commercial real estate well, real estate in general most of us are not thinking in terms of those things that we're doing. Those people who have properties out of state, and you really hit on something there. So it doesn't really matter what size your portfolio is. That I know.
Speaker 1:As an investor myself, I always target those out of state investors for various reasons, ok, and but this right here is one that I think bodes well for any investor to have in their arsenal, if you will, of tools. I know we have a cost segregation where you can utilize that to reduce or at least get some tax benefits or reduction relief there. But this tax assessment part or or or appealing, I should say just adds on to it. I got a quick question here. So now, during the course of appealing taxes, does this happen to work in reverse? And what I mean by that is that for those who are looking to refinance, now that they've gone and appeal their taxes to reduce the valuation, doesn't that come back to haunt them in some form or another, or does it?
Speaker 3:I know it doesn't, that's another. That's another thing you guys are talking about. I mean, you have, you have different values, right, you have the taxable value and you have the market value. Now, historically they're not equal, but where we are in the market now with, you know, values decline, they're almost, they're almost similar now, but that taxable value in no way affects anything else as far as the price that you can get, if for refining, assessing, or the market value.
Speaker 3:I mean, I've seen instances where I was actually, you know, working for the appraisal district or assessor, where a property would sell for 30 million dollars but it was on the tax rolls for 10 million dollars. So they can't. The assessors are Typically, as I said, they're behind the market if the market is going up and then also too, like said, they're using, they're using old data, so, and they don't have, they don't have stuff that may be up to date, so they may be behind. And also too, you know, they they may not appraise a particular Market area as much as in the other type of, in the other area that may be have a lot of transaction stuff, so they can be behind. So, no, but to answer your question, no, it doesn't affect it at all.
Speaker 2:Good answer, I think I answered the same way. I'm surprised hit you with that question, but anyway moving along.
Speaker 3:So I want to jump in when I was listening to that.
Speaker 2:And help me out. Right, they were trying to gang up on me that day. So let's change gears a little bit. Let's talk a little bit about the industry. What's what's opportunity like, like you know, because it's very interesting field and I'm just wanting from a Employment, employer opportunity, what's the opportunity like to get into this field and what's it? How do you, how do you get into a field like this?
Speaker 3:Well, that's a great question. I would say there's a great opportunity into the field because, you know, as you guys know, this isn't a, this isn't a sexy feel like being a commercial real estate brokerer, developers. So you know a lot of students or you know aspiring commercial real estate professionals. They may not know about it. I didn't even know about it when I first moved out.
Speaker 3:It was kind of one of those things that I fell into and it up in a blessing, you know, and so, with that being said, it's a lot of, it's a lot of Industry players that are retiring and there's a gap and need for young talent to come into the field. You know and I believe that I got in at the perfect time to also answer your question to get in, I mean, you really just need a business finance degree and I just understand real estate, you know, because it's one of those things where we fall under the consulting slash, valuation, valuation, a little bit of appraisal Category, and so, if you learn, if you understand how to value properties, and you, you know, have a desire to, to be in commercial real estate and do something that you know Ancillary part of the industry, yeah, it's definitely, definitely a field that's growing and I don't see it. I don't see it being eliminated in time soon because, as we all know, taxes are definitely here to stay and there's going to be someone needed at all times to fight the values.
Speaker 1:All right. So now You've been in real estate for a long time. You've gone through various tronches in the commercial real estate realm. What do you see? What is your T Leif tell you in terms of time? What time are we here in the market? What I mean by that is that are do you see us going into a Recessionary period anytime soon for there to be a correction, or do you see this being Some what of a lull in the market and then things are going to take off and zoom again? What's your perspective on that, john?
Speaker 3:You know, garrett, that's a great question. I would say and I always say here in Texas, because you know Texas is completely different from the rest of the United States I would say, here in Texas, you know, I think that maybe next year we're going to come out of, you know, this recession or whatever you want to call it, and values are going to start back, climbing up and activities going to climb up. You know, simply because of you know, we had to slow down simply because of the interest rate environment. You know, like here and anywhere else, but there's a lot of money waiting on the sideline here that I know for sure that's just waiting to hop back in so these deals can make sense in pencil again. So that on my local level that's what I believe in Kind of mirror that with the on a national level too, I believe some markets will recover faster than others, but I believe here in Texas we're in a position to, you know, recover within the next year.
Speaker 1:Now, when I think in terms of the state of Texas, the four major metropolis come to mind automatically and has Dallas, houston, austin and San Antonio, and in all those four cities you have, as we know, a large CBD Central Business District where there's a lot of office properties. Now going back to your thing here tax assessment. Although Texas is different and every market is different, are you seeing that the office market has taken a big hit, let's say, in those particular areas, compared to maybe something like a New York, san Francisco or Chicago?
Speaker 3:I would say I think the office market is taking a big hit. You know, here and everywhere else. You know, outside the state as well. You know and I'm talking specifically here we have a lot of, you know, obsolete office that was built in the 80s, 90s and sometimes early 2000s that has to be repurposed. I know for sure, just from talking to some of my friends in the industry, that a lot of them will be converted, but that doesn't work in certain markets.
Speaker 3:I believe there's maybe between six and 10 properties I know for sure now that are being converted, but that's because Dallas is giving incentives. As you know, that's really expensive to make that conversion. You know, from office to multifamily, you know from all everything that's involved, from plumbing and anything else. So, but yeah, no, to answer your question, I think it's taking the biggest dive, for sure, and I mean just like anything else and just like anything else in commercial real estate.
Speaker 3:You know properties are going to have to, you know, evolve, you know the use is going to involve, you know, and they become obsolete. So it's a good opportunity for people with creative visions to get in early and figure out what to do with this stuff Because, as you know these assets are well located and you can't just leave them sitting there. So somebody's going to figure it out. But I know for sure places like you know Texas and those four you know four metros. Here you know they're giving incentives for developers to come and do something and I believe you know, once those projects get along the way, that's going to be a case study, for you know other states as well.
Speaker 1:And reading the tea leaves, what it really shows is the time for opportunity. Opportunity. If you're not in real estate, now's the time to think about seriously getting into it or joining someone who is already into it. And I'm speaking to our listeners out there. I'm hoping you're listening up, because John has given us some information and he's telling us what time it is. And so stack your chips, because there's going to be a lot of opportunities and it does not necessarily mean distress opportunities.
Speaker 2:Yeah, I just wanted to just say that, you know, the opportunity is more so, or I'll say also in the ancillary positions that support a lot of these real estate opportunities. And I think that's what I might take away here is, I mean, he's John is uncovered a feel that I'm, you know, I'm aware of appraisers but wasn't aware that there was actually, you know, position such as the one he has as far as a tax, helping people bring their taxes down from a commercial perspective. So I mean that to me is an eye opener and I think for our audience. And here again, here on the crotch, you know, I mean is that is to talk about those types of things, the top of opportunities, because people, you know, out here and there's I don't know what to do. You know I'm confused, you know I don't know what directs are, there's no direction to go in.
Speaker 2:But here again a little research. You know, here again John said it just kind of fell, but a little opportunity and information. It gives you a whole new perspective because it sounds like a great job it really does and it sounds like a career that you can really build on that's and it's long lasting and it's not really saturated. So I mean I think having John on the day has been real eye opener for me and hopefully for our audience also. As far as here again, opportunity that's what we want to do here on the crotch It'll mean pockets is bring opportunity as well as expose you, give you information and education. I think we've definitely done our job today. Hey John, come on, what do you got? Anything that we haven't covered that you'd like to leave our audience with before we sign off?
Speaker 3:I mean I would just expound on what you just said about you know, looking at property task consulting as an opportunity for a career.
Speaker 3:You know, as I said, you know I've, as Gary said, I held a lot of tight, I've held a lot of positions in the commercial real estate industry early on, trying to find my way and just the way the cards stacked up, stacked, you know, I end up falling, kind of falling into this career field. You know, it's just one of those things where you know, as I said, that it's not something that sex is not something that you hear about a lot but I believe is a great field. Because you know, I would say I've had my best years, career wise, over the last couple of years doing this recession. Because you know, when the market is doing good, I'm going to argue that the value is too low. When the market is doing bad I'm a market I'm going to argue that the value is too high. You know stuff, so you know it's it's definitely something that's almost recession proof. So I would definitely encourage, you know, you listeners to, you know, consider this as a career opportunity.
Speaker 2:Wow, well said Smitty, what you got, man, we're going to take our audience home. I know you got some curls and wisdom, oh, dear porse.
Speaker 1:Well, I tell you, you know, here's a quote it's really bad if you don't read at least one book per month. It's very bad if you don't realize how much that matters.
Speaker 2:Yeah, it does matter, it does matter. And, as we always say, on the crotch, you know, man, as we sign out, if you didn't know now, you know. Thank you, take care. Thanks, john, take care. This is your dogaré life. Bye.