There has been lots of discussion and articles written about the rising costs that are starting to hammer commercial property owners but particularly multi-family owners in parts of the country. Rising operating expenses and slower rent growth are squeezing the returns many of these investors and operators had been accustomed to over the past few years. Huge jumps in insurance costs particularly in Florida, Texas and along the East Coast have investors crying for help. In Texas, they have an additional problem with sky high property taxes.
Everyone always thinks Texas is a low tax or no tax state but that’s for personal state income tax. There isn’t any. But the government has to operate somehow and a big part of their funding comes from property taxes. Residential taxes are high as well as commercial and multi-family. Here’s a helpful article on commercial property taxes in Texas.
Owners are trying to squeeze what they can out of these properties. If they have not done cost segregation yet, that might be something that they should at least evaluate. There may be some significant tax savings sitting there for them that could help them with their cash flow or just help build up their rainy day fund. We typically see that owners will save between $30,000 – $70,000 per $1 million in building cost or basis. So if they have a $10 million multi-family building, that tax savings might be $300,000 – $700,000 +/-. The cost of the study is but a small fraction of that. If you’d like to know more, don’t hesitate to reach out. We offer a no cost, no obligation quote to see how cost segregation might help you as a building owner.
