In the last couple of years, I’ve gotten more questions on how to file a tax appeal for commercial properties. In the world of Georgia tax appeals, any building with over 3-units is considered a commercial tax appeal. That means appealing a triplex would be considered a residential appeal but appealing a quadraplex would cross over to a commercial tax appeal.
In a commercial property tax appeal, the valuation is done differently. With residential appeals, the sales comparison approach of valuing property is used. This is why sales comps are emphasized and used as the primary basis of valuing a property.
However, with commercial appeals, the income approach of valuing property is primarily used. This means you will be asked to provide rent roll and profit & loss statements for the last 3 years. Many property owners consider this private information and financially invasive. Unfortunately, if you want to successfully file and win a tax appeal on a commercial property in Georgia, this is something you will likely have to share.
The numbers you provide from your rent roll and profit & loss statements are input into tax assessors software systems to come up with their proposed valuation number. However, the valuation number is not absolute because values are subjective. There is also a “fudge factor” that exists with every property. The calculated valuation number is subject to manual adjustments, professional opinions, and external factors. The list is too long of everything that could be considered an “external factor” but just know it exists.
One important factor to be aware of and know is the going “cap rate” for your building. “Cap rate” is short for capitalization rate. (You can Google it for a technical definition.)
Determining what an appropriate “cap rate” is difficult for most property owners. That information is frequently private. It can only be found through paid access of expensive commercial property information systems. Additionally, there are few commercial real estate specialists that will freely research or provide this information.
Commercial real estate professionals will lead you to believe that you MUST have all this information for a commercial property tax appeal. Anecdotally, I have seen some phenomenally successful tax appeals where the property owners simply provided only a rent roll, profit & loss statement, and a lot of persuasion and old-fashion grit. Strategic negotiation tactics & strategies can be effective in resolving smaller commercial tax appeals.
You don’t have to be a commercial real estate expert to successfully get through a commercial tax appeal. But having some basic commercial real estate knowledge & background helps. I’ve seen winning results through behind-the-scenes information shared with me. I’ve even been through a few commercial tax appeals with a client. It’s not a traumatic experience.
Where commercial property owners tend to get tripped up is their general unfamiliarity with the tax appeal process. But that is easily cured if you read the free articles on this website, watch my YouTube videos, study my flowchart of the Georgia tax appeal process, and buy (and read) my book on Amazon (less than $10 on Kindle!).
Secondarily, commercial property owners are unfamiliar and get tripped up with the jargon and lingo of commercial real estate and the income approach to valuing property. (I am currently writing & producing some educational materials to cure this problem.) In a future video, book, or online course, I will cover these aspects in more detail.
The point of this article is that it is very possible to file & win commercial property tax appeals in Georgia doing it yourself! It flies in the face of what property tax appeal service companies might try to sell you. It is all in your preferences and expectations.
I wrote a book “TAX FREEZE: How to File & Win Property Taxes in Georgia” (available on Amazon) which will help you understand the GA property tax appeal process. Although the intended reader is meant for owners of single-family homes, the general principles and overall process for commercial property tax appeals in Georgia is nearly the same.
I launched a new YouTube channel called TAX FREEZE Command. You should subscribe to it to get my latest insights and information on GA property tax appeals and other tax matters.
I also have a playlist of YouTube videos for property owners to educate themselves about the GA property tax appeal process.