The Biggest Expense in Multifamily: How to Fight Your Texas Property Taxes
For multifamily owners in Texas, no single line item hits harder than property taxes. They are the largest expense on almost every deal, and in a market where rents have flattened and expenses have crept up, winning your property tax appeal can be the difference between a deal that cash flows and one that doesn't.
On this episode, Old Capital's James Eng sits down with Ryan Heddleston and Clayton Sievers of Valorem, a property tax consulting firm that does one thing and one thing only: Texas multifamily. Between Clayton's years inside the appraisal districts and Ryan's 17 years operating apartments, they bring a rare "both sides of the table" view of how assessments actually get set, and how owners can push them down.
Here is what they shared.
A firm built for one job
Most property tax consultants are generalists who handle office, retail, industrial, and multifamily all at once. Valorem took the opposite approach.
"We only focus on this one discipline, which is multifamily, and we're only in the state of Texas," Ryan explained. "We're a specialist in this field, whereas there's a lot of generalists out there."
That focus, plus a team that came directly out of the Dallas, Denton, and Tarrant appraisal districts, has fueled fast growth. In roughly two years, the firm has grown to about 275 communities and become one of the fastest-growing consultants in DFW. Clayton started his career at the Dallas Central Appraisal District in 2015, worked his way up to senior appraiser, then spent seven years at a large consulting firm before co-founding Valorem. Knowing how the district thinks, he said, is a real edge.
First, the basics: how a Texas property tax appeal works
If you are new to owning in Texas, here is the timeline every owner lives by:
April: The appraisal district mails your notice of value.
May 15: The single most important deadline. You must file your appeal by then (you get 30 days from the notice date if they notify you late, but May 15 is the anchor).
Informal review (roughly May to July): You exchange data with the district and try to reach an agreement. About 80% of properties settle here.
ARB hearing (June to early July): The remaining properties go before a three-member Appraisal Review Board panel, where you and the district each present data and the board sets a value.
If you still don't like the ARB's number, you have another level. For properties assessed at $5 million or less, you can use binding arbitration, which is cheaper, faster, and doesn't require an attorney. For properties above $5 million, the path is litigation, filing suit against the appraisal district.
That word sounds more dramatic than it is. "It always sounds more intense than it is," Clayton said. "Really it's just the second phase of the appeal." In the major counties, he estimated that 80% to 95% of properties valued over $5 million go through litigation, it is relatively inexpensive, and it generally wraps up in 6 to 12 months.
What changed in 2026: the market finally caught up
For years, the winning strategy in Texas was "equal and uniform," arguing your value down by comparing it to similar properties. In a rising market, districts settled a lot of those cases informally because they couldn't defend a market-value argument.
This year flipped.
"Equal and uniform has reigned supreme for the longest time, all the way up until this year," Clayton said. "The values have caught up."
Two things followed. First, districts have become more hesitant to grant reductions, so more properties are heading to actual ARB hearings and litigation than Clayton has seen in years. Second, and more surprising to owners, many notified values in 2026 came in higher than 2025.
"The notified value in 2026 was higher than 2025," Clayton said, "and everyone in multifamily is looking around like, what is happening?"
The reason is mechanical. Districts run mass appraisal formulas, and they have largely kept their models the same since about 2023. Rather than touch cap rates, they are adjusting vacancy and expenses to preserve those cap rates, because they are not yet convinced the downturn is permanent. The good news: this was the first year the districts openly acknowledged that the distress is a market issue, not just a handful of bad operators. As Clayton put it, the "light bulb" went off this year, and he expects next year's notice values to be less egregious.
The new weapon: failed transactions
With market value now the main argument, Valorem leaned on its broker relationships and sales data. But the most powerful tool this year was something most owners never think to use: deals that fell apart.
"Something that was really powerful that we were able to provide this year was the failed transactions," Clayton said.
Here is why it matters. When a property is quietly marketed at $20 million, then re-guided to $15 million, and then either gets taken back by the bank or recapitalized, that price drop never becomes an official sale. It never shows up as a data point for the appraisal district. Valorem started collecting those failed deals, along with broker opinions of value (BOVs) and letters of intent (LOIs), to show districts that guidance prices in a submarket were running well below current assessments. It is not standard practice, but it is exactly the kind of aggressive, evidence-based argument that moves numbers.
A real example: $65 million down to $52 million, and heading lower
Clayton walked through one deal that shows how far off a mass-appraised value can be. The property, an early-2000s community near White Rock Lake in Dallas, sold for $56 million in 2024. The district notified it at $65 million, well above what it had just traded for, simply because that number was "equal and uniform" with similar-vintage properties in the area.
Valorem got it down to $52 million through the ARB and planned to file litigation with the goal of reaching the mid-to-high $40 million range.
"It's a good example of showing how far off the valuations can be," Clayton said, "and that there's still hope to be able to underwrite properties less than 100% in Dallas."
For buyers underwriting new deals, that is the lesson: don't accept the assessed value at face value. A disciplined appeal can meaningfully change your tax bill, and therefore your returns.
How to pay the bill without wrecking your cash flow
Even a great appeal takes time to settle, so how you pay matters. Tax bills come out in October and are due before February 1. Most owners pay the full liability and wait for a refund once the case settles, and that refund can take up to 90 days.
Clayton shared two ways to ease the cash-flow hit:
Split payments (Tarrant and Bexar counties): These counties let you pay half before November 30 and defer the rest until June 30. If your lender allows it, you can settle and pay only the difference instead of waiting on a refund.
Tax Code Section 42.08: If you have a lawsuit filed, you can pay based on last year's tax liability instead of the disputed amount. The unpaid balance accrues penalty and interest, but once you settle, you have 21 days to pay the difference penalty-and-interest-free. The catch: many lenders dislike seeing penalty and interest on a tax statement, so this option works best for owners whose lenders are comfortable with it.
The operator's real lever: rent and occupancy
Here is the most actionable takeaway for owners, and it surprises people. The single biggest thing you can do to lower your assessment is often tied to how you run the property.
Districts run your property on your reported market rent and then apply a stabilized occupancy, usually somewhere around 6% to 10% vacancy. If your property is actually sitting at 40% occupancy, you do not get credit for that pain, because they are pricing it as if it were stabilized.
That leads to a counterintuitive result. A property that cut rents about 10% but pushed occupancy up to 80% will usually earn a bigger assessment reduction than a property sitting at 50% occupancy with 50% collection loss.
"Rent at the end of the year is the most impactful change to the property that the appraisal district is going to look at," Clayton said.
His advice: track your rent over a three-year window, and bring your income statement to the protest when it helps your case. And these days, he noted, it almost always helps.
The bigger picture for operators
Ryan, who started operating in 2010, put the current environment in context. The 2010s were easy: low interest rates, cap rate compression, and steady rent growth. Today's operators are dealing with a glut of new supply on top of soft fundamentals.
"Being a really good operator now, in light of all the challenges, just means you've got to control expenses along every line item," Ryan said. Insurance, he noted, has come way down, which is a meaningful relief, but labor and other operating costs remain stubborn.
That pressure is exactly why he helped build a tax firm focused only on multifamily: to be "super aggressive for the client in pushing the envelope and finding new strategies to lower that number one expense for all of us, which is property taxes."
What owners should do before next April
If you settled your 2026 value, don't just file it away. Between now and the next notice, Ryan and Clayton recommend:
Have your ARB result reviewed to decide whether litigation makes sense.
Track your rent and occupancy trends carefully, since that data drives next year's argument.
Get a second opinion. Valorem offers free portfolio reviews to tell owners whether their current consultant is leaving money on the table, or doing just fine.
Key Takeaways
Property taxes are the number one expense in Texas multifamily, and a disciplined appeal directly affects your returns.
May 15 is the deadline that matters. Miss it and you lose your appeal for the year.
2026 flipped the playbook. Market value, not equal and uniform, drove almost every appeal, and many notified values came in higher than last year.
Failed transactions are powerful evidence. Re-trades, dropped guidance prices, and lender takebacks show the district where the market really is.
Rent and occupancy are your biggest lever. Districts stabilize your property, so improving occupancy (even at lower rents) can drive a bigger reduction.
Plan your payment. Split-payment counties and Tax Code 42.08 can protect cash flow while your case settles.
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The bottom line
In a tougher market, you cannot control interest rates or supply, but you can control your expenses, and your biggest one is your tax bill. As Clayton showed with the White Rock Lake deal, the gap between a mass-appraised value and reality can be millions of dollars. The owners who treat property taxes as a strategy, not a bill, are the ones who protect their returns.
Thinking about financing your next Texas multifamily deal, or want to underwrite one the right way, taxes included? The Old Capital team can help you size it up. Reach out at oldcapitallending.com