Property Taxes: The Hidden Expense Nobody Negotiates Hard Enough
Thank you for reading week one of my new real estate news letter
Welcome to Mike Lang Real Estate — Making Your Real Estate Deals Stronger. Each week I’ll pull back the curtain on the issues that quietly determine whether a transaction works in your favor or against it. No theory. Just the practical things I see matter in real deals.
I’m starting this newsletter with the topic that started it all for me.
In the summer of 2000, I was a college student working what I still consider one of the best summer jobs a young person interested in real estate could land: the Perry Township Assessor’s office in Indianapolis. I spent that summer learning how assessors think, how they value property, and how the process works from the inside. It gave me a perspective on property taxes that I’ve carried into every real estate deal I’ve worked on since. Most people treat an assessment as a fixed fact. After that summer, I never could.
I’ve watched owners spend three months fighting over a lease rate, then sign off on an assessment that costs them twice as much over the same period. It happens more often than you’d expect — and the reason is simple. Rent is visible. It shows up in the LOI, it comes up in every phone call, it becomes the proxy for the whole deal. Taxes sit in the background, quietly doing their work.
Here’s the math that should change how you think about this. On a $3 million commercial property, a $15,000 annual tax increase looks modest on its face. But if your cap rate is 7%, that swing in annual expenses reduces your property value by more than $200,000 on paper. A 1-point cap rate compression gets written up in trade publications. A decade of tax escalation that produces the same damage gets almost no attention.
The largest real estate investment trusts in the country understand this. They have entire floors of people — analysts, attorneys, consultants — doing nothing but managing the property tax process across their portfolios. They know that disciplined assessment management is asset management. Most individual owners treat it as paperwork.
Why assessments go unchallenged
Most owners receive the assessment notice, glance at it, and file it. The appeal window is short — in Indiana, you have until June 15 to appeal your assessment for that tax year — and the process feels opaque. Miss that date, and you’ve waived your right to challenge the number regardless of how wrong it is. The deadline is firm. It doesn’t move because you were busy.
The methodology question matters just as much as the deadline. Indiana assessors use three valuation approaches: cost, income, and sales comparison. The approach they choose can swing the outcome significantly. If your assessor valued an income-producing property using the cost approach — replacement value rather than what a buyer would actually pay based on cash flow — you may have a legitimate argument for reduction. But here’s the thing: the assessor is working without your numbers. They don’t know your actual NOI. They’re applying a methodology to limited public information. It is your job to educate them. Bring your rent rolls, your actual operating expenses, your vacancy history. Make the income approach case with real data. An assessor who sees a well-documented income analysis will work with it. One who sees nothing will work with what they have.
What owners get wrong during the appeal
The first mistake — and it’s a costly one — is filing an appeal without first getting a rough sense of what your property is actually worth. This is not a step to skip. If you file an appeal and your property is currently under-assessed relative to market value, you can end up with an increased assessment. Appeals are not automatically protective. The process is a full review of the assessment, and it can go in either direction. Before you file anything, do the basic work: pull comparable sales, get a rough income-based valuation, and understand where you stand. If the assessment looks high relative to value, file. If it looks low, don’t.
The second mistake is treating the informal conference as the end of the process when it’s really the beginning. Indiana’s appeal ladder runs from the informal conference with your county assessor, to the Property Tax Assessment Board of Appeals, to the Indiana Board of Tax Review, and ultimately to the Indiana Tax Court. Most appeals resolve at the first or second step. But owners who accept an unsatisfying informal result without escalating leave money on the table.
The third mistake is ignoring the cumulative effect of small annual increases. A 3% assessment increase feels manageable. Five consecutive years at 3% is a 16% cumulative jump. On a property with a 7% cap rate, that compounds into a material value reduction that never showed up as a single alarming number — just a slow bleed that nobody flagged because each individual increment seemed reasonable.
A word for NNN landlords and CAM pass-through situations
If you’re a triple-net landlord, or if your leases pass property tax increases through to tenants as part of CAM, you might think this doesn’t affect you directly. It does. A successful appeal reduces the occupancy cost your tenant carries over time — and lower occupancy cost means a healthier tenant, a more competitive space, and a stronger argument for renewal when the lease comes up. Tenants who are stretched by rising CAM costs don’t renew. Tenants with manageable occupancy costs do. The appeal benefits you even when you’re not the one writing the check.
The right time to start is before the notice arrives
Indiana assessment notices typically arrive in the spring. The June 15 deadline follows. That window is enough time to review the notice, pull comparables, get a rough sense of value, and decide whether filing makes sense. The questions to ask: What approach did the assessor use? What is the implied value per square foot relative to comparable sales? Does the assessed value reflect what a real buyer would pay today?
File to preserve your rights when the case is there. Don’t file reflexively when it isn’t. And if you’re not sure, that’s exactly what a quick review is for.
Don’t treat the assessment as fixed. It’s an opening position.
If you’d like a second set of eyes on a property tax assessment, reach out. A short review of the notice, the methodology, and your operating data is often enough to determine whether an appeal is worth pursuing.