Every self-storage offering package carries the seller’s property tax bill forward as if it were the buyer’s. It almost never is. In Texas and most other states, a sale is the event that resets the assessment, and the buyer who underwrites last year’s taxes is underwriting a facility that will stop existing at closing.

Key takeaways

• Property tax is the largest operating expense in self-storage, and the seller’s bill reflects an assessed value the county set before anyone agreed to pay a different number. The sale is the new evidence.
• A $7 million purchase of a facility assessed at $4.5 million, at a 2.3 percent combined rate, adds roughly $57,000 a year in tax, worth $800,000 to $950,000 of value at storage cap rates.
• Texas is a non-disclosure state, but the deed, the deed of trust, sales questionnaires, broker announcements and the district’s own income model mean the county finds out anyway.
• The 20 percent circuit breaker on sub-$5 million commercial property ends after the 2026 tax year and does not survive a sale, so 2027 notices will reflect both. Model the purchase price times the local rate, price the difference into the deal, and protest the first assessment anyway.

Property taxes are the largest single operating expense in self-storage. At the large public operators they run between 40 and 50 percent of direct property costs, and at a typical privately owned facility in Texas, where there is no state income tax and the property tax carries the load, the share is often higher. No other line on the expense statement comes close. So it is strange how little scrutiny the number gets in an acquisition. The seller’s offering package shows last year’s bill, the buyer’s analyst copies it into the pro forma with an inflation bump, and the deal is priced.

The problem is that last year’s bill was calculated on last year’s assessed value, and last year’s assessed value was based on what the county thought the property was worth before anyone agreed to pay a different number for it. The sale is new information. Once the appraisal district has it, the old value is finished, and the tax bill that replaces it belongs to the buyer alone.

Why the seller’s bill is the seller’s

Appraisal districts in Texas are required to value every property at market as of January 1 each year. In practice they cannot, because there are far too many properties and far too few appraisers, so they lean on mass appraisal models and leave values alone where nothing has signalled a change. A facility that has sat under the same ownership for twelve years, has never been refinanced in a way that produced a public record, and has protested successfully a few times along the way can carry an assessed value a long way below what a buyer would pay for it. The owner knows this. It is one of the quiet advantages of long ownership, and it shows up in the offering package as a modest tax line that makes the net operating income look better than it will be for anyone else.

A sale changes everything about that picture. The buyer paid a price. The price is, by definition, the best evidence of market value available, and it is exactly the evidence the appraisal district has been missing. The following January, the district will value the property with that evidence in hand, and the gap between the seller’s assessed value and the buyer’s purchase price becomes the gap between the tax bill in the pro forma and the tax bill in the mail.

The arithmetic is unforgiving. Suppose a facility that trades for $7 million was assessed at $4.5 million under the seller. At a combined rate of roughly 2.3 percent, which is ordinary in the major Texas metros, the seller was paying about $103,000 a year. The buyer, once the district catches up, will pay something closer to $160,000. That is a $57,000 difference in annual expense, and at the capitalization rates storage trades at, it is worth between $800,000 and $950,000 of value. On a $7 million deal, the buyer who did not model it has overpaid by more than 10 percent before taking the keys.

Texas does not tell, but the county finds out

Buyers sometimes take comfort in the fact that Texas is a non-disclosure state. Sale prices are not recorded on the deed, there is no transfer tax return revealing the number, and the appraisal district has no statutory right to demand it. All of that is true. None of it means the district will not find out.

The deed is public, so the district knows the property changed hands and when. The deed of trust is public too, and it records the loan amount, from which a reasonable loan-to-value assumption produces a reasonable price. The district will mail the new owner a sales questionnaire, which is voluntary, and which a surprising number of buyers fill out. The broker who marketed the property will announce the sale, and the trade press will report it. Lenders order appraisals and those appraisals circulate. And the district, having seen the deed, will simply revalue the property using its own income model and the market rents it can see online, and let the new owner protest if they disagree. Non-disclosure makes the district’s job harder. It does not make the sale invisible, and a buyer who is counting on the county never noticing a $7 million transaction has built a plan on hope.

Nor does the sale have to be the trigger. Texas appraisal districts reappraise on a cycle, and a storage facility that has been undervalued for years can be caught up in any year the district turns its attention to the property type, sale or no sale. The reset after a sale is the most predictable version of the problem. It is not the only one.

The 2027 problem

There is an additional wrinkle for anyone buying in Texas this year, and it is worth understanding because it will land on 2027 tax bills whether or not the buyer saw it coming.

In 2023 the legislature created what it called a circuit breaker limitation: for the 2024, 2025 and 2026 tax years, the appraised value of non-homestead real property worth $5 million or less could not rise more than 20 percent a year, regardless of market. It was a pilot. The 2025 session had the chance to extend it and did not, so it ends after the 2026 tax year. From January 1, 2027, any property that was being held below market by the cap will be valued at market, all at once.

For a storage buyer this matters twice. First, the limitation does not survive a sale. It expires at the start of the tax year after ownership changes, so a buyer closing in 2026 on a capped property loses the cap for 2027 regardless of the legislature. Second, even a buyer who closed in 2024 or 2025 and has enjoyed two years of limited increases is about to see them end. A smaller facility whose assessed value has been climbing 20 percent a year while the market value climbed faster has a reckoning coming, and the seller of such a facility has every incentive to close before it arrives. A buyer looking at a sub-$5 million Texas facility this fall should assume that the 2027 assessment will reflect the full purchase price, and should ask how far below market the current assessment is sitting, because that is the size of the step.

The same mistake in other states

Texas is the largest storage market in the country, but the mechanics travel. Oklahoma caps annual increases in fair cash value at 5 percent for most commercial property, and the cap resets to market when the property sells or is improved. A facility that has been under one owner for a decade in Tulsa can carry a taxable value far below what a buyer will pay, and the reset is automatic. California’s Proposition 13 works the same way and has for fifty years, which is why buyers there have long since learned to model their own purchase price rather than the seller’s bill. Florida, Georgia and the Carolinas reassess on sale or on short cycles with the sale price as the anchor. The states differ in detail and in how quickly the catch-up arrives. They agree that the buyer’s price becomes the buyer’s value.

What this means for the deal

The fix is simple to state. The property tax line in a buyer’s pro forma should be the buyer’s purchase price multiplied by the local rate, not the seller’s historical bill, and the difference between the two is a cost of the acquisition as real as the roof.

That has three consequences a buyer should think through before the offer goes in rather than after.

The first is price. If the reset costs $57,000 a year, it costs roughly $850,000 of value, and that is a negotiation to have with the seller now, not a surprise to absorb in year two. Sellers and their brokers know perfectly well that the tax line is going to move, and the ones who present it honestly are the ones worth dealing with. The ones who argue that the county will never find out are telling the buyer something about the rest of the package.

The second is the lender. Debt service coverage is calculated on net operating income, and a lender who underwrites the seller’s taxes is sizing a loan on income that will not exist. Most institutional lenders already reassess taxes on sale as a matter of policy. Local and regional banks sometimes do not, and a buyer who gets a larger loan on the strength of a tax line that is about to double has borrowed against a number that will not survive the first appraisal notice.

The third is what to do about it once the notice arrives. A reset to the purchase price is not the end of the conversation. Storage facilities are routinely over-assessed even at market because the district’s income model applies stabilized occupancy and street rates to a property that is collecting less, and because the purchase price for a storage facility includes things that are not real estate: the management platform, the tenant insurance income, the brand, the customer list. A buyer who paid $7 million for a facility and can show that a meaningful part of that was business value rather than land and buildings has an argument the district has to hear, and Texas adds the equal and uniform remedy on top, which lets an owner argue for a value in line with comparable properties even if the market value is defensible. The protest deadline is May 15 or thirty days after the notice, whichever is later. A buyer who models the reset, prices it into the deal and then protests the first assessment anyway has done the job properly. One who skips the first step and relies on the third is gambling with the expense line that decides whether the deal works.

The takeaway

Property tax is the biggest expense in the building and the only one the buyer can predict with near certainty before closing, because the buyer knows what the property is about to be worth to the county. The number is the purchase price. Every other line in the pro forma is an estimate. This one is a calculation, and it is the seller’s bill, not the buyer’s, that is the fiction.

Buyers in Texas this year have one more reason to get it right. The circuit breaker that has been holding smaller commercial assessments down since 2024 is ending, the cap does not survive a sale in any case, and the 2027 notices will reflect both. A facility that looks like it clears the hurdle on the seller’s tax line and misses it on the buyer’s was never a deal. It was a pro forma.