How to Protest Property Taxes on Rental and Investment Properties in Texas
If you own a rental home, duplex, vacation property, or any investment real estate in Texas, you have the same right to protest your property tax appraisal as any homeowner — and in many cases, you have even more reason to do so.
Unlike primary residences that benefit from the permanent 10% homestead appraisal cap, investment and rental properties have far fewer protections against rising assessed values. That makes protesting your appraisal one of the most effective ways to control costs and protect your returns as a property investor.
Why Protesting Matters More for Investment Properties
No Permanent Appraisal Cap
Homestead properties in Texas are protected by a 10% annual cap on appraised value increases. That means even in a hot market, the taxable value of a primary residence can only rise by 10% per year.
Investment properties don't get that protection. Your rental property's appraised value can jump 30%, 50%, or more in a single year if the appraisal district decides the market supports it. That increase hits your bottom line directly — and gets passed through to tenants as higher rents or absorbed as lower cash flow.
The Temporary 20% Cap Expires After 2026
In 2023, Texas passed SB 2 (codified through Proposition 4), which created a temporary 20% appraisal cap for non-homestead properties valued at $5 million or less. This "circuit breaker" limitation applies to rental homes, commercial buildings, and other investment real estate for tax years 2024, 2025, and 2026.
This cap expires on December 31, 2026 unless the Texas Legislature extends it and voters approve a new amendment. If it sunsets, there will be no limit at all on how much your investment property's appraised value can increase in a single year.
That makes the next few years critical. Protesting now to establish a lower baseline value can save you thousands in future tax years — especially if the cap goes away.
Every Dollar of Overvaluation Costs You More
On a homestead property, overvaluation is cushioned by exemptions and caps. On an investment property, the full appraised value is taxable. There's no homestead exemption to offset the bill. If the appraisal district overvalues your rental property by $50,000 and your combined tax rate is 2.5%, that's an extra $1,250 per year coming straight out of your returns.
Multiply that across several properties in a portfolio, and the annual cost of not protesting adds up fast.
What Types of Investment Properties Can Be Protested?
You can protest the appraised value of any property you own in Texas, including:
- Single-family rental homes
- Duplexes, triplexes, and fourplexes
- Vacation rentals and short-term rentals (Airbnb, VRBO)
- Second homes that are not your primary residence
- Fix-and-flip properties (even if you plan to sell soon)
- Small apartment buildings and multi-family complexes
- Mixed-use properties (residential units above commercial space)
- Vacant land held for investment
The protest process is the same regardless of property type. You file a Notice of Protest with the county appraisal district, present your evidence, and either settle at an informal hearing or go before the Appraisal Review Board (ARB).
How Investment Property Appraisals Differ
Appraisal districts in Texas use three approaches to determine a property's market value. Understanding which method they used — and which one benefits you — is key to building a strong protest.
Market Approach (Comparable Sales)
This is the most common method for single-family rentals. The appraisal district looks at recent sales of similar properties in the area and uses those to estimate your property's value.
The weakness of this approach for investment properties is that it doesn't account for condition, deferred maintenance, or rental wear and tear. A comparable home that sold to an owner-occupant in move-in condition shouldn't be used to justify the same value for a rental property that hasn't been updated in a decade.
Income Approach
For multi-family and income-producing properties, the income approach can be a powerful tool. This method values the property based on the income it actually generates — not what the district thinks a buyer would pay.
If your actual rental income, vacancy rates, and operating expenses show the property produces less income than the appraisal implies, you have a strong case for a reduction.
Cost Approach
This method estimates what it would cost to rebuild the property from scratch, minus depreciation. It's less commonly used for protests but can help if the appraisal district has overestimated the quality of construction or underestimated depreciation due to age and condition.
Evidence That Wins Investment Property Protests
Building a strong case for an investment property requires different evidence than a standard homeowner protest. Here's what to bring:
Comparable Sales With Adjustments
Gather 3 to 5 recent sales of similar properties within the same area. Adjust for differences in square footage, lot size, condition, age, and features. A comp that sold for $400,000 but has a pool, updated kitchen, and 200 more square feet should be adjusted downward when compared to your property.
Texas law requires adjustments to comparable properties — a simple "price per square foot" argument won't carry as much weight as properly adjusted comps.
Rental Income and Expense Documentation
For multi-family and income-producing properties, bring:
- Rent rolls showing actual monthly income per unit
- Vacancy records documenting periods without tenants
- Operating expense statements (maintenance, insurance, management fees, repairs)
- Net operating income (NOI) calculations
If your actual NOI is lower than what the appraisal district's valuation implies, that's direct evidence the property is overvalued.
Property Condition Evidence
Rental properties take more wear and tear than owner-occupied homes. Document everything:
- Photos of deferred maintenance, wear, and needed repairs
- Contractor estimates for major repairs (roof, HVAC, foundation, plumbing)
- Inspection reports showing the property's actual condition as of January 1 of the tax year
Remember: the appraisal district values your property based on its condition on January 1. Any repairs or improvements made after that date don't affect the current year's value.
Equity Comparisons (Unequal Appraisal)
You can also argue that your property is appraised higher than comparable properties on the appraisal roll — not just higher than what it would sell for. This is called an unequal appraisal or equity argument.
Pull the appraisal district's values for similar nearby properties. If your rental is appraised at $350,000 but three comparable rentals on the same street are appraised at $290,000 to $310,000, you have a strong equity case regardless of what the market value might be.
Special Situations for Texas Property Investors
Converting a Primary Residence to a Rental
When you stop using a property as your primary residence, you lose the homestead exemption and the 10% appraisal cap. The appraisal district will remove the homestead designation, and the property's appraised value can jump to full market value in a single year.
This is one of the most common — and most costly — surprises for investors. If you're converting your home to a rental, expect the appraised value to increase and plan to protest the first post-conversion appraisal aggressively.
Fix-and-Flip Properties
If you're holding a property temporarily for renovation and resale, you're still on the hook for property taxes during the holding period. The appraisal district may not account for the property's pre-renovation condition when setting the January 1 value.
Document the property's condition with dated photos and contractor bids before you begin renovations. That evidence establishes the value as of the appraisal date, not after the improvements.
Short-Term Rentals (Airbnb, VRBO)
Short-term rental properties don't qualify for homestead exemptions, and the appraisal district may assign them a higher value based on the assumption of premium rental income. If your actual occupancy rates and income don't support that valuation, use your booking records and financial statements to make the income approach case.
Portfolio Owners With Multiple Properties
If you own several investment properties in the same county, you can file a protest on each one individually. Consider whether a professional tax consultant can handle the portfolio more efficiently — the time and coordination involved in protesting multiple properties adds up quickly.
The Protest Timeline for Investment Properties
The process is the same as for homestead properties:
- Receive your appraisal notice (typically mailed in April)
- File your protest by May 15 or 30 days after receiving the notice, whichever is later
- Attend an informal hearing with the appraisal district to negotiate
- Go before the ARB if the informal hearing doesn't produce an acceptable result
- Appeal further through binding arbitration or district court if needed
There's no fee to file a protest and no risk of your value being raised as a result of protesting. The worst outcome is the value stays the same.
For a comparison of how residential and commercial property tax protests differ, see: Residential vs Commercial Property Tax Protests.
Why Investment Property Owners Hire Professional Help
Protesting an investment property is more complex than protesting a homestead. The evidence requirements are different, the income approach involves financial analysis, and managing protests across a portfolio takes time.
Working with a property tax consultant like Ballard Property Tax Protest gives you:
- Expert analysis of which valuation approach gives you the strongest case
- Adjusted comparable sales prepared to appraisal district standards
- Income approach arguments built from your actual financials
- Representation at hearings so you don't have to attend yourself
- Portfolio management for investors with multiple properties
We handle the entire process from filing to hearing, and you only pay if we reduce your taxes.
Protect Your Investment — Protest Every Year
The single biggest mistake investment property owners make is skipping the protest. Unlike homestead properties with a 10% cap as a safety net, your investment property's value can surge unchecked. And with the temporary 20% non-homestead cap set to expire after 2026, there's never been a more important time to establish the lowest defensible value on your investment properties.
Contact Ballard Property Tax Protest to get started on your investment property tax protest today.