Preparing for Texas Multifamily Property Assessments in 2025

By: Brad Dickerson – Senior Manager, Real Estate

^{*The following is a continuation of the analysis written by Brad Dickerson in 2023 regarding Texas multifamily cap rates and the resulting property valuations during the respective appeal cycle.}

As we approach the 2025 Texas property assessment cycle, enough time has passed to analyze cap rate trends from 2023 and their impact on multifamily property valuations. Having fully navigated the 2023 and 2024 assessment cycles, we have the data to evaluate whether those projections were accurate, where they missed the mark, and what Texas multifamily property owners should expect in 2025.

Where the Texas Multifamily Market Acted as Predicted

Back in 2023 we correctly anticipated that Texas Central Appraisal Districts (CADs) would not fully capture, or capture at all, the uptick in multifamily cap rates that stemmed in the second half of 2022. The CADs were generally aggressive in their 2023 multifamily assessments, citing a lack of recent sales volume warranting cap rate changes, financials showing increased rents (effective rents had closed the gap on previously increasing market rents), and generally stable vacancy rates. While market conditions at the end of 2022 indicated values were decreasing, 2023 assessments were at a peak in many cases, particularly in those counties that hadn’t previously decreased their cap rate models to match the market in their prior 2022 values.

An Overview of the 2023 and 2024 Assessment Cycles

While we accurately predicted 2023’s increases, 2024 was less consistent across the state. Appraisal Districts often have a “lag” in their assessments. That being true, several showed a greater willingness to align their cap rate models with recent market conditions, leading to a more in-touch valuation cycle in 2024 than initially feared. While some counties remained aggressive, others (notably Harris, Williamson, and Travis) utilized higher cap rates in their models, leading to declines in multifamily property values. Conversely, many DFW counties aggressively pressed for increases.

Looking Ahead to The 2025 Assessment Cycle

Looking ahead to the upcoming 2025 property assessment cycle, Texas multifamily real estate owners and investors should prepare for continued fluctuation:

• Cap Rate Adjustments: With surveys reporting stabilized or slightly lower cap rates year-over-year in some markets, appraisal districts may adjust their cap rate models even further.
• New Construction and Increased Vacancy: Varying by market, the continued influx of new multifamily unit deliveries will continue to weigh on market rents and occupancy rates.
• Variance by County: While some appraisal districts have shown a willingness to adjust cap rates, others have been resistant to fully acknowledge or mirror market conditions. Property owners should expect these nuances to continue from county to county.

While our 2023 multifamily cap rate analysis provided insight into understanding Texas multifamily property tax trends that year, 2024 proved that appraisal districts often interpret market conditions differently, reflected in their approaches. As we move into 2025, multifamily owners should anticipate further cap rate adjustments and continued variability in assessments depending on the market. Contact the Texas property tax consulting team at Invoke Tax Partners to discuss your Texas multifamily portfolio as we head into this appeal cycle.