Property Taxes Are Killing Your Rental Cash Flow | How Real Estate Investors Can Fight Back

Michael Reeves (00:00)
So we heard all the news. Texas is such a great business environment.

Man, the real estate’s off the chain. You’re making so much money here. And then they don’t realize that they have property taxes. So yes, you’re gonna get big equity splits, but you’re not gonna cash flow because the property taxes is the effective tax rate’s about two percent. So if you have a million dollar property, which is not a fancy property anymore, you’re paying close to twenty thousand dollars a year in property taxes. So you’re not gonna get rich on cash flow immediately in Texas.

Scott Bursey (01:58)
Welcome back to the Real Estate Pros podcast, powered by Investor Fuel. I’m your host, Scott Bursey.

And today we’re sitting down with Michael Reeves, a true serial entrepreneur who has successfully navigated three exits, including a venture he started from his car with nothing but a phone and a list. He is currently tackling the real estate industry with the latest innovation. The Andy App. It’s the first tool allowing Texas property owners to appeal tax assessments with just a click. Listeners expect to learn how to identify massive pain points in the market and how to leverage technology to streamline your own investments. Michael, welcome to the show.

Michael Reeves (02:36)
Yeah, awesome. Thank you. Appreciate you.

Scott Bursey (02:38)
It’s awesome having you here, my friend, and help our listeners get up to speed. Please give us the ninety second highlight reel of how your career has ignited and where you’re pouring your fuel now.

Michael Reeves (02:50)
Yeah, absolutely. I’ve been in property taxes and obviously real estate for gosh, at least since 2014. Started a property tax lending business where people were unfortunately couldn’t pay their property taxes or inherited properties or real estate investors that kind of got underwater and some things. And we would loan them the money. It was kind of like a payday loan for property taxes and ultimately saw a an issue where most of those folks had never argued the value of their property taxes. They never appealed it.

And so their tax bills were through the roof because the county was obviously just kept taxing them, kept going up and up and up, and nothing was being done about it. So we started protesting property taxes in 2021 and just started building it. Next thing you know, started looking at technology. And you know, you can you can order DoorDash, you can get Instacart, you can, you can watch a movie and I can watch a football game on my phone, but why can’t I appeal my property taxes? So again, we created The Andy App.

Locally in Texas now we serve all two hundred and fifty four counties, but now through a click of a button, we are the first and only property tax protesting and appeal services on the Apple and Google Play Store, serving all Texans and soon the rest of the country.

Scott Bursey (03:59)
That’s incredible. It really speaks volumes to the raw hustle needed to break through the noise. Thanks for sharing that, Michael. And we love to hear more about your recent focus. What really caught my attention about you was the way you’ve been able to take the stress and confusion out of a bureaucratic nightmare like property tax assessments, turning it into a simple mobile interface. With that in mind, wondering about your early days, what core strength do you think kept

you going when you just started running out you know running a business out of your car with no resources.

Michael Reeves (04:36)
Yeah. It’s interesting because it’s just tenaciousness. Again, I I’ve got friends all the time that go, Michael, I want to, I want to start a business, or Michael, I think I’m about investing in that. Or Michael, I want to do I’m like, don’t do it. Don’t do it. Because the emotional roller coaster and the intensity of the highs and lows, man, I mean, it’s if you can’t handle that part of it, where one day you think you’ve made it and the next day you’re

trying to write yourself a resignation letter, which I did one time. I actually quit to myself. I wrote a typed out a resignation letter, realized there was nobody to turn it into. So I had to keep going. But yeah, that that’s really what it comes down to is you got to be tenacious. And at the same time, you got to be a realist because entrepreneurs, we lie to ourselves. Real estate investors, you lie to yourself. It all looks good. And you think it looks good and then you convince yourself, but then

deep down inside, there’s some snakes in the grass that that were always itching at you to research. But again, you just gotta be tenacious and you gotta realize that what you have could change things but you gotta do your research and you gotta understand that not everything’s gonna hit. But if it’s looks good, smells good, and at the same time you’ve got the passion to do it, yeah, you can’t stop.

Scott Bursey (05:42)
Speaking about being tenacious, how do you leverage that same strength in your tech ventures right now?

Michael Reeves (06:38)
I guess you gotta figure out your why. I’ve got four kids and a wife and again that’s my why. I was raised by a single mother in a small house, right? And so I saw what struggle. My mom was a flight attendant and how she grinded just to put food on the table on a flight attendant’s salary with no help. And again, you just have to have a why. You know, again, you wanna be successful. You think about all the people in your head that told you couldn’t do something.

You know, you think about, you know, symbols and hey, I’m gonna get that. And it’s not material things. Give you a quick story. My mom, when I was eight years old, gave me money to go to the bookstore or the book, the book fair school. And instead of buying a book, she told me to buy a book. I bought a poster of a Lamborghini. And I put that on my wall. My mom was so mad at me. I said, I told her one day I said I’m gonna drive that Lamborghini. Right. And so it’s not a symbol of, you know, just wealth. It’s a symbol of I told my mom I was gonna do something, I’m gonna do it.

Right. So it’s really what your why is and you gotta figure that out. And it can’t be money. If why is your money and why and that’s your success, it can’t be. It’s gotta be something else besides that.

Scott Bursey (07:37)
That mindset is everything. Michael, really interested in the flip side. What’s a common weakness you see traditional real estate investors struggle with when they try to integrate new technology into their operations?

Michael Reeves (07:50)
Technology is great. I don’t think it’s the technology the problem. I honestly think I go back to, you know, what the what the real estate investor or the entrepreneur business owner, they lied to themselves on the project. And they don’t see the numbers, they don’t understand the numbers, they don’t understand their market. If you’re an entrepreneur and you’re trying to sell something to somebody, do you truly understand your market? If you’re buying a building or buying a Airbnb property.

Do you truly understand is somebody really going to rent that place? You know, it all looks good on paper and sounds good on Instagram and you see all the wonderful success stories, but man, you really got to deep dive into and cross every T and dot every I, or you’re gonna be left holding the bag. I’ll give you an example. I spent a lot of money on my app. I put a lot of money in it, but guess what? I didn’t research. I didn’t realize that Apple may never accept you for the Google or for the Apple Store.

Google’s fairly easy. Apple doesn’t just let anybody on the Apple Store. So one of my buddies is a tech guy, he’s a very successful social media platform owner. You would know him if I said his name. But you know, he’s like, Michael, you may never get on that store. And I’m like, whoa. So I spent all this money. Don’t even know that I can’t, I may not get on Apple. Took me eight months and 17 tries. So again, you gotta do your research. You can’t just fly blind and fly by the seat of your pants. It’s not the technology.

Technology’s great when you know the answer going into it.

Scott Bursey (09:10)
Appreciate the honesty on that. Digging a bit deeper, where do you see the biggest opportunity for investors using data driven tools like yours in the current market climate?

Michael Reeves (09:21)
It’s everything, you know? And I know there’s a the big war on data centers and data and what that looks like. Data is absolutely everything. Using technology and data can save you, it’ll give you the answers that maybe you don’t know. Right? I mentioned earlier that you know Texas right now got a lot of real estate investors, they’re getting out of Texas, right? I actually have a client from California selling their property in Texas. He wants out.

So we heard all the news. Texas is such a great business environment.

Man, the real estate’s off the chain. You’re making so much money here. And then they don’t realize that they have property taxes. So yes, you’re gonna get big equity splits, but you’re not gonna cash flow because the property taxes is the effective tax rate’s about two percent. So if you have a million dollar property, which is not a fancy property anymore, you’re paying close to twenty thousand dollars a year in property taxes. So you’re not gonna get rich on cash flow immediately in Texas.

So again, using an app like mine to protest those property taxes.

Because there’s only two ways to change the mortgage payment. Number one, get lower insurance premium. And number two is to appeal your property taxes. Other than that, you’re not lowering that payment. So again, leveraging technology, looking at technology before you buy stuff that can help you ultimately, my great answer.

Scott Bursey (10:32)
How about this, Michael? What is the biggest threat you see right now for property owners who continue to handle their tax protests the old fashioned manual way?

Michael Reeves (10:43)
Well, first of all, I don’t know how they have time, right? Because if you go down to the appraisal district, and this is in many states, it’s funny in Florida and Key West, they actually make you drive to Key West to go inside to argue your property tax. You can’t do it via Zoom. Again, where’s the time? And then the data. Where are you getting the data? You don’t know what you don’t know. So you may grab a mountain of data to lower your taxes and the county may not accept it, or you may not be able to argue it well.

Right. So again, your property’s being compared to other homes and other properties in the neighborhood that have been listed. And Texas is a non-disclosure state. So they’re pulling an algorithm based off of listing prices. Well, you have to prove to the county that your property is not worth what they’re saying it’s worth. Right. Sorry. That’s they’re it’s not worth what they’re saying it’s worth. And then again, if you don’t have the correct data to do that.

You’re wasting your time. So you’ll spend three, four hours trying to argue a case and you don’t have the correct data. So again, if you leverage technology with the right companies with a click of a button like ours, you know, again, we can boost the net income of that property because I can lower your property taxes.

Scott Bursey (11:48)
That’s a massive, a massive point. Thank you for highlighting that. And give us your take on strategy. What is the biggest strategic advantage you found in being a first mover in the property tax app space compared to traditional consulting?

Michael Reeves (12:03)
Again, it makes it easy, right? Communication is everything, right? Look, I’m in Texas, you’re in probably a different state. We’re communicating. How are we doing? I remember as a kid looking going, how could, man, imagine like I would think it was on The Jetsons, they were talking to each other. And I thought it was what? It was wild. So the difference is technology’s always changing. And if you can leverage a platform that’s leveraging technology and AI, AI is smarter than human beings. So the traditional tax consultants are using humans to do it. Humans make mistakes. Humans forget hearings. Humans forget evidence. Humans don’t have the ability to do certain things that that AI can do. Right. And so again, a click of a button in communication, right? So if I’m trying to get a hold of a traditional tax consultant, I’m emailing them, I’m calling them. Maybe it takes them three or four minutes to answer the phone or puts me on hold. Or maybe I send an email, it takes him four days to respond or 48 hours to respond.

Now via application, I can communicate with my client via application, much like your friends communicate with you through Instagram. I can send you a DM through my app. I can talk to you via application, right? So again, that’s better. So if the client wants to know what happened. One of my competitors, one of my current clients said the competitor just sent them a bill. They didn’t even know what they did. So it’s like, yeah, they lowered their property taxes, but they just got a random bill in the mail. Okay. Well, now via application and communication, I could let know exactly what I did better than any human tax consultant.

Scott Bursey (14:14)
Do you think non-tech investors can adapt the same first mover mentality in their local markets?

Michael Reeves (14:21)
Don’t know, man. That’s a great question, Scott. I mean, again, you’re talking from an investor buying into their own local communities.

Scott Bursey (14:28)
Yes, implementing your technology.

Michael Reeves (14:30)
So I just understand the question a little bit better. But yeah, absolutely. Again, everyone pays property taxes in most states. Most states have atrocious property taxes. So you got two options appeal it or eat it. Right. And so what really drives me nuts is we’ll go to the grocery store and we’ll argue with the guy behind the counter because our milk rang up two dollars more than it should have on the sticker price. And we’re going, we want our two bucks back, but you won’t

appeal your property taxes locally, right? Or at least find a firm or at least through a click of a button, know that every single year we we’re going to do it for you. Just like LifeLock monitors your credit report, we’re going to monitor your property taxes in your community through a click of a button.

Scott Bursey (15:08)
Love that. What does your professional network look like right now, Michael?

Michael Reeves (15:13)
It’s funny because I’m all over the state doing speaking engagements. Interviewed politicians that are going to Austin telling people they’re gonna put you know change property tax law. And you and I both know they’re not. And you know, I do real estate conferences, I’m the keynote speaker. I’ve got friends that are billionaires that are that are in major social media platforms. I just met a potential

partner that scaled a large beverage company, just sold it for a billion dollars. Real estate agents, we’ve got partners that sell The Andy App on our behalf. So we’ve partnered with a home inspection company. So when they do the home inspection, they automatically file their property tax protest and their homestead exemption. I have a Paris a the Paris Agency which is a insurance company. So when they put the home insurance on the property they’re also signing you up for your homestead exemption.

And they’re appealing your property taxes. So we’re bringing on a lot of big partners and then they’re earning profit sharing and residual income off of the savings of the property as a partnership, a profit sharing residual. So when they’re doing the home inspection, they get paid the one time on the home inspection. But with The Andy App, because they’re a partner, they’re getting residual savings every single year off their client that they originally did the home inspection on. So yeah.

Scott Bursey (16:27)
Solid work. Big network. Absolutely. Thank you for taking us down that path. And Michael, if somebody’s listening and they’re thinking to themselves, hey, this is somebody I really like and would like to learn more about your business. What is the first thing that you would like to tell them about your business?

Michael Reeves (16:45)
Thing is, we got to educate the public on property taxes. Now, obviously, Texas right now, we’re gonna go to other states, but I talked to a mortgage broker yet or mortgage company yesterday, they’re gonna implement us in their process. And if you think about his deal, you don’t get a homestead exemption. And in many states, if you don’t file a homestead exemption, your property taxes, there’s no cap on it, right? And so his whole deal, and we’ve been going back and forth, and he got really upset with his team because they were ignoring the implementation.

And he goes, guys, you don’t realize that what happens is if you sell them a loan, they buy that house, you fail to educate them on a homestead exemption or even get them to apply it. And three to four years from now, they’re going to find out that they never got a homestead on their property. So who are they going to blame? They’re going to blame the lender and they’re going to blame the realtor. So again, we keep that blame point, the finger pointing game. So we file immediately the homestead exemption right at point of sale.

Right. So then the client has it, they save on their property taxes. And again, it’s just getting education out there. And the first thing I want people to know is if we want change, it’s change of numbers. There’s over 12 million property owners in the state of Texas. If all 12 million of us stood up one day and said, Hey, I’m gonna protest my property taxes, what do you think would happen? Right. And now through automation and application in The Andy App.

That’s my goal is for twelve million plus Texans to use my platform to when we can make protesting your property taxes as apple pie is filing your federal income taxes.

Scott Bursey (18:14)
Wondering as we wrap up, Michael, what is the most valuable piece of advice you’d give to an investor looking to build their own scalable asset from the ground up?

Michael Reeves (18:23)
And going back to what we talked about, you better know everything about the numbers. You better know everything about the neighborhood. You better know about what’s coming on the future. I got a friend that owns a restaurant and they’re building a massive outdoor music venue by my house. This thing is insane, right? And so I keep telling him, buy the building, buy the building, the other investors in California, buy the building because he doesn’t know what he has. So he’s gonna sell you this building for cheap, and you know that.

Right around the corner when they exit that concert venue, guess where they’re driving? Right by your restaurant. And guess what the value of this building is going to be when they want to tear it down in 10 years? Right. So again, you got to know whether it’s a business, starting a business or investing in real estate or whatever it may be that’s going to hit your bottom line and make you money or not make you money. You better know everything there is to know about it and don’t lie to yourself. Entrepreneurs.

Investors lie to themselves. They get rose-colored glasses. They think that you’re gonna make a they only see the profit. They don’t see the water main break. They don’t see, they got to replace this, replace that. They just don’t see it. And again, ladies and gentlemen, you gotta know the numbers. You gotta know everything there is to before you jump two feet in. Because if you don’t and you lose money, that causes everything else in your life to fall apart. Your marriage could fall apart, your families fall apart.

Your corporate job could fall apart because all you’re thinking about is the hundred grand that you just lost over here. It takes sacrifice. So and you better know going into it what that sacrifice is gonna be, and you better know the numbers.

Scott Bursey (19:52)
Michael, your passion truly resonates. And can you take that same passion and give us our listeners a final analysis of your operation, some golden nuggets, if you will.

Michael Reeves (20:04)
Yeah, we’re gonna be the best. We are the best. The technology that we’ve created in is the ecosystem. There’s again, I think it’s a household name. You can call me crazy, but I’m a dreamer. And I think I’m sitting here because I do dream and I don’t sleep at night. And I don’t dream sleeping, I dream awake. And again, I think we’re Uber. You can call me crazy, but I think at the end of the day in the next three to five years, especially in the state of Texas and going to other states, people are gonna slowly start waking up and going.

Wait a second, I didn’t realize I could appeal my property taxes and I could do it on an app on their phone, just like you can watch Netflix, just like you can order DoorDash, just like you can pay your auto insurance through Progressive. And again, there’s a lot of real estate apps out there nowadays that are popping up as well that’ll help real estate investors. But again, from a property tax protesting, because again, there’s only two ways to lower the mortgage payment. Yeah, that without going through a modification or a refi, which nobody’s doing refis right now.

The only two ways you can lower your mortgage payments, get different insurance premiums or appeal your property taxes. And through Andy and a click of a button, you upload all your pictures of the property. So any imperfections, any repair estimates, you walk around the house, take pictures of it, upload it to the app, and the artificial intelligence is going to negotiate a lower tax bill on your behalf. Quick and easy and simple.

Scott Bursey (21:22)
Nothing crazy about that, Michael. And for those of our listeners that want to keep this conversation moving, stay in your lane or collaborate with you. What’s the best way for them to reach you?

Michael Reeves (21:32)
Yeah, so theandyapp.com or download it on the Google and Apple Play Store. If you want to be a partner and you want to sell the app within a strategic partnership within your services, easily reach out to us either via website or even application. And again, guys, the only way to get the word out there is spreading it. And hey, look, we can’t we don’t spend $13,000 a day in ad spend like some of my competitors do.

Again, putting billboards. We don’t think billboards and radio ads and some of that stuff educate clients. We just don’t and then the population. We think good, solid partnerships. We have a 50-50 rev share with our partners. So if you think you want to talk to your neighbors or whoever portfolios that you guys have, if you’re a real estate investor in the state of Texas, we’d love to protest your property taxes for you. You guys keep 70% of tax savings. We keep 30%. We also go back five years and look for potential refunds.

And potential corrections. We found one that was a front porch. A guy built a front porch. County was taxing it as livable space for five years. We got that gentleman a ten thousand dollar refund and our app and our artificial intelligence finds all those things.

Scott Bursey (22:39)
Michael, this has been an absolute master class. Thank you for joining us today.

Michael Reeves (22:44)
Thank you. Appreciate you.

Scott Bursey (22:45)
And to our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be fueling your tanks with the lineup of elite guests, just like Michael Reeves, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.