239: How to Escape City Taxes and Real Estate Regulations with Julie Drenner

I bought a lake house in Austin and discovered I was paying city taxes even though the city wasn’t providing water, sewer, trash collection, or electricity.

Julie Drenner helped me legally remove the property from Austin’s tax rolls. But that uncovered another problem: the city could still regulate what I build, how I remodel, and how I use the property through its extraterritorial jurisdiction, or ETJ.

If you own, develop, or invest in real estate, these overlooked jurisdictional rules can quietly affect your taxes, construction timelines, rental income, and resale value.

Julie explains where property owners may be losing control, why cities have little incentive to make these rules easy to understand, and what every investor should investigate before buying or developing their next property.

Mic Drop Moments

• “When you see the fallacies in the laws, you can then change the laws.” – Julie Drenner

• Fighting Government With Law and Leverage
• What Annexation Means for Property Owners
• Taxation Without Services or Representation
• The Lake Austin Tax Problem
• Which Properties Can Be Disannexed?
• How ETJs Restrict Property Owners
• What Disannexation Actually Changes
• Escaping Permits, Fees, and Regulations
• How Disannexation Increases Property Value
• ETJs and Commercial Real Estate
• How to Get out of an ETJ
• Austin’s Military Base Loophole
• Hidden Regulations Investors Should Investigate
• Why Investors Should Contest Appraisals
• How Entrepreneurs Can Change Laws
• Removing Your Property From City Control

Brad Weimert: Attorney by education, deep political background. You have worked on things from the legal side, the lobbying side, the policy side, and most recently, you are leading the charge to move, like $290 million off the tax base for Austin. Julie Drenner, welcome to the show.

Julie Drenner: Thanks, Brad. Thanks for having me.

Brad Weimert: Yeah. So, first and foremost, I want to talk about this whole crazy tax situation with Lake Austin and disannexing, et cetera. But I am terrified with the proposition of fighting government. So, if you are fighting government, do you think it’s more important to have the law on your side or to know how government actually moves?

Julie Drenner: Well, you absolutely have to have both. It’s not an either/or situation because you have to use the laws that are on the books, obviously, and you have to know how government works, so therefore, when you see the fallacies in the laws, you can then change the laws. So, it really takes a twofold approach.

Brad Weimert: I feel like there are laws that are sort of subjective in some respect. And the reason I ask the question is because I feel like there are these laws that should be cut and dry, but they get pushed around and navigated around because people know how to navigate government.

Julie Drenner: Well, there’s definitely legislative intent, and that is what the law was written to do. And yes, then people can use what the actual words are to do other things. So, that’s always the conundrum, and that’s what we call the unintended consequences. And honestly, that’s the beauty of at least our state government only being in session every other year for six months. Because that gives us that interim time, that 18 months to say, “Hey, this bill worked exactly like we want it to,” or, “It worked a little bit, but there is a loophole. We need to close that loophole,” et cetera, et cetera, et cetera. And that’s kind of what we’re going to be talking about today.

Brad Weimert: Yeah, I love it. So, there is, as you know, I have my hands in lots of different real estate things on a routine basis. It is tremendously helpful to have more context with how governments interact as it pertains to real estate in particular, if you’re investing in real estate, period. We’re going to get in the weeds with a couple of things, but there’s kind of a case study that we’re going through right now, which is Lake Austin and disannexing. Before we get to that, what is disannexing or disannexation?

Julie Drenner: Yeah. I don’t even know how to spell it sometimes.

Brad Weimert: What’s the simple way to explain that, and why does it matter to a property owner in Austin?

Julie Drenner: Sure. So, Austin is allowed to annex properties when they bring services to those properties. So, Lake Austin is a very unique case in that several years ago, the city just…

Brad Weimert: Well, let’s back out before you get the example. So, annexing is basically the city. Is annexing voluntary or involuntary?

Julie Drenner: It can be both, actually. So, for instance, City River Place decided voluntarily that they wanted to be annexed into the city. So, they took a majority vote of the neighborhood. They decided to petition to be annexed. When they did that, the city granted it, and then they therefore taxed them and gave them city services.

Brad Weimert: And the city services are like water…

Julie Drenner: Trash, electricity.

Brad Weimert: Trash, police, electricity.

Julie Drenner: Et cetera.

Brad Weimert: Fire. Okay.

Julie Drenner: Now, on the Lake Austin case, that was an involuntary annexation and actually an illegal one. And therefore, that’s why we have the situation we have today of the ability to de-annex because the initial annexation was not legal.

Brad Weimert: Well, so that kind of answers the next question before we get into the backdrop here. But I think that there’s a… You kind of see two sides of this when you’re looking at news on it, and the question is, is it a loophole for rich homeowners, or is it holding the city government accountable?

Julie Drenner: No, there’s no loophole because when you annex a property as the city, you’re promising them that you’re going to bring them services. That’s why they have the ability to tax you, because you now have their services. You’re now dependent on them for your essentials, i.e., water, energy, et cetera. But if you do not bring those services, then you can’t tax them because you’re not giving them anything. So, therefore, that’s why it is a legal act. And in addition, especially when we’re talking about Lake Austin, you don’t have any representation. So, again, you’re getting taxation without services or representation and regulation.

So, therefore, you have a homeowner who has all these regulations put on them by the city. There’s, like, over… There’s hundreds of city ordinances. There’s all the building codes. All of those things are put on the homeowner, yet they’re not able to vote on someone who has the ability to change those ordinances. So, that’s why it’s a double slap in the face. So, it has nothing to do with rich or poor or anything else. It has to do with basic rights of what the government is required to do to be a civil servant to its landowners

Brad Weimert: I love that. So, okay, let’s go into this crazy story. So, as a reference point, the way this came to be for me is I bought this lake house about a year ago, and like this context is super important. I have four septic tanks on the property. I pump the water out of the lake, right, and then go through this crazy filtration process, and that is the water that you drink and shower in, et cetera, on the property. I pay for trash service. So, a trash company comes by and gets it. The city doesn’t do any of that stuff. So, no water, no plumbing, or sewers, no trash pickup.

Julie Drenner: No electricity.

Brad Weimert: No electricity, right? All this is stuff that I pay for independently. And so, you, as a close friend, said, “Hey, give me some money, and I’ll get you out of the city taxes altogether.” And I was like, “Let’s rock.” So, how did this come to be? Why is my property, or lakefront property in Austin, in this situation? What is the backdrop from the beginning?

Julie Drenner: Sure.

Brad Weimert: Because this started a really long time ago.

Julie Drenner: Yes. I don’t actually remember the date, because I’m not great with dates, but it was several years ago, less than 10 years ago, the city just decided to annex all the property on Lake Austin. And I don’t know what the auspice was for that other than taxation, and they did so. And, at the time, I also lived on Lake Austin, so I paid city taxes for four or five years without any kind of services and without any relief. So, a bunch of us got together and said, “Do we need to sue the city? Like, what do we need to do?” Because again, this is illegal. We didn’t have any voting rights, so we couldn’t vote the people out that were continuing to put on ordinances on our properties and regulations on our properties.

At the time, we were building a house, and so we had to do all the city codes, we had to do all the restrictive inspections and ordinances. Like, this is my favorite. When we finished the project, we got a notice from the city that said, “Oh, you need to pay us a fine because you did not recycle your construction material, and you did not do your quarterly reports on where you were recycling it.” And I was like, “What are you talking about?” There was not, at the time, a recycling construction company. So, they made us pay a fine, which we had to pay because we were in the middle of closing. We weren’t going to not close on a multimillion-dollar property for some hundred-something dollar fine. But yet they made that ordinance, they fined us, and we literally physically could not comply with the ordinance.

So, this is what the city does. And it’s just wrong. So, that’s kind of the backdrop of how I personally got involved with it is that there was no reason for the city to do it other than a money grab to tax those properties because they are some of the highest wealth properties in the city.

Brad Weimert: Yeah. So, right now, what I pulled up was that there’s a petition involving 143 properties that are adjacent or near Lake Austin. That’s about 130 acres. So, what is it about that specific set of properties that made them eligible to dis-annex as opposed to anything else in the city that is in a situation where they’re annexed?

Julie Drenner: Okay. So, first of all, they have to… It’s not all properties that are along Lake Austin, which I also found out. Some properties along Lake Austin do have city water. And so, those are not eligible to be de-annexed. And the other ones are the ones that are in the situation that I talked about, where just a few years ago, the city just decided to annex them and give them no services. So, only those properties are the ones that are eligible.

Brad Weimert: Interesting. So, it still seems pretty sh*tty. Like, so great they’re providing water, but that’s one of, like, a variety of services that you should get if you’re paying city taxes. So, I, as a single person, find it strange that I’m paying for school taxes. Now, it’s a different thing, but it’s parallel, right? And I could argue that the value of the property… Well, I’ll get into property value later, because, like, that’s an interesting thing as it pertains to annex, disannex. But are there other areas in town? Like, what’s the qualifier to allow you to be disannexed? Do you have to get no city services? Just one? So, you have to have zero city services. So, if they provide one but not the other, then sorry, you’re screwed. Lovely. That’s amazing.

The other thing that comes into play here that’s interesting is there’s this idea of being annexed in the city, which means you’re getting city services, you get taxed, and then there’s ETJ. What is ETJ, and how does that fit into the picture?

Julie Drenner: Sure. There’s actually ETJ and limited purpose district. So, ETJ stands for extraterrestrial jurisdiction, literally like E.T. for home. And limited purpose jurisdiction. They’re cousins. Those are areas that are just outside, literally could be your next-door neighbor, it could be the person across the street, just outside the city limits. And what the city did back in the ’80s is they had a two-mile ETJ, and then they did a five-mile ETJ. And they basically said, “Look, we know that eventually there’s going to be a lot of people living here. Eventually, we’re going to bring services here, so we’re just going to regulate you now, and we’ll bring you services in a couple of years.”

And that was, again, in the ’80s. So, they have, again, made these promises to these landowners, put regulations on them, and then never fulfill their promises. So, now, in the same vein of this regulation without representation, a bill was passed to release properties from ETJs because, again, they’re essentially illegal. So, when you have a property in the ETJ, you’re not being taxed, you’re not getting services, but yet you still have to obey building codes, which are huge in expense, zoning ordinances, permitting, inspections, all the city ordinances like we were talking about with fines and how tall your grass grows and all those other things, without the city, again, doing anything for you.

So, a bill was passed last session that would allow piecemeal, which again, I think find irrational, that people have to know individually that their property is eligible for this release, and then to go and petition the city to do so.

Brad Weimert: Yeah, those things are incredibly frustrating to me in general. Like, I’ve long held a belief that we should have a certain set of laws that sunset if they aren’t renewed. And there are tons of things that fit in this category, but we have the most dumb, absurd laws on the books ever from, like 1820, that just don’t make any sense. And nobody even complies with them now or abides by them, but they’re still on the books. And there’s just this whole set that should go away, and the other is, like, opt-in versus opt-out. And so, in this situation, having to proactively try to get your money back from the city and not get taxed when they know they’re not providing services is incredibly frustrating.

Julie Drenner: Yeah. Well, I actually had a bill when I was lobbying, and it would’ve just released all properties from all ETJs. But of course, it didn’t pass.

Brad Weimert: As it is.

Julie Drenner: Yeah.

Brad Weimert: So, your stance is that it’s not legal for the city to be collecting taxes from a property while not providing the same services.

Julie Drenner: Correct. And it’s not legal for them to burden cities or to burden properties, whether it’s taxation or by regulation. So, it pertains to both the ETJ and these de-annexed properties. But the kicker is, is that where I personally live now is in this little bitty triangle. So, I live now in a limited-purpose district, and that is there’s no relief for me whatsoever. So, there’s ETJ properties around me, there’s full purpose district, and now I’m in a limited purpose. And a lot of the properties that you’re talking about on the lake and others that have ETJs, they’re split. And this is my favorite, like St. Stephen’s is a great example. It has property in the ETJ, in the limited-purpose district, and the full-purpose district.

And this is a school that’s trying to educate our children, and they have to do these gymnastics just to try to figure out how they’re going to build their next building because of these asinine jurisdictions. And they should just be able to have the relief from all of it all at once.

Brad Weimert: So, I mean, I think that I started this by saying, like, it’s valuable to know this stuff if you’re investing in real estate, period. I want to get to the real estate investing thing in a minute, but, to sort of delineate the annex versus ETJ or the other bizarre or the sister limited purpose jurisdiction, what services are tied to… What are city services, and what are ETJ-related things? Meaning, like, when I… So, you dis-annexed my property on the lake, but it sounds like it’s stuck in ETJ now.

Julie Drenner: Correct.

Brad Weimert: And so, what are the benefits to getting out of the annex situation, and what do I need to now… what do I lose by doing that? Or how does that change things? And then same thing with ETJ?

Julie Drenner: Well, in my opinion, you lose nothing except for not having to pay taxes. So, the delineation of the dis-annexation specifically is that you no longer have to pay city taxes. The delineation of the ETJ and let me back up. The city, again, had never de-annexed anything until last year. That’s when the bill became law. So, I was one of the first properties that did that on the property that I was talking about. And when we de-annexed it, we just figured that we’d be immediately put into the county. They didn’t tell anybody, “Oh, no, we’re going to put you in an ETJ.”

Brad Weimert: Oh, wow.

Julie Drenner: Yeah, so that’s another just kind of heinous thing that I feel like is not right. They don’t tell people that, “Oh, we will release you. You won’t have to pay taxes, but we’re still going to regulate you just the same, unless you go through a second process.” No one tells you that.

Brad Weimert: Well, so it sounds like you save the taxes, but you lose city services, right?

Julie Drenner: No, because you never had them.

Brad Weimert: Oh, right, right, right, right.

Julie Drenner: So, again, you don’t lose anything.

Brad Weimert: But how about fire and police?

Julie Drenner: No, you don’t lose that. So, when you de-annex, then you ask to be annexed into a fire and police, but it costs you nothing to do that. You basically are just informing them, “Hey, by the way, I still exist.” That’s it.

Brad Weimert: “If I burn, come get me.” And I think…

Julie Drenner: You send them an email,

Brad Weimert: In this case, this is… So, in my case, the city police and fire aren’t going to come save me, which they weren’t anyway, and now the county will. Is that the idea?

Julie Drenner: No.

Brad Weimert: Okay.

Julie Drenner: Nothing is going to change.

Brad Weimert: Oh, got it.

Julie Drenner: Yes. The city will still come, and they have to by law.

Brad Weimert: Oh, interesting.

Julie Drenner: Yeah. That’s the little black cloud they try to put over you. “Oh, but you might lose emergency services.” No, you don’t, because you email them and you say, “Hey, this property still exists,” and they will still come and service you.

Brad Weimert: Amazing. So, then the ETJ side of things, it sounds like it’s… You said building permits, codes, et cetera. So, if you’re building stuff, anybody that’s ever built anything or even tried to do an addition on their house…

Julie Drenner: Remodel.

Brad Weimert: By the way, this is any city in the country. It just is worse in some cities than others. Like, LA is notoriously terrible to try to get anything done with real estate. Austin is easier, presumably, than LA, but still a mess. So, if you’re in an ETJ, you are subject to all of those. But you also mentioned some other fee-based things. What other things fit into the ETJ?

Julie Drenner: So, a lot of fees that have to do with… Well, oh, a great one is short-term rentals, okay? So, if you’re in an ETJ, you still have to get a license for an Airbnb or VRBO. You still have to pay your 18% hotel occupancy tax, which is insane. So, getting out of the ETJ, you no longer have to do those. Again, people are just like, “Oh, why do I need to do this?” I’m like, “Why wouldn’t you?” I mean, there is no reason for you… I think the last time I looked it up, there were 400 city ordinances that you are under just by being in the ETJ. Everything from literally how tall your grass grows to all these other fines and ordinances that you don’t need to be under anymore.

We don’t have private property if we have the government regulating it so intensely that they tell you how tall your grass needs to grow, or if your trash can needs to be seen or not seen, or out or whatever. I mean, it’s insane.

Brad Weimert: How do you think… I agree with you, and I mean, I think that the deeper, I think the more you do in life, the bigger you allow your life to be, the more you expose yourself to all these crazy nuanced laws, regulations, even outside of government, just, like, stuff. Like, the more stuff you do in life, the more you find the little edge cases that are like, “Wait, what? That’s how that works?” But government things in particular are some of the most frustrating, because it feels like you can’t do anything about it. As somebody that’s done a whole bunch of real estate investing, you’ve built a bunch of homes, sold a bunch of homes, how do you think disannexing impacts the value of a property?

Julie Drenner: Oh, it increases it exponentially, because again, it’s freedom. So, that’s why I work a lot with realtors, because people are trying to make their, especially in this environment right now, they’re trying to make their properties more desirable to buyers, and sellers, this is the best thing they can do. Because every single buyer is going to tweak something, right? They’re going to remodel the kitchen, or they’re going to put in a pool, or whatever they’re going to do. And if you tell them, “Oh, by the way, you no longer have to go through the permitting process,” their builder is going to love them. Their remodeler is going to be like, “Oh, this is the best thing ever, because I don’t have to deal with the cities and the inspections and et cetera, et cetera.” So, it just makes the property more valuable because, like you said, there’s more freedom to do what you want on your own property.

Brad Weimert: This seems like, I mean, this is a very specific thing that’s close to my heart and yours. More importantly, it’s close to my wallet and yours. but it also seems like it’s very nuanced, right? It’s this niche situation in Austin right now with lakefront property. Do you think that there’s, I mean, is this something that all real estate investors should look at when they go to buy something? Should they be digging into jurisdiction, city tax, state tax, ETJs, et cetera?

Julie Drenner: Absolutely, and this is a whole caveat that we haven’t even talked about yet is the ETJs also pertain to commercial property. So, for instance, your neighbor came to me to de-annex his property on Lake Austin, and I just looked at the tax rolls, and I said, “Oh, by the way, you remember you have a commercial property over in XYZ, and you have a short-term rental over here and over here. So, these are all in the ETJs.” And he was like, “What?” So, we released eight of his properties.

Brad Weimert: Oh, damn.

Julie Drenner: So, I mean, for a commercial property, it’s huge. So, yes, definitely. There’s another client of mine. She called me up because she was looking at a property, and it’s a warehouse, and she wants to know if it’s in the ETJ because if I can release it from the ETJ, all of a sudden, all the zoning laws go away, all of those things that are just hampering for no reason. I’m not saying that all government is useless. Of course it’s not. Of course, there’s codes there for a reason. I get that. But when they become so overburdensome that they no longer make sense and they are just there to burden people’s properties and their wallets, then it’s time to fight back, and that’s what this is about.

So, yes, if you’re investing in any property, commercial properties, real estate of any kind, you should be paying attention to this. Your title companies can help you with that. Your real estate agents can help you with that. But that’s why…

Brad Weimert: You’re giving a lot of credit to real estate agents there.

Julie Drenner: Oh, well, because they’re my clients. They help because there’s no way that I can reach the 84,000 properties that this affects in Austin alone, much less the entire state. So, I rely on people who are talking directly to homeowners. And title companies are great too, because they’re the ones who understand these nuances, like you’re saying, and understand what you can and cannot do with a property just based on the title and deed alone.

Brad Weimert: We finally found some value in title companies. Look at that. Only took me 20 years of real estate investing.

Julie Drenner: Yeah, but that’s the thing is that it is such a nuanced thing that I think that the city has just banked on, no one really paying attention to it, and now we’re bringing attention to it. And that’s how it should be. The citizens should know how it affects them.

Brad Weimert: So, there’s a pretty clear delineation between disannexing and getting out of an ETJ.

Julie Drenner: Yes.

Brad Weimert: Right? Disannexing is, like, a very clear, if the city is not providing you services, you shouldn’t be paying taxes for it.

Julie Drenner: Correct.

Brad Weimert: Period. And that’s the only way to get out of it, and that’s probably a very limited use case, I would imagine.

Julie Drenner: Yes.

Brad Weimert: ETJ seems like a much broader use case, which is like they have put these restrictions on your property, and they’re governing it like it’s in the city, even though it’s not.

Julie Drenner: Correct.

Brad Weimert: So, how are you able to or allowed to get people out of the ETJ?

Julie Drenner: So, they just passed a bill last session. So, that is the only reason that we’re able to do it is because it’s a state law now.

Brad Weimert: Texas-specific.

Julie Drenner: Texas-specific. It does have some loopholes that we can get into if you want to, but, yeah, that’s the easy answer to that one.

Brad Weimert: Yeah, that’s great. So, anybody that’s not in Texas, like, I’m going to make a point of pushing this in Austin because it’s super relevant to Texas, right? But, entirely possible, I mean, I think that this is, like, a checkbox that you should be assessing if you’re a real estate investor, period. And you brought up some really good points, which are that the salability of your property and the value of your property, both the value and how quickly you can move it are heavily influenced by what you can do with the property. And so, if you don’t have to comply with city rules, regulations, building codes, zoning, et cetera, it completely changes the outcome of what the property could be, right?

Julie Drenner: 100%.

Brad Weimert: Like, wild, wild difference. When you assess properties for development, it’s always the limitation of the zoning.

Julie Drenner: Yes. And also speed of construction.

Brad Weimert: Yep.

Julie Drenner: And again, the client that I’m talking to, she wants to know how fast can she get it out of the ETJ as soon as she closes, so that she can start construction, because it’s going to be a factory, so time is money.

Brad Weimert: Yeah. Well, let’s talk nuances, because before we started recording, you told me that I’m screwed on my ETJ proposition. So, what are the loopholes, and how is the city approaching this? Because it does seem like… Well, and before we talk about that, what’s the motivation for ETJ for the city?

Julie Drenner: Well, obviously, it’s money. Because if they…

Brad Weimert: Well, permits through the zoning, et cetera.

Julie Drenner: The permitting.

Brad Weimert: Got it.

Julie Drenner: The inspections. There is, I mean, again, we’ve built so much. There is no auspice for them to approve your permitting and say you’re done when they go to inspection. It always benefits them for you to fail your inspection, so you get to then pay for a re-inspection, and it delays you. So, again, it’s a double whammy to you. It’s an additive to them. So, that’s…

Brad Weimert: Misaligned incentives.

Julie Drenner: Exactly.

Brad Weimert: Yeah, those are the best.

Julie Drenner: Yeah, I love that. That’s a great term.

Brad Weimert: So, what are the loopholes here?

Julie Drenner: Okay, thank you. Yeah. So, the biggest loophole, which is something I just discovered, is that the city has recently, and again, this law has been on the books for a while now. The city recently decided that the Bee Cave Armory is a military base. They said that the rationale was is that it was federal land and that there’s training done there. And my argument is that that does not make it a military base. There is no military base in Austin. But because they’ve designated that, there’s a loophole that was written in the bill, and I don’t know the rationale behind it, is that if your property is within five miles of a military base, that is a buffer zone, and it cannot be released from the ETJ.

I also do not have any information. I’ve asked the city several times to give me a map to show me what that five miles is. There’s no map that I’ve been given yet. I’ve asked for even a data set of addresses. I’ve not been given any information. So, right now, I’m just trying to get information on what that five-mile looks like, because the five-mile ETJ is basically the whole city. So, did they just take…

Brad Weimert: Oh, right.

Julie Drenner: Yeah, so did they just take the whole bill and gut it by calling this armory a military base? So, that’ll be a fun thing to look at, because session is coming up, and I’ve already started talking to the senators that might be interested in us closing that loophole, adding the limited purpose jurisdiction to the bill and make this, again, legislative intent reality.

Brad Weimert: Yeah. I love that you just ended there because the intent here, I could make the argument that the intent of having some zone around an actual military base is to make sure that no weird sh*t is built right next to the military base, right? You’ve got some control over what’s going in there, two regulations that don’t hamper the military base. That makes sense to me, some logic there. But you broke that logic, first off, with this particular thing, when this isn’t a military base by any stretch of the imagination. Also, the zone around it is not a rational amount of space, as it pertains to Austin, which is like five miles in… Anywhere in Austin is a crazy distance to cover so many different types of properties that, yeah, totally kills all other rules around that.

Julie Drenner: Exactly. And again, they just recently made this designation. That also does not smell, does not pass the sniff test.

Brad Weimert: When is session?

Julie Drenner: So, session begins in January.

Brad Weimert: Okay.

Julie Drenner: So, January to May.

Brad Weimert: It’s a lot of 18% revenue for them in the meantime.

Julie Drenner: Exactly. But now is the time to organize and to get on the stick because, first of all, the great thing is the senators who passed the bills to begin with are not up for re-election, so they have time to focus on these things instead of trying to get elected in this interim session. And this is when the workhorse begins, is during the interim. If we can get ourselves together, if we can write the bill exactly how it needs to be passed, because the devil is always in the details, as we’re seeing with these loopholes being exploited, then we can, I think, have a good shot at moving something forward in the legislature.

Brad Weimert: Are there any other parallels for real estate investors or other situations where you’re like, it totally makes sense to assess the law that’s around this and see if there’s wiggle room here? The crux of this for me is, and I think hopefully the takeaway certainly for Texas real estate right now is, like, check if you’re in an ETJ. This is an easy, open thing to do. But as it pertains to any other real estate investor, when you’re looking at, “Should I be paying the taxes I’m paying? Should I be subject to the rules that I’m subject to?” how do you think about approaching that? Like, are there other easy targets that you can go after here? What’s sort of the mental model to say there are other things that are worth pushing on?

Julie Drenner: That is a hard question because there are so many.

Brad Weimert: Yeah.

Julie Drenner: I mean, it really comes down to, I mean, there’s everything from tax appraisal reform that needs to happen, which has been on the Texas legislature’s mind to property tax reductions, to things like exemptions for whatever. You talked about public school systems, and now we have vouchers. I mean, it’s just such a myriad that I think that the best approach is to inform yourself as best you can about the exact properties, because location is everything. So, again, where you’re located is going to determine, again, what regulations, what taxations, what’s affecting your property. And then go after those things that are not aligned with the public/private property values that we have.

Brad Weimert: Yeah. I mean, I think that if I’m sitting anywhere else in the country, first off, I’m thinking I’m going to go talk to the robots, right? I’m looking at ChatGPT or the like, and Claude whatever, Grok, and saying, “Hey, what are the regulations that people are contentious about as it pertains to real estate in my city, in my state, in my area?” And that’s going to surface some of these. The other, from a real estate perspective, investing perspective, is taxation and tax appraisal of the real estate is so wildly different from city to city, state to state, and how it happens, that if you’re investing in real estate, you have to do it. Like, you have to look at how that process works. In Austin, you can contest your appraisal. And any serious real estate investor that I know contests their appraisal every single year.

Julie Drenner: Absolutely.

Brad Weimert: Every single property you own, every single year you’re contesting appraisal. Because otherwise, they’re just going to push it up as high as they can get it, and you’re just going to pay the taxes. And I think if you’re not actively involved in real estate, you hear that and you’re like, “Ah, okay, it’s this other additional little thing.” No, no. This is a massive dollar amount. And for a state like Texas, where a huge chunk of their revenue comes from property tax, they have a heavy incentive, again misaligned, to try to maximize that taxable value.

Julie Drenner: Yes. And that’s why tax appraisal reform has been so hot for, I mean, decades. Because, like you say, it’s almost arbitrary. It really is. I mean, it’s someone going out there and looking at comps. And as you know, comps are even really, really difficult. Because you’ve got, especially the high-end properties, a lot of there is NDAs. And so, people are guessing, and then they’re always going to guess on the high end because it behooves them to do so. And so, yes, you should absolutely be protesting every single time. And we should, again, continue to have tax appraisal reform at the legislative level.

Brad Weimert: Yeah. Look, anybody that thinks appraisals are logical, the only thing you need to do is buy real estate once and realize that somehow magically your appraisal comes in exactly at your purchase price 98% of the time.

Julie Drenner: Exactly.

Brad Weimert: Like, what the fu*k are you talking about?

Julie Drenner: Right.

Brad Weimert: It’s a completely irrational proposition. The only appraisals that make any sense, really, are income-based appraisals for commercial properties that are like, “No, this is the cashflow of the property. This is what you’re making on the property.” Okay, well, that’s a pretty good benchmark for what the property’s worth, right? This is what we know you’re making. But to drive that point home, I have empty land that got appraised at the same dollar amount as my neighbor that has a house on the property.

Julie Drenner: Wow.

Brad Weimert: How is that possible?

Julie Drenner: Yeah. Dirt versus a house.

Brad Weimert: Dirt versus a house. And even on contest, they argued the point, and it only got dropped like 7%.

Julie Drenner: Yeah, a smidge.

Brad Weimert: And it was like, “Wait, this is an empty lot. What are you talking about?” Do you have any other recourse from a tax appraisal perspective right now?

Julie Drenner: Not at the moment. Again, this is where people, they don’t really pay attention so much to our state legislature, but it’s in our backyard. And again, this is where your local representatives, your local senators, need to hear from you, because this is the only way that you change the laws. Your state reps, your state senators are the ones that most affect your pocketbook. And yet most people can’t even tell you who your representatives are in the House or the Senate, or even our lieutenant governor. Now, our governor, everyone pretty much knows his name now, but everybody else in state government, nobody really pays attention to. And it’s mind-boggling to me.

Brad Weimert: Yeah. Well, I think that COVID did us a favor on that front because I actually, even leading up to COVID, and I won’t belabor this point too much, but leading up to COVID, I literally had conversations with people, around why we even had this division between federal and state government because we are the United States, and we’re supposed to be united on this front. And, for me, it wasn’t until COVID that I saw, in my lifetime, that I saw this radical delineation from between states and how they operated differently. And COVID was such a bright illustration of the difference between states. But in my life, at least up to that point, nothing had impacted me in that way where it was so clear. Now, I think there’s so much Texas state pride.

Julie Drenner: I was going to say, you’re not from Texas. We have the 10th largest economy, our state, in the entire globe. That is insane, and that’s probably an outdated, I know that’s outdated because I’ve been retired for a while. But that, in and of itself, that we have that much economic engine in our state itself makes everything else different. And like you were talking about, too, the auspice that we have so much of our income coming in from our property taxes. We have no state income tax. We’re a community property state. All of those things make us so unique and so bright and beautiful, and the best that it makes us unique, and it makes you think uniquely when you are investing. Because you have to factor in all those different things, which are positives. But it also shows you, again, the glaring negatives where we can improve.

Brad Weimert: Yeah. Well, and for clarity, I’ve now been in Texas for 12 years. And a little while.

Julie Drenner: You’re a teenager. Okay.

Brad Weimert: Exactly. I’m a teenager now. And through that, I gained so much appreciation for the separation between the federal government and the state governments, specifically with some of the actions that were taken through that process. Nonetheless, every entrepreneur that’s made it this far to listen to this is like, “Yeah, but I don’t want to fu*king deal with government and dealing with people and change.” It’s sort of like dealing with your HOA.

Julie Drenner: Oh, 100%. All your accounting. Like, no one wants to do the paperwork.

Brad Weimert: Yep.

Julie Drenner: That’s the boring part. As entrepreneurs, we want to do the bright, shiny, fun things.

Brad Weimert: Yep.

Julie Drenner: And I’m the same way. I mean, I had to do some QuickBooks thing, and I was like, “Ugh, I hate this part of it.” But that’s the part that gets ignored, and that’s why these asinine things can happen. And then all of a sudden, we’re all questioning and scratching our heads, “How did this happen?” That’s how it happened.

Brad Weimert: So, we’ll wrap with this. What are the steps that you think people should take, in general, if they want to make change? So, you mentioned state representation. And then we’ll talk about this one specifically. But in general, what are the steps that you should take if you want to see something get changed?

Julie Drenner: Well, obviously, vote and vote informatively. Vote in the primaries because that is where all of, in our area, a lot of things are done in the primaries. And again, people don’t pay attention. They don’t know the candidates. So, just take a few minutes to get informed. It’s not hard now. We have more information than we can possibly digest. Take the time to do that. And then, again, we live in Austin. We don’t even have to drive, but 15 minutes or 30 minutes to go to the Capitol when things are happening and just make yourself known. Go talk to your state rep, talk to your senator. Go to the committee hearings. Know what’s happening. Everything is online. Just listen to it, and if you disagree, send an email.

Like, get with your neighbors. Especially things like this, these are neighborhood things, and if a whole neighborhood comes together and goes up and says, “Look, this is affecting us in this way,” and then you get the neighborhoods together, and you start to hear, “These are all affecting us the same way,” then you’re able to make change. And it’s just that simple.

Brad Weimert: Well, I’m glad that you said you can listen to this stuff online and you can send an email, because those are really accessible, easy things. Going to these things, to me, sounds painfully boring, and I don’t want to do it.

Julie Drenner: But pick one. Pick one issue that is important to you and just do one. Don’t try to change the whole world. You’re not going to. The great thing, again, about the Texas legislature is that the bills… There are 6,000 bills, okay? These legislators, they are not paid but pennies a day, so they’re not experts on everything. So, if you go in and you tell them, “Look, this is affecting me in this way, this one aspect,” they appreciate that because they know that they don’t know. And it takes just that personal outreach of, “Hey, I need this to change because it’s hurting my wallet and this is my family,” and blah blah blah. So, I know it sounds difficult, but it really isn’t, and it really changes the world.

Because whatever happens in Texas reverberates, and that’s the great thing about our state is we have so much power that when something happens in our state, we pass it, it becomes model legislation. And then the legislators, during the interims, they go on these retreats, and they meet with all these other legislators. And they all pass notes to each other and say, “Hey, this worked in my state. You want to pick it up? Look, this is the bill that we passed.” So that’s what was so gratifying to me, personally, was I would write the bills that became the law, and then I would see those laws multiply across the country. I mean, that’s one person making a difference across the country.

And then my favorite was when I worked with, like, textbooks for example. Those used textbooks I saw in Uganda. So, literally, what happens in Texas does change the world. And it’s amazing what an individual can do just by letting the people that represent them know how it affects them.

Brad Weimert: Yeah. I think, and you’ve got Texas pride shining through here. But to illustrate this statistically, there is no state in the country that has as many massive cities as we do, period. By a lot, right? Dallas, Houston, San Antonio, and Austin are all top 10, top 12 in size. There’s nothing else like that. And so, LA is what California has, right? Chicago and New York, and those are the big ones. Other than that, you’ve got one-off cities. And the drop-off from the massive cities to the medium-sized cities happens very fast, right? You’ve got 10 big cities-ish, 15 maybe, and then everything else goes shoom, and everything’s much smaller. And Texas has four of them.

So, I think my takeaway on that stuff is, as an entrepreneur, you should probably think about laws that you don’t like that impact you negatively. You’ve got an easy path here to do that. Listen to what’s happening with your state government, send an email, and you can find that stuff online. As a real estate investor, you’ve got these really clear-cut actionable items, which is tax-assessed value, and then your zoning has so much to do with the profitability of the property and the investment, and ROI of the property. So, no matter where you are with that stuff, you should be looking into both of those things. As it pertains to Austin and Texas in particular, where do people go to find out more about you and what you’re doing to help people disannex or get out of ETJ?

Julie Drenner: Very simple. I have a very clear-cut website. It’s cityfreeproperty.com, and everything is on there. It is the easiest. You put in your name, you upload your survey, you pay my little fee, and I do the rest. So, super simple.

Brad Weimert: Well, I can attest to that because that’s what we did, and it was super easy, and I am now disannexed.

Julie Drenner: Yeah.

Brad Weimert: So, let’s work on the ETJ.

Julie Drenner: All right. I’m working.

Brad Weimert: Julie Drenner, thank you so much.

Julie Drenner: Thanks, Brad.