Property taxes in Texas

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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2mo

@Adam Stewart

IMO there's effectively no return on non-value add LTRs anywhere right now - Texas, Tallahassee or Toledo. 

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  • Arman AhmedPro Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 905 votes
    2mo
    Quote from @Adam Stewart:

    Hello all! Quick question - What is the general consensus on property taxes in Texas? Do you think this makes investing in a rental property cost prohibitive or not worthwhile? 


    Property taxes in Texas can definitely have a big impact on cash flow, but they don't automatically make a deal a bad investment. The key is underwriting them accurately and making sure the numbers still work after accounting for taxes, insurance, and maintenance. It's also worth comparing Texas with Midwest markets, where many out-of-state investors find lower property taxes, lower entry prices, and stronger cash-flow opportunities. At the end of the day, it's all about buying the right deal, not just the right state.

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  • Adam Stewart
    OP
    Member since 2026 · 3 posts · 0 votes
    2mo

    Thank you Arman!

    0Reply
  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2mo

    @Adam Stewart

    IMO there's effectively no return on non-value add LTRs anywhere right now - Texas, Tallahassee or Toledo. 

    2Reply
    • Dan H.Pro Member
      Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
      2mo
      Quote from @Nicholas L.:

      @Adam Stewart

      IMO there's effectively no return on non-value add LTRs anywhere right now - Texas, Tallahassee or Toledo. 


      I mostly agree with Nickolas but will add additional qualifiers to the value add he mentioned with the assumption that we are both referring to high investor LTV (most properties will cash flow at 0% LTV): off market below value purchase or below market financing that maybe be achieved via assumable, sub to, etc.

      Now I will use numbers and general rules to show the challenge.  The primary rule I will use is vacancy and expenses other than P&i will be 50% of rent (the 50% rule).  Granted this is a very rough estimate but recognize that it is more aggressive in cheap markets where maintenance/cap ex consumes a higher percentage of the rent.  Next realize that the highest initial rent to price ratio is in the cheap markets.

      So the numbers with a 1% monthly rent to price ratio that many Midwest RE agents throw out there as cash positive   Here is the math that ratios stay the same regardless of the price and I am using $10k just or the simplicity of the math.

      $100k property at 1% ratio has $1k rent.  
      $1000 - $500 (50% rule) - $506 (P&i at 80% LTV, 30 your term, and 6.5% rate) is negative $6.

      Now recognize in these cheap markets, the 50% rule is aggressive and vacancy plus expenses are very likely to exceed the 50% rule.

      Now recognize that the 80% LTV will need $20k down plus closing costs. The SP500 has lifetime return near 10% and a recent return significantly greater than 10%. Sp500 is passive, residential RE is not passive.

      if you cannot achieve a return far greater than passive options via residential RE then I question why?

      I invest in Residential RE to make lifestyle differences.  Tough to achieve in the current market especially if buying without a value add with market rate financing.

      this may be blasphemy on bigger pockets, Residential RE is not always going to be the optimal investment opportunity.

      Best wishes

      1Reply
  • Adam Stewart
    OP
    Member since 2026 · 3 posts · 0 votes
    2mo

    Thanks, Nicholas. Yes - i need to get into the value add play more, but am time poor. 

    0Reply
  • Joseph CacciapagliaBusiness Member
    Lender · San Antonio, TX · Member since 2020 · 1k+ posts · 1k+ votes
    2mo

    I've been investing in Texas since 2005, and I've been helping other investors in this state for almost as long. Property taxes are just one line item on your spreadsheet, and definitely not a great reason to rule out an entire state. I've invested in several other states, but keep coming back to Texas. The pro landlord environment, rapidly growing population, and diverse economy just work for me. If the only thing you care about is year 1 cash flow, then many TX cities will be tough. That hasn't been my main concern for a long time.

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  • Alyssa MarquezBusiness Member
    Real Estate Agent · San Antonio TX / Fort Lauderdale, FL · Member since 2023 · 114 posts · 25 votes
    2mo

    Texas property taxes are definitely higher than in many other states, so they need to be factored into your numbers. That said, plenty of investors still do well in Texas because there's strong rental demand, population growth, and no state income tax. As long as the property cash flows after accounting for taxes, insurance, maintenance, and vacancies, it can still be a solid investment. The key is buying the right deal, not just focusing on the tax rate.

    1Reply
  • Alyssa MarquezBusiness Member
    Real Estate Agent · San Antonio TX / Fort Lauderdale, FL · Member since 2023 · 114 posts · 25 votes
    1mo

    Texas property taxes are definitely something to factor in, but I don't think they make rentals automatically unprofitable. It really comes down to the purchase price, rent, insurance, and overall cash flow. If the numbers still work after taxes and expenses, there can be good opportunities.

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  • Ravi KakuBusiness Member
    Lender · Houston, TX · Member since 2025 · 41 posts · 22 votes
    1mo

    Property taxes are definitely one of the biggest factors investors have to underwrite in Texas, but I wouldn't say they make investing here cost prohibitive. They just make buying the right property even more important.

    In my experience, what has had an even bigger impact over the past few years is the combination of higher property taxes, rising insurance premiums, and higher financing costs. All three together have tightened cash flow, so investors have become much more selective with their purchases.

    That said, investors are still buying in Texas because we continue to have strong population growth, job growth, and long-term demand for housing. Many of the investors I work with today are placing a greater emphasis on buying below market value and creating equity through renovations (forced appreciation), rather than relying solely on monthly cash flow.

    I think the days of almost any rental property cash flowing are largely behind us, but well-bought deals with realistic assumptions can still perform well over the long term. The key is making sure the numbers work with today's taxes, insurance, and financing—not hoping they'll improve later.

    Out of curiosity, are you looking at a specific Texas market, or just asking about the state in general?

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