Real Estate Agent · Houston, TX · Member since 2026 · 25 posts · 4 votes
Out-of-state investors keep using "about 2%" for Houston taxes. Close, but here's what a rental actually pays. There's no homestead exemption, so you pay the full rate.
1) Inner Loop (City of Houston + HISD), 2025 rates per $100:
City 0.5192 + HISD 0.8783 + Harris County/Flood/Hospital/Port 0.6241 + HCC 0.0988 = about 2.12%, plus a small county education levy.
On a $300K rental that's roughly $6,360/yr, or $530/mo.
2) Towne Lake (Cy-Fair, MUD 449): about 2.54% all-in, using a published estimate.
Same $300K is about $7,620/yr, or $635/mo.
That's about $105/mo of cash flow gone before insurance, just from the MUD line. And MUD rates aren't fixed. MUD 449 was 1.03 in 2023 and is 0.94 now, and other districts move the opposite way.
Never underwrite off the listing's "tax" number. That's usually the seller's homesteaded bill.
What are you plugging in for taxes on your Houston deals right now?
Really useful breakdown, and the last line is the one people need to hear in every market. The tax number on a listing is the current owner's bill, not yours.
Different setup up here in NYC but the same trap. A lot of the time the seller has a homeowner exemption like STAR, or a senior or veteran exemption, so their bill looks low. On paper the house cash flows, then the investor buys it and the number goes up once the exemption drops off. I've seen a few hundred a month disappear that way.
For anyone out of state running Houston numbers, I'd take your approach and just run the full rate on the purchase price from day one. If the deal only works with the seller's bill, it doesn't work.
Really useful breakdown, and the last line is the one people need to hear in every market. The tax number on a listing is the current owner's bill, not yours.
Different setup up here in NYC but the same trap. A lot of the time the seller has a homeowner exemption like STAR, or a senior or veteran exemption, so their bill looks low. On paper the house cash flows, then the investor buys it and the number goes up once the exemption drops off. I've seen a few hundred a month disappear that way.
For anyone out of state running Houston numbers, I'd take your approach and just run the full rate on the purchase price from day one. If the deal only works with the seller's bill, it doesn't work.
Exactly. Same trap with a different exemption name. On Houston deals the gap is usually bigger, because the seller's bill often has a homestead exemption and sometimes an over-65 freeze on top, so the listing number can be way off. Appreciate you adding the NYC angle. Do your investor clients ever look at Texas, or mostly stay local?
What's your email so we can discuss further? Or we can just message on here if you'd rather.
Mostly local for my clients, Staten Island and the rest of NYC, but I've had a couple ask about Texas because the prices look so good next to ours. Once they run the full tax and insurance numbers it usually changes the picture a lot. Happy to keep chatting here.
That's the usual reaction. The price looks cheap next to Staten Island, but the carrying cost is where Houston bites. Inside the city with no MUD, the stack is roughly 2.1% a year (City about 0.52, HISD 0.84, county side about 0.62, HCC about 0.10 per $100). On a $300K rental that's around $6,250/yr in tax alone, before insurance, and an investor doesn't get the homestead exemption the seller had. MUD subdivisions add another layer on top. When your clients ask about Texas, are they after cash flow or appreciation?
Mostly cash flow. They see a 250k house and figure it'll rent for way more than it costs to carry. Once you put the 2% tax, Texas insurance, and a property manager in there, the spread gets a lot smaller than they expected. The ones who still like it are usually going for long term appreciation in a growing area and are fine with thin cash flow for a while.
Matches what I see. The blunt version for your clients: Inner Loop single-family is mostly a land and appreciation play. At the full non-homestead tax rate plus a real insurance quote, most of it won't cash flow with a normal loan. The ones that pencil are usually older duplexes or small multis bought right, and even those run thin. For a cash-flow-first client I'd rather tell them to pass than force it. Do your Texas-curious clients have a price ceiling, or is it more about the total check they want to write?
I'd add one more line to the underwriting. Texas appraisal districts tend to move assessed values toward market after a sale, so even the full rate on the seller's assessed value can understate year two. I'd run taxes on the price I'm actually paying, then plan to protest the valuation every spring, either myself or through a protest firm that works on contingency.
Agreed, and Texas has a wrinkle that makes your point bigger.
1) Non-homestead property under about $5M gets a 20% cap on yearly appraisal increases (Tax Code 23.231), but only starting the year after you've owned it on a January 1. Year one after a purchase can jump straight to market.
2) That cap currently expires Dec 31, 2026, so I wouldn't lean on it for 2027 numbers.
3) HCAD's deadline is May 15 or 30 days after the notice date, and iSettle lets you settle online without a hearing.
Brian, on your out-of-state units do you protest yourself or use a contingency firm, and what cut do they take?