Rents vs increase in property taxes -Austin metro

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Rents vs increase in property taxes -Austin metro

Sujith C.
Austin, TX · Member since 2016 · 8 posts · 3 votes

Hi,

With Williamson county appraisal for 2022, my rental property tax due increased by 35%!!! I already raised the rents by 16% last year and now this.

Would you think rents will grow to catchup with property tax increases? I am afraid that people would stay away if I increase the rent by 35% and would be difficult to rent it out. If I do not increase, I would be under the water. Suggestions/thoughts?

Thanks

S

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Aaron Gordy
Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
4y

@Sujith C. Are you protesting your taxes? Its a regular thing for us. You will be surprised at the results, usually. 

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  • Matthew CrivelliBusiness Member
    Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
    4y

    I believe rents will continue to increase across the country. It seems to be the most natural outcome, expenses go up, property value goes up, income is going up, (specific to Austin) wouldn't it make sense that rents will go up as well? Especially in the middle of inflationary times? I would bet yes.

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    4y

    It's going to be tough not to raise rent as an increase of this, as supply gets scarce and interest rates climb renters are going to be less picky. Are you negative cash flowing as a result of this? Raising your rent is completely justifiable with a tax increase of 35%. 

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  • John Clark
    Member since 2018 · 1k+ posts · 1k+ votes
    4y
    Quote from @Sujith C.:

    Hi,

    With Williamson county appraisal for 2022, my rental property tax due increased by 35%!!! I already raised the rents by 16% last year and now this.

    Would you think rents will grow to catchup with property tax increases? I am afraid that people would stay away if I increase the rent by 35% and would be difficult to rent it out. If I do not increase, I would be under the water. Suggestions/thoughts?

    ---------------------------------------------------
    First, rents do not have to increase by 35 percent in order to "catch up" with property tax increases. Property taxes are only one component of all expenses, so the question is whether the sixteen percent rent increase covers your total increase in expenses plus additional risk and return.

    If your expenses (and reserves are an expense) are greater than rents (which are set by the market), then sell or go bankrupt. Otherwise, your rents should be determined by the market, not by expenses, and certainly not by one component of expenses.
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  • Aaron Gordy
    Real Estate Broker · Austin, TX · Member since 2012 · 1k+ posts · 1k+ votes
    4y

    @Sujith C. Are you protesting your taxes? Its a regular thing for us. You will be surprised at the results, usually. 

    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    4y

    @Sujith C. definitely protest!

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  • Whit Ewen
    Investor · Austin, TX · Member since 2017 · 36 posts · 14 votes
    4y
    Quote from @John Clark:
    If your expenses (and reserves are an expense)are greater than rents (which are set by the market),...
    > to me reserves are not on the income statement and are balance sheet item 
    > the brutal reality, yes, rents are set by market
     then sell or go bankrupt.
    > Well, then. The gentleman perhaps makes a hornet look cuddly, in Texas parlance, with this statement. How else can we encourage you come up with ways to be at market rent but still recover more of your expenses? You can add value, but also use reserves, take on some more debt temporarily, lots of levers to pull here. Keep a long term view. Don't be discouraged. You got this!

    Otherwise, your rents should be determined by the market, not by expenses, and certainly not by one component of expenses.
    >

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