Austin, TX · Member since 2013 · 40 posts · 2 votes
Hey Guys. I have been doing the numbers for rental properties here in Austin implementing the 50% rule (I know its super conservative, but so am I) and if the property taxes in Austin were lower like in other states it seems it would be easy to be cash flow positive. However with these massive taxes every year, I have no idea how the heck to do a cash flow positive deal unless I buy a property at a ridiculous deal like foreclosure.
Investor · Groves, TX · Member since 2009 · 44 posts · 25 votes
12y
Well the high property taxes in Texas are a double edged sword. Paying those property taxes keeps you from paying state income taxes and also helps suppress the purchase price of properties.
Contractor · Valparaiso , IN · Member since 2013 · 604 posts · 327 votes
12y
Does Texas have a property tax cap? In Indiana we cap @ 2% which makes it easier to get some nice cash flow since we loose our exemptions on investment property.
Rental Property Investor · Indianapolis, IN · Member since 2013 · 100 posts · 48 votes
12y
The properties are out there. Your down payment and interest rate will make a big difference on your cash flow. There are Single family homes in the Austin area in which you can get 1% rent (from purchase price). If the rates/down payment are good, you will definitely cash flow. Dont be afraid to go to williamson county. I read an article the other day that said williamson county has one of the best rental markets from an investor stand point in the US. Just have to keep looking my friend.
Investor · Arlington, TX · Member since 2013 · 27 posts · 1 vote
12y
You have to realize the limitations of the 50% rule. The same property with the same exact numbers might cashflow better in a different state, but when you adjust for the fact that you'll have to pay income taxes on that rental income in another state you probably come out ahead in Texas. As a general rule I disregard the 50% or 2% rule. My formula is PITI cant exceed 40% for buy and hold. So far its been holding up pretty well as far as the texas market goes.
Investor · Groves, TX · Member since 2009 · 44 posts · 25 votes
12y
Well the high property taxes in Texas are a double edged sword. Paying those property taxes keeps you from paying state income taxes and also helps suppress the purchase price of properties.
Austin, TX · Member since 2013 · 40 posts · 2 votes
12y
Interesting stuff from everybody. I have so many variables to learn.
@Fred Makaye I am going to google PITI and find out how to calculate that formula and see if maybe that gives me some clarity.
@Chris Adams I dont know about the property tax cap, i am also going to look that up this morning.
@Joel A. Williamson County makes sense as its going to have a bunch of folks from Dell and Instruments moving in up there to do work for a couple years and then getting transferred. I will give the MLS a search up there.
Austin, TX · Member since 2013 · 40 posts · 2 votes
12y
@Fred Makaye i just checked out PITI, and its obviously easier than i thought it was going to be. When you say it can't exceed 40%, do you mean 40% of rental income on that unit?
We have a similar issue. The rate in our areas ranges from 2.9 - 3.2% which is significant enough to impact the return a property produces. viz. a 400K property will have an annual tax bill of ~12K.
Austin, TX · Member since 2013 · 40 posts · 2 votes
12y
@Roy N. the property taxes in Austin range from 1.9%-3.1%. So not quite as high as yours but I have been looking at properties in the 300k range and they average a tax bill of around 7k a year which is IMO a lot of money to spend every year just for the right to be here.
Investor · Austin, TX · Member since 2013 · 112 posts · 57 votes
12y
@Christopher Sica, remember, no state income tax. When we moved from St. Louis to Austin a few years ago, we found that between the higher property taxes but no state income tax anymore, it was about a wash.
It's a problem if you pay state income tax somewhere else because you live there (e.g., CA) and property taxes in TX because that's where your property is.
I'm looking at buying some SFRs in St. Louis now, the cash flows in Austin are just not that good. You can find a deal here or there I'm sure but to put a decent portfolio together would probably take a long time...
Austin, TX · Member since 2013 · 40 posts · 2 votes
12y
Thanks @Gunnar Teltow I am doing a lot of searching and an probably going to do a Live-In Duplex hopefully in an area surrounded by SFH's. thats the only way I will be able to pull some cash flow down here. Also, I really love Austin and am not ready to be a long distance landlord yet.