Property tax increases on rental properties

[Jeff Brenot]

Hello BP, 

I am evaluating a 4-plex in the Austin, TX area. The last tax assessment was for $395k in 2015 (~$9k taxes based on 2.2% tax rate). However, in the meantime, a similar property to the one I am evaluating sold for $665k after rehab. The list price for the property I am evaluating is ~$625k. I am super nervous that the taxes will skyrocket. I have run the numbers at $9k property tax and cash flow is very good. However, if the county increases taxes to based on the recent comps, they could be upwards of $14k annually which would eat into cash flow significantly. 

I do plan to be an owner occupant and could potentially homestead it down the road. However, is there anything I can do to prevent the taxes from skyrocketing if I purchase for anywhere close to $625k? Are property taxes usually increased gradually or can they jump up significantly all at once? I would appreciate any additional information I should be aware of. Thank you! 

[Greg H.]

The homestead exemption for property tax purposes in Texas can be applied to a multi family property but only a % of the property.  You will reforge full exemption on basically 1/4 of the property 

However, the 10% maximum value increase only applies to the part of the property that is the homestead

Additionally, you would have had to occupy the property prior to January 1st of this year to receive any benefit in 2017.  So there is no cap on the value for 2017. The appraised value for 2017 should be available within the next month or so and any protest filed by May 31st