Texas Property Tax Blood Bath

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Texas Property Tax Blood Bath

Sam White
Rental Property Investor 路 Dallas, TX 路 Member since 2013 路 85 posts 路 248 votes

Blood bath is dramatic, but hoping to get some conversation going on this. lol.

Homeowners across the state of Texas are getting jaw-dropping tax notices in the mail this month.  Huge reassessments of value on their property which in many cases are making it unaffordable.

So yes, on one side of the ticket, get your cash ready because I believe many people will decide to sell.

But in the interest of homeowners and landlords alike, I believe Texas needs property tax reform.

I am not the lobbying type.  I am much more interested in putting my nose in the grind and making more money than complain about things.

However as a young landlord, I see this being an issue that needs to be addressed for the health of our real estate market.

Property taxes in Texas are antiquated both in concept and as a funding source.  I live in Dallas County and there is much talk about politically mobilizing on this issue.  Whether it be a rate adjustment or total reform as a goal.

So I wanted to get some feedback from BiggerPockets members on ideas, and organization on this.

Even if it is just compiling an email list to get signatures to send to politicians.

The ones who spend our tax dollars voice their opinion regularly.  It is important they hear ours.

Sam White 

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Russell BrazilBusiness Member
Moderator
Real Estate Agent 路 Washington, D.C. 路 Member since 2012 路 17k+ posts 路 30k+ votes
9y

High property taxes come with having no state income tax. At least with a property taxes you can essentially choose how much you are paying the state. Want to pay less taxes, own a cheaper house. With an income tax you have no such power.

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  • Account Closed
    Investor 路 Leander, TX 路 Member since 2016 路 299 posts 路 402 votes
    9y

    You would think San Antonio would be lower in property taxes due to all the money that tourism brings in, as well as all the high taxes on hotels and other tourist things. 

    The school districts must be well funded. 

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    9y

    For this very reason I think the last place anyone who lives in a high state income tax like CA and Oregon ( close second) should buy rentals Is Texas... you need to live in Texas to make sense of buy and hold in that state.. to pay income tax and what amounts to 2X to 3X amount of property tax just to hold a rental is I think something that many just don't look at .

    I can't tell you all the folks I talk to that go into Texas buy and hold don't realize what the tax's can do and after a few assessments their positive cash flow is now neutral or negative.. and in foundation issues Hail wind etc.. tough place for out of state to do business.

    @Andrew Johnson  One thing I recall when I lived in CA.. is certain counties you can also port your prop 13 tax's if you decide to say sell your prime home in a high value market like Palo Alto or PV or someplace like that  were you bought in 1980 for 150k and your on prop 13 at 2k a year and you buy a home say up in Gold country for 600k.. you can port that tax rate to the new place and not pay tax on the full 600k... My in-laws did that when they moved from Cupertino to Nevada City... same scenario  sold their little rancher for 1.5 and bought a really nice home in for 600k but the rancher they paid 30k for in the mid 60's 

    Best tax treatment around Is to Live in Vancouver Washington  work there .. pay no state income tax. property tax's are lower ( but they have a 1.7% sales tax when you eventually sell) then cross the bridge and pay NO sales tax on everything you buy in Oregon.. that's why you have major malls right across the river HUGE costo etc..

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  • Andrew Johnson
    Real Estate Investor 路 Encinitas, CA 路 Member since 2016 路 3k+ posts 路 3k+ votes
    9y

    @Jay Hinrichs I don't think I've been lucky enough to live in those counties. You're 100% right about Vancouver.  There's a company down here in San Diego that has senior leaders who live there, headquarter the company there, but spend most of their time in San Diego (rent here) because that's where a good chunk of the operational infrastructure is.  They'd never move to San Diego because of being able to double down on tax benefits in Vancouver.  

    1Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant 路 Summerlin, NV 路 Member since 2014 路 45k+ posts 路 66k+ votes
    9y

    @Andrew Johnson  I just bought a place in Vegas for the same reason.. much of my income comes from states like FLA with no state income tax.. and other states like SC with very low tax.

    bringing it all back to OReogn then paying 10%  I will MORE than pay for the home I am buying in Vegas just out of income tax savings alone.. plus get out of Orygun crap winter.. snow bird as it were.  Oregon also has a massive inheritance tax that has had many who are lucky enough to have large enough estate to flee the state as well.. although I don't really care if that tax came into effect I would not be here.. but if your concerned about your kids or grandkids maximizing what your leaving them.. then its a concern.

    One of my business Partners moved to San Antonio though from Orygun... Although the number one in migration state for CA talent remain Orygun ... WA  Texas third.

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  • Nichole Stohler
    Rental Property Investor 路 Scottsdale, AZ 路 Member since 2017 路 116 posts 路 136 votes
    9y

    @Sam White , I recently ran into an investor from Austin who talked about the tax assessments.  He's fighting them both on his personal residence and his commercial property.  

    1Reply
  • Account Closed
    Investor 路 Princeton, TX 路 Member since 2014 路 1k+ posts 路 1k+ votes
    9y

    There has been a huge amount of complaining about our property tax system in Texas in the last few years.  I am not expecting any major changes anytime soon.  Nobody wants to be the person that created the income tax (which we probably need).  Any other system will almost certainly be blocked by the courts.

    If Texans want to prevent an income tax they probably need to amend the state constitution to allow state wide property tax.  This could make some of the legal challenges easier to deal with. 

    1Reply
  • Steven C. Suarez
    Hurst, TX 路 Member since 2016 路 192 posts 路 114 votes
    9y
    Sam White Love the title! You should work for a click bait maker! Lol. Taxes, fun topic. I see it like squeezing a long balloon. If they cut property taxes they'll just raise them somewhere else. Be it gas, cellphone taxes, toll roads etc.. Once burocracias are accustomed to receiving set amounts of income, there's no turning back. They'll just grow and grow with longer and longer tentacles. Just gotta deal with it and vote libertarian ;)
    3Reply
  • Zana Blue
    Investor 路 Saint Augustine, FL 路 Member since 2015 路 227 posts 路 61 votes
    9y

    Part of the problem here is that colleges...non profits...government buildings are not taxed but yet receive the same services...so the burden just keeps escalating on the home owners... suggestions have been made that the non profits contribute in the form of a user fee but never happens...right now we are about half who pay and half who get a free ride ...

    1Reply
  • Joe Kim
    Rental Property Investor 路 SF Bay Area, CA 路 Member since 2014 路 352 posts 路 543 votes
    9y

    Dramatically increasing taxes eating away at my positive cash flow in texas is one of the reasons why sold 3 of my texas properties (one last year and 2 this year).   Also, texas has had a great run and nicely appreciated home values.   It may not be the absolute peak but we are close.   Better to be close , rather then dealing with the stress of selling when prices are falling is not worth it.

    But the big positive for investors, is high taxes is also one of the ways, investors can buy properties in texas cheap during a recession.  Wholesalers are probably just waiting for that next downturn.

    I missed the last downturn in 2009-2013, and only started REI at the end of 2013. I"m getting myself ready for the next big one.

    0Reply
  • Account Closed
    Investor 路 Clifton, NJ 路 Member since 2017 路 53 posts 路 54 votes
    9y
    I have nothing valuable to add to his conversation. I just am enjoying reading about these magical places where taxes are so low or non existent. I'm just over here in Jersey crying into my tax bills. But I hope y'all get get that figured out cuz I'd love to move to Texas!
    1Reply
  • Account Closed
    Houston, TX 路 Member since 2017 路 19 posts 路 12 votes
    9y
    What's even worse is that Lt. Gov. Dan Patrick first ran for public office on this very issue here in Houston and with his radio show caused a big stir in this topic and got overwhelming support and never did anything about it. It is my belief that he even became involved somehow with Bentencourt Tax Advisors which fights the appraisal districts on the behalf of people that wish to fight the property appraised value, I believe that to be a conflict of interest. On one hand he "fights for the people" to reform the property tax system and on the other hand (it's my opinion) that he's in the business of making money fighting the appraisal districts. I once asked him this on his radio show and he hung up on me and berated me for another 30 minutes. He acted like a kid that just got busted with his hand in the cookie jar and denied everything and called me everything in the book, and the man doesn't even know me. Friends called me while he was ranting saying the same thing, "you struck a nerve". Paul Bentencourt left public office to start this business, and these two and a couple others were every close in helping the public in fighting their taxes and then next thing you know it this business was started. I don't care that they started this business, more power to them, but to run for public office on the issue of over valued property taxes and out of control government appraisals is quit hypocritical. This is the truth as I see it and know it, I would stake my life on my beliefs.
    2Reply
  • Account Closed
    Houston, TX 路 Member since 2017 路 19 posts 路 12 votes
    9y
    That's why I made my decision not to buy SF homes in Texas.
    0Reply
  • Hung Trieu
    Investor 路 Houston, TX 路 Member since 2014 路 37 posts 路 7 votes
    9y

    where did you  invest ?@Account Closed

    1Reply
  • Linzay Kelly
    Houston, TX 路 Member since 2017 路 10 posts 路 7 votes
    9y

    All I know is that the state of Texas is sitting on a big hoard of cash they call "The Rainy Day Fund" and every session they are looking for new ways to spend it.  Perhaps they could refund some of our property taxes back to us or cut them.

    3Reply
  • Dan H.Pro Member
    Investor 路 Poway, CA 路 Member since 2015 路 7k+ posts 路 8k+ votes
    9y
    Originally posted by @Andrew Johnson:

    @Sam White Are you saying that your assessed value is wrong?  That you think your property is worth less than the assessor?  Do you have documentation (like an appraisal) to back it up?  If the answer is "yes" there is an appeals process.  It's the government, you can pretty much appeal anything.  And if the property did have a homestead exception and it doesn't now, well you knew the increase was coming.  

    But let's take a big step back and go on your thesis that "property taxes in Texas are antiquated both in concept and as a funding source."  California thinks so, we have Prop 13, everybody loves in on paper.  Until they realize that it comes with a state income tax.  If you think your property tax is rough trying seeing your marginal income (like rental cash-flow taxed at ordinary income rates) taxed at 10% to 13%.

    I'm not saying I'm in favor of massive property taxes, I'm not.  But if I had the choice between property taxes and a state income tax, I know which side I'm on in that discussion.  

    Ca income tax pre dates prop 13.  I am not even sure that it has risen since prop 13.  So prop 13 did not result in the state income tax or state sales tax.  

    If your point is that one way or the other the state has to collect taxes then true.  Ca uses state income tax, property tax, sales tax, and a gas tax.  

    The intent of prop 13 was that people's property tax did not go up at astronomical rates when property appreciates (which long term it always has in So Cal and San Fran area). A couple of years ago property values in San Diego rose 20% for the year.  Without prop13 the property taxes would have risen at same rate as the property which may have been a large burden on many owners (fixed income, etc.).   Salaries have not gone up at same rate as property.  

    0Reply
  • Greg Dwyer
    Investor 路 Houston, TX 路 Member since 2016 路 12 posts 路 5 votes
    9y

    FYI: https://wallethub.com/edu/states-with-highest-lowe...

    1Reply
  • Account Closed
    Houston, TX 路 Member since 2017 路 19 posts 路 12 votes
    9y
    Hung Trieu in Memphis, Mid South Home Buyer.
    0Reply
  • Lane Kawaoka
    Rental Property Investor 路 Honolulu, HAWAII (HI) 路 Member since 2011 路 4k+ posts 路 2k+ votes
    9y
    You can put properties in LLCs before the sale and supposedly that might mask it from taxes. But let's face it who is going to pay for the great appreciation.
    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper 路 Austin, TX 路 Member since 2013 路 4k+ posts 路 4k+ votes
    9y
    Originally posted by @Lane Kawaoka:

    You can put properties in LLCs before the sale and supposedly that might mask it from taxes. But let's face it who is going to pay for the great appreciation.

     Be it an individual or entity, the property is going to be taxed based on its assessed value and in order to protect your interest the property taxes will need to be paid

    0Reply
  • Angel Gutierrez
    Investor 路 Dallas, TX 路 Member since 2014 路 51 posts 路 20 votes
    9y

    Yup! Welcome to Texas!

    Taxes(property) have ALWAYS been high here and they are only going to get worse!

    The counties(especially Dallas) is broke due to their own poor fiscal policies. Take a look at the Dallas Pension Fund disaster! 

    And ... to fix it.. they want ALL DALLAS County property owners need to make up for the shortfall....

    Nuff said... :)

    1Reply
  • Wai Chan
    Rental Property Investor 路 San Diego, CA 路 Member since 2014 路 80 posts 路 44 votes
    9y
    I am from San Diego and I own 8 SFR in Dallas. I purchased them from Aug 2014 to Sept 2016. Although I am happy to see all my property appreciate, I am paying close to 40K in property tax. Thanks to the hail, I am paying another 7K home insurance every year. Apparently all these expense has been lowering the cash flow. In order to make up for the loss of cash flow, I must increase rent. But the rent increase can never be compared with the property tax and insurance increase. I am interested to learn how investor deal with this situation? How much rent will you increase this year? Given the fact that companies are relocating to Dallas,I believe housing price in Dallas can still appreciate for the next few years so maybe I will just forget the cash flow for now and wait for the appreciation and increase of equity?
    0Reply
  • Justin R.
    Developer 路 San Diego, CA 路 Member since 2015 路 1k+ posts 路 1k+ votes
    9y

    @Wai Chan Would you agree that you should charge whatever rent the market will support?  I fail to see how your taxes or your insurance costs have any relation whatsoever to the rents you're charging - those rents are based on supply and demand of housing product.

    1Reply
  • Vivek Khoche
    Investor 路 San Jose, CA 路 Member since 2017 路 343 posts 路 102 votes
    9y

    Two examples:

    1. My friend sold his Pleasanton CA home in 1986 bought in Dallas Texas. 20 years latter he sold his TX house for a discount. Pickup a number and do your math for his decision.

    2. 2015 in the same area new construction plan was proposed starting @$450K , number of applications were higher and due to bidding war  lucky one got for $650K. My co worker was among the lucky one that time. Lately he calls me to discuss if there could be a better place to relocate.

    Morale of the story do whatever works for you. Foundation, heat, taxes are bonus.

    Happy Investing

    Vivek 

    0Reply
  • Account Closed
    Investor 路 Leander, TX 路 Member since 2016 路 299 posts 路 402 votes
    9y
    Originally posted by @Account Closed:

    I have nothing valuable to add to his conversation. I just am enjoying reading about these magical places where taxes are so low or non existent. I'm just over here in Jersey crying into my tax bills. But I hope y'all get get that figured out cuz I'd love to move to Texas!

     Get in line 馃構

    1Reply
  • Gary Baker
    Investor 路 Keller, TX 路 Member since 2015 路 81 posts 路 22 votes
    9y

    My take is that my property tax increase should be linked to my W2 income increase. Investment property taxes should be linked to the annual rental increases in the property. My annual pay increase has been pathetically linked to official inflation, yet my daily expenditure rises way above the official rate. (Annual Insurance increased from $2200 to $3700).  Rentals are stuck in the dark ages as the market generally cannot afford more than the 1-2% annual increases that people receive. Property tax increases at 10% pa are not sustainable and this is going to hasten a property correction. There are going to be some who can ride this, but there are going to be many more in a blood letting.  Astute investors will clean up, but longer term damage will be done to the market if there is not some form of reform.

    City's don't care, they are reaping a fortune currently, so nothing will be done until too late.

    1Reply
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