Rental Property with unreasonable local taxes

8 Replies

I have a property in a small town in Texas, it is worth approximately 250K and I am renting out for $1700 a month. This was a former residence of mine but the taxes have recently jumped to over 7K a year. I am not sure how anyone could operate a rentals in this area with those kind of taxes? Does anyone have any idea how I could lessen my taxes on this property? Do i need to hold it under an LLC would that offset taxes?

Check with your local Property Valuation Department and find out their procedure to dispute it's value.  From there, see if you can get a real estate agent to pull comps on comparable houses and see if they have assessed your property correctly.  If not, use those comps to dispute its value. 

In my county they are pretty fair on the higher end homes, but they tend to be high on lower end homes.   My county will also take into consideration the amount of income I'm generating on a property.   I have successfully lowered my property taxes using this tactic.

Good Luck :)   

Thanks I will try that first just wondering why everyone thinks Texas is a great place to invest with taxes through the roof?

As @Kevin Nalley said check how to appeal the taxes. Holding it under an LLC would not affect the property taxes at all.

Thanks I will try that first just wondering why everyone thinks Texas is a great place to invest with taxes through the roof?

We in general properties that are priced in the higher end of the market are not good rentals. The $250K price you mentioned would be cheap for Downtown DC and would probably cash flow nicely.  That price in baltimore would put it relatively high in the marketplace and would not cash flow well. 

I second Neds quote on the price of rentals.  I would never purchase a $250k house in my area as a rental investment, but that depends on the area.  Unless you are going for a specific niche market, I would stay with  "bread and butter" or starter homes.  

Texas = no state income tax = high property taxes

I've always thought of Texas as a great place to work and rent but a bad place to own property especially for outside investors. 

Sounds like it's time to sell the house and possibly buy a few starter homes.  I am not afraid of buying out of my area any advice as to great markets for starter homes?

Peter I think it depends on your risk tolerance.  You can pickup new starter homes in mix white/blue collar emerging neighborhoods in southern states like Tennessee for under $200k that will attract high income tenants.  Safe rents but lower cap rates.

Contrast this with the Midwest or the Northeast where you can pickup rentals for well under $100k in bad/recovering/gentrifying/undiscovered neighborhoods that produce amazing cash flow but many more headaches. 

If I were in Spokane I would be looking in Utah and Idaho.  I know Boise and Salt Lake are taking advantage of the California migrations and should continue to do well for real estate. 

@Peter Raber  

In Boise my non owner occupied rentals run about 1.4% for property taxes. If you can find a newer 4 plex rents are running about $750 a door easy and mine are always full. I have an excellent PM company that understands investors and they run me 8%. Some new PM company is advertising 6% but I don't plan on switching. Newer 4 plex units can be had for $325k to $350k (but go fast) so you would not hit the 1% rule and you have to watch the HOA fees if you bought into a multi building complex. Airfare to Boise from Spokane or SeaTac is not too bad either. Some folks are getting more than $750 but I have long term folks so I am happy with $750. I have been contemplating direct mailig owners to see if I could pick up a building at a reduced price.

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