Real Estate Agent · Houston, TX · Member since 2026 · 47 posts · 7 votes
Builders and wholesalers pricing Houston infill: the tax on a spec home is set by one date, not by when you close.
1) Texas appraises property at market value as of January 1 (Tax Code 23.01). Whatever stands on the lot that morning is what gets valued for the whole year. A home finished in late December and sold in March carries a full year's tax on the finished value; it gets prorated at closing, but it sits in your carry until then.
2) For scale: the City of Houston's 2026 rate alone is $0.51919 per $100. On a $900k spec that's about $4,670 a year from the city portion, before county, school district and any MUD.
3) Holding to rent instead? The Comptroller's 20% circuit breaker cap on non-homestead property valued at $5,320,000 or less (2026) only starts on January 1 of the year after the first Jan 1 you own it, and the Comptroller's page says the limitation expires Dec. 31, 2026 unless it's extended.
4) Wholesalers: put the Jan 1 timing in your numbers when you pitch a teardown. A lot bought in November and finished the following fall usually sees two Jan 1 valuations before it sells.
Builders, what month do you target to finish Houston specs? Drop the areas and lot size you're buying below.
Charos, the January 1 lien date is a carry problem dressed as a closing cost, and this thread is underwriting it as the latter.
Run it institutional. $900k finished value, $180k lot, $760k all-in basis. 70% LTC is $532k at a 9.5% constant, or $50,540 of annual interest. That same $532k is only 59% LTARV, meaning the lender already haircut the finished appraisal for exactly this revaluation risk. Now the tax: a vacant lot assessed at $180k carries roughly $3,800 at a 2.1% combined rate. A December 31 CO flips the assessment to $900k, call it $18,900 county and school plus $4,670 city plus $8,100 MUD if you are inside one. That is a $23,000 swing, 2.6% of finished value, incurred before a single closing.
Then test the hold. Rent $5,400, NOI $64,800, less $27,000 tax, $5,400 insurance, 5% reserves, leaves about $29,160 against $532k of debt, DSCR 0.55 against a 1.25 floor. Refi at 75% LTV on $900k is $675k, 30-year at 7.5%, $56,600 debt service, DSCR 0.52. The asset does not fund itself, so the January 1 election is a financing decision, not a tax one.
The S-curve is the trap: vertical cost is flat through foundation and framing, then steepens through finish-out, so exposure peaks precisely when you have the least schedule flexibility. Horizontal infrastructure per lot and the CO both need to land in Q4, not Q1.
What is your contracted takeout date and rate, and does the deal still clear 1.25x if the CO slips two weeks past January 1?