$80k for buy and hold

[Chris Gosselin]

I’m looking to spend $80k to buy a single family home, is it worth limiting my search to no income tax states? I’d love to hear what market you would hone in on for a property in this price range. I’m not looking to make 15% but I’d love to net 10! This is my first day on the site and my first rental purchase. Thanks in advance. 

[Aaron K.]

No it actually is better to have a property in a state that closely matches your state of residence's income tax if all else is equal.  Texas is a great example of this they have no state income tax so they get there money elsewhere (read property taxes)  So there property taxes are high, if you live in a high tax state like CA or NY you pay 10% of your income to the state.  

However the way state taxes work is you get a credit for taxes paid in other states so let's say you have a rental in AZ and the taxes there would be 5%, you'd pay 5% to AZ and another 5% to CA.  So you will be taxed at the highest rate between the state you earned money in and the state you invested in.

Now if you live in a zero income tax state you may want to consider looking only in other no income tax states but either way after expenses and depreciation it won't make too big a difference anyway.