How to Estimate Property Tax? (Texas)

[Charles Clark]

Hi all, I've been running numbers on different properties trying to evaluate cash flow. One issue I am having is the cost of taxes, I'm not sure what is the best way to estimate it.

Zillow has a simple estimate of % rate x asking price to estimate taxes. However this value is far higher than the tax paid in the tax history section, which is based on a lower property value.

I'm thinking this second value might reflect a homestead exemption or the like, which I don't want to include in the cash flow estimates as a rental. However I am not sure how assessment works. If you buy a property does the sale price become the new assessed value? Or is it based on something else? (Bought a vehicle last year, the price I paid was more than the assessed value for sales tax purposes, that is part of what is driving my confusion here, not sure if the same situation applies to real estate).

Obviously I don't need an exact answer, but its difficult to evaluate cash-flow opportunity with such a wide discrepancy in figures. 

[Matt Solis]

Zillow’s tax numbers can be way off, I wouldn’t use them. Google the appraisal district of the county the property is located in, and search the property there to find last year’s taxes. Note that any exemptions will not be listed on the county website, so if the taxes seem abnormally low, there’s probably an exemption on it. You can look up the taxes on a few comparables to get a better idea of what the taxes will be.

The sales price is not the assessed value. The assessed value is determined by the county and is used to calculate taxes, land + improvements. It’s usually a good bit less than the actual sales price.