Texas Property Tax Blood Bath

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Texas Property Tax Blood Bath

Sam White
Rental Property Investor · Dallas, TX · Member since 2013 · 85 posts · 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 · Washington, D.C. · Member since 2012 · 17k+ posts · 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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  • Gary Baker
    Investor · Keller, TX · Member since 2015 · 81 posts · 22 votes
    9y
    Originally posted by @Russell Brazil:

    High .... the state. Want to pay less taxes, own a cheaper house. With an income tax you have no such power.

     That is nonsense really, everybody aspires to more valuable homes and this is not about someone buying a home in the current market at the current value and tax rate. When the market runs away and you are forced out of a home that you have been in for 10+ years because your W2 has not kept up with inflation, let alone stupid market forces; then, what you say is heartless. Yes taxes need to increase, but at these unsustainable rates it is morally wrong. Major market corrections (local/national) always hurt the economy more deeply than softer smaller swings and corrections. Sustainable and natural increases in tax and growth are far more healthy in the longer term.  The next crash may put a whole lot of investors and realtor's against the wall. There are no complaints currently about the growth, but we will hear the crying later. Basically it is greed, one of seven deadly sins - no?

    Also, anyone can reduce their income tax, simply downgrade their lifestyle, give away all they have and get a minimum wage job.

    2Reply
  • Wai Chan
    Rental Property Investor · San Diego, CA · Member since 2014 · 80 posts · 44 votes
    9y
    Originally posted by @Justin R.:

    @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.

    I see the direct relationship. I run the rental houses as a business and I try to improve the profit every year. Right now the situation is that property tax has been increasing by 10-20% for the past two years (Please don't get me wrong, I am happy with the property appreciation for sure), so I must do something to keep my profit if I cannot improve it. I am out of control for the cost of property tax and insurance so in order to ensure I am still making money I must increase rent. For sure I cannot increase rent by 10-20% right now but I can foresee that it will happen soon across Dallas unless landlords are happy with a lower cash flow....

    Another possibility is that landlord wants to sell the property because cash flow is lowered. Unless renters in Dallas are capable of buying their own places, the sell-off will just further drive the supply lower. People still need a place to rent so that would lead to rent increase as well...

    1Reply
  • Steve B.
    Engineer · Portland, OR · Member since 2014 · 1k+ posts · 1k+ votes
    9y
    Justin R. It's no great economic mystery that increases in property taxes will be paid by the landlord in the short term and the renter in the long term
    0Reply
  • Aaron Mazzrillo
    Investor · Riverside, CA · Member since 2011 · 2k+ posts · 3k+ votes
    9y

    My last Taxes house is going on the market in just a few weeks and I'll do the happy dance the day it sells. The property tax rates there are disgusting.

    1Reply
  • Daniel Wheeler
    San Antonio, TX · Member since 2017 · 18 posts · 8 votes
    9y

    I'm overseas and looked at my San Antonio SFRH today... ouch. I've had the same rental rate on the house for two years. It may be time for a raise on the next lease.

    In 2013 when I bought this house I had an entire selection of prime target rentals I could buy at 120kish less than 10 years old etc...

    Just looked at the listing for the city and there is 1 I would buy and rent out.

    0Reply
  • Joel OwensBusiness Member
    Moderator
    Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
    9y

    Property tax attorneys and other companies generally are performance based on results achieved. Sometimes an appeal might not be good if your taxes are already low as the verdict might be to raise them higher.

    All the muni's right now nationally after years of keeping rates flat during the recession are pumping and pumping up to inflate values to siphon away additional taxes from owners. I know many in Texas and you have to fight and protest by a certain date. It's a game the government plays and it takes time to win a reduction on appeal. Even on commercial retail centers in Texas where the tenants pay the property taxes you have to watch it as an owner. The reason is high taxes push the total cam      ( typically landlord insurance,property management,repairs to the building, property taxes etc.) the tenants pay the landlord higher. So payment above base rent per sq ft goes higher with the monthly cam. As a property owner it is critical to fight this pretty much every time unless your taxes are ultra low. In new developments there is usually an assessment on land value as property is being constructed and a building is just starting to be leased up. As it fills up to stabilize the assessor does a new evaluation of the property. The tenants have to be trained that initial cam is low as it's a new center and to expect a rise in overall cam. The goal is for the total rent base plus cam to be inline or under with other centers in the area once stabilized.

    Everyone wants money but nobody wants to spend it....................... : ) That's the game played in America and how well someone works the system in their favor the better they tend to do over time. 

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  • Stephen Masek
    Investor · Mission Viejo, CA · Member since 2012 · 627 posts · 204 votes
    9y

    Few people know that you can move when older and still keep the Proposition 13 protection in California.  However, Proposition 13 is definitely under attack in California.  The radical leftists hate it, so they want to start by eliminating it for commercial real estate.  That would be very interesting in places such as LA with rent control, as it would cause massive numbers of foreclosures on apartment buildings.  The up-coming radical increase in California gasoline and vehicle taxes are being challenged by a recall campaign which is likely to be successful.   

    0Reply
  • Seth Borman
    Rental Property Investor · Phoenix, AZ · Member since 2016 · 553 posts · 314 votes
    9y

    @Scott Newton the other way of looking at this is you've got a lobby of existing property owners that have shifted the cost of maintenance and repairs from themselves to new developments, which is why California has some of the highest impact fees in the country.

    0Reply
  • Seth Borman
    Rental Property Investor · Phoenix, AZ · Member since 2016 · 553 posts · 314 votes
    9y

    Texas is on a spending spree to try and turn itself into California in 20 years. Keep that in mind when they start adding freeways all over the place.

    (I lived in Texas from 2010-2015).

    0Reply
  • Greg H.Pro Member
    Moderator
    Broker/Flipper · Austin, TX · Member since 2013 · 4k+ posts · 4k+ votes
    9y
    Originally posted by @Seth Borman:

    Texas is on a spending spree to try and turn itself into California in 20 years. Keep that in mind when they start adding freeways all over the place.

    (I lived in Texas from 2010-2015).

     We are already adding freeways everywhere and they are all Toll Roads

    1Reply
  • Seth Borman
    Rental Property Investor · Phoenix, AZ · Member since 2016 · 553 posts · 314 votes
    9y

    They aren't all toll roads... the 28-ish lane I10 in Houston will not be tolled to pay for rerouting it around downtown.

    The tie in to real estate is that you can expect more of the same with increasing property tax bills into the future.

    0Reply
  • Scott Newton
    Northridge, CA · Member since 2017 · 14 posts · 5 votes
    9y

    @Seth Borman I would argue that the law benefits both existing and new property owners, over time. Yes, if you've been sitting on a property for generations, there is a huge benefit. However, prior to the constitutional amendment, new home sales and resales were being taxed at higher rates than they would be under the current law. With California property values at extremely high levels, each resale is an opportunity for the state to reset the assessed value, and reap a huge benefit, even at the 1% rate (+ local additional levies).  The national property tax average is around $2150. California's median home price in December was $470,000, which equates to a property tax of at least $4700. The law is a benefit to even new home buyers: they'll have full understanding of what to expect from a tax levy standpoint for decades to come.

    0Reply
  • Seth Borman
    Rental Property Investor · Phoenix, AZ · Member since 2016 · 553 posts · 314 votes
    9y

    The proof is in the pudding. California prices are out of control and getting worse. Impact fees can cost more than a house does in other parts of the country. The fact that some people benefit doesn't help most homeowners, or most renters, and the fact that commercial property is able to lock in their taxes is almost criminal.

    Texas has the opposite problem in that they continue to raise taxes to pay to build things that will crush them to maintain. Roads are bad enough, pensions are worse. We will see what happens; I doubt it will be pretty.

    0Reply
  • Roger S.
    Investor · TX · Member since 2015 · 393 posts · 290 votes
    9y

    There seems to be no rhyme or reason to the assessments being mailed out.  I own 2 identical houses, side by side, and there are identical houses on either side of these 2.   The appraised value of each house goes from left to right, $42,000,  $68,000, $54,000 $45.000.  My two are the ones in the middle and the 68k one increased by $27,000  I had another little 800 square foot house without CH/a and no garage go from $46,000 to $81,000 this year.  

    In all, all but one of our house went way up.  I protested 5 of them, and got a reduction on all 5, but even the reductions made no sense.  The 2 side by side house above, one of them was reduced to 40k and one to 47k.  Identical houses!!

    To make matter worse, I looked up the properties owned by the Appraisal Districts board members.   Most of them were right in line, but one board member owns a nice 1660 square foot brick home with 2 car garage and a fireplace, and his appraised value is 44k.  That's 27 bucks a square foot, where 2 of my little frame houses were well over 90.  AND, his value has gone down every year for the past 4 years.

    0Reply
  • Sam White
    OP
    Rental Property Investor · Dallas, TX · Member since 2013 · 85 posts · 248 votes
    9y
    Steven C. Suarez I agree. Liberty in general is directly tied to property ownership per writings of Thomas Paine and Declaration of Independence and other influences of 1776 ;)
    1Reply
  • Josue Vargas
    Real Estate Agent · San Antonio, TX · Member since 2017 · 814 posts · 466 votes
    9y

    One of my properties in San Antonio, bought on 2013 at $340, valued at $350K on 2014 (did not protest), valued at $380K on 2015 (did not protest), valued at $415K on 2016 (did not protest), valued at $432 at 2017...  This is definitely NOT the market value of the property, currently protesting it. 

    0Reply
  • Roger S.
    Investor · TX · Member since 2015 · 393 posts · 290 votes
    9y

    Protest every year.  They are counting on you not protesting it.

    0Reply
  • John Pate
    Investor · Georgetown, TX · Member since 2017 · 11 posts · 11 votes
    9y

    The state of Texas is better than most, but all governmental agencies will never limit their spending appetites. The highest tax states like IL are broke due to out of control spending. If you think an income tax would help, I disagree. They would lower property taxes for a few years, but then creep back up to their current levels while keeping the income tax in place. 

    I don't understand how property taxes could double in a year unless they are rentals. But a homestead exemption should limit increases to 10% a year. Personally, we left Austin 3 years ago in large part to excessive property taxes. But now Georgetown is also getting very high. I've had good luck using a tax protest company here in Austin. You only pay they reduce the taxes below the current ssesment. 

    1Reply
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