High property tax rates mitigation

[Eyal T.]

I'm exploring the SA market and wonder, how does everyone cope with the 2%+ property tax rated? Seems like it really erodes the CF...

[Will Pritchett]

Great question. It is a big consideration and one reason we don't buy at ARVs above about 160K for single family rentals. It's a big bit into cash flow. For those of us living in Texas, we don't have state income tax so that is a small consolation. For those of you in state income tax states, I'm not sure how that works but I would think you'd get taxed again on your income in California??? As our values increase here the taxes follow suit and cash flow drops.  We've sold a few that appreciated into anemic cash flow as taxes outpaced rents. We reinvested at lower price points. Generally we see less appreciation in these cheaper houses but if cash flow is your goal, that can be an acceptable trade-off. 

I hope this helps. It is harder to buy deals that cash flow these days but the DO exist. Best of luck!