I’m in a relatively low property tax area of Texas (By TX standards). I have a 2.375% mortgage and my payment with tax/ins is around 1900 a month with homestead exemption. Every resource I look at puts the rental estimate of 3,900 a month. 5bd 4ba 3300 sq ft.
I’ve planned to hold onto this house if we ever move since have the nice low rate and a lot of equity and would just like to hang on to the asset. But running the numbers as a rental with losing the homestead exemption for property taxes My property taxes would go to around 13k a year from around 7k. This on top of the high expenses of owning a home in TX due the extreme elements like hail, wind, heat I’m just curious how Texas re investors justify it. Is it mainly just price appreciation of the home? Trying to decide if it would be worth the stress of holding on too or just take the money and run which would be around 300k.
Texans how do you justify?
byu/Normal_Commission986 inrealestateinvesting
Posted by Normal_Commission986
7 Comments
The homestead exemption loss is brutal but you’re looking at solid cash flow even with the tax jump. Most TX investors I know are banking on appreciation plus that rent looks conservative for a 5/4 – you might be able to push 4200-4500 depending on area. With 300k equity though, taking the money and deploying it elsewhere might give you better returns without the landlord headaches
You don’t think $1500 a month is enough? Most people are ‘happy’ with $200/per property in profit after all expenses are paid including contingency/future cap ex.
I live in Texas. It’s an owner friendly market much more so than a renter market for exactly what you point out.
Can you not math? It’s 24k of profit a year, you lose 6k to increased taxes that’s still 18k plus the principal pay down. There’s plenty of room there for maintenance. It’s an easy no brainer.
We rent a 5/4 in Arlington in Interlochen (a nice neighborhood). We rent it fully furnished medium term for $7,400 a month and it’s fully booked all the time. The biggest problem with renting in a class A neighborhood is the nosy neighbors so make sure to buy them Christmas gifts so they chill out and leave you alone.
Medium term rentals are a bigger money maker than LTR and STR. There’s a high demand for furnished places for groups in town for work and insurance displaced families.. Just need to consider the cost to furnish a house that big can cost 15k or so. We get most of our furniture used on marketplace and I have a truck and trailer so we do everything ourselves.
If you’re interested to see the Airbnb link PM me and I’ll send it to you.
Chasing appreciation isn’t an investment strategy just because you have a low interest rate. Make sure the property cash flows after the change in property taxes, mortgage, vacancy, and property management are all factored in.
Your homestead tax loss isn’t that high and your insurance will actually drop if you turn it into a rental. I’m in your exact situation and I started renting it out. Go for it!