Who buys high end homes? (Houston, Dallas: sales, real estate, rental)

[Austin97]

Originally Posted by Taterhead

Exactly,

We would buy the home outright, so no morgage paymemts. My husband hates the fact that we would own our home and still be paying almost a morgage payment in taxes per month just to be near the kids. We are looking seriously at Tennessee for that reason alone.

Im not sure what the current status is, but a few years ago I heard about a tax freeze for senior citizens so that at least your tax rate/appraisal value wouldnt cause an increase in absolute dollars.

I think there may be a way to defer your property taxes until death as well. The property taxes would get paid out of the equity on the home when it is transferred to your children

I dont know if either of these are in effect, but you might want to look into it.

[pdxtech]

Originally Posted by Taterhead

Actually, to put it into perspective, as I said, we were looking at spending around $250,000 for a home in texas. The annual property taxes would be around $6,000. That's more than we pay in property taxes on a $600,000+ valued home and state income taxes on an annual income of over $120,000 a year, combined (in Arizona). After we retire, we're looking at an annual income of substantially less than that.

I understand. I think the high property taxes in Texas do discourage
many retirees from coming here. It would be nice if in addition to the
Senior citizen exemptions, they waived the school district tax
contributions for Seniors (only for the first home), because they already
paid into the system when they had school going kids. But, this
is just my opinion. Any legislators on this forum?

[austin-steve]

The tax rate can swing quite a bit depending on where you buy. This is another reason I love SW Travis County where I live. Our property taxes are cheaper than just about anywhere else around Austin.

I'm looking at my property tax notices for some of the properties I own. The tax rates are as follows:

1.9928% SW Travis County inside Austin ETJ (Oak Hill area outside city limits)
1.9928% South Austin Manchaca Rd. area, outside Austin city limits
2.5254% Oak Hill inside Austin city limits
2.3054% Duplex near downtown Austin
2.528248% House in Leander (Williamson County)

With the exception of houses I own in Leander, which are appraised about $10K too high, all of my Travis County properties are undervalued, some by significant amounts. This is fairly common but you can't count on it.

I tell everyone moving to Austin to figure out your tax rate and multiply it by the price you're paying for the home just so you'll know your worst case scenario.

Steve

[Biscuits]

Originally Posted by Taterhead

But the property tax on a 450k home is killer on you in Texas. What happens to all of you when you retire? that homestead exemption doesn't help much. My kids live in Austin and we really want to retire there to be close the them, but the property tax is a big issue for us.

At the age of 65, you can choose defer all of your property taxes and pay nothing; leaving the estate with the bill. Assuming your property appreciates above the 2.7% annual tax burden (I think the 30-year national average is 6.5%) then there should still be money left over for your heirs (if that is also a concern).

There is also a freeze of the school portion of the property tax bill (the largest taxing authority in most cases) once you reach 65.

Some of the arguments that one should root against property appreciation, or buy in slower appreciating areas, in order to pay less property taxes is ridiculous. Net worth is something to root for, not against. Also, there is currently a 10% cap on taxable appraised value with talk locally of pushing that number down to 5%.

[Taterhead]

Originally Posted by Biscuits

At the age of 65, you can choose defer all of your property taxes and pay nothing; leaving the estate with the bill. Assuming your property appreciates above the 2.7% annual tax burden (I think the 30-year national average is 6.5%) then there should still be money left over for your heirs (if that is also a concern).

There is also a freeze of the school portion of the property tax bill (the largest taxing authority in most cases) once you reach 65.

Some of the arguments that one should root against property appreciation, or buy in slower appreciating areas, in order to pay less property taxes is ridiculous. Net worth is something to root for, not against. Also, there is currently a 10% cap on taxable appraised value with talk locally of pushing that number down to 5%.

Husband looked into this and said the rate is more like 8%, so in 30 years that would leave a bill of aprox. 600000. If we buy a home say for 250000, who knows if it will be worth 600000 when we die. I don't want to leave my children with a tax burden. Homes don't appreciate very fast in Texas imo, so that worries me. it looks to me like there is no way around this, we can't live near my kids plain and simple. I feel sorry for those who live there all their lives and have to deal with theses taxes after they retire and own the home outright. There should be a break for us who paid into school taxes our whole lifes when we retire.

Debbie

[FromCalitoSteinerRanch]

Originally Posted by Taterhead

...There should be a break for us who paid into school taxes our whole lifes when we retire.

Debbie

Well, I am a little sore that I have to pay into Social Security and I will never see a dime of it. It will be overburdened to the point of no payout for those born in the same year as myself.

So, I get to save to a 401K on top of Social Security. I get only about 60% of my pay check to use for housing, 529 Plan, etc.

Next time you are on vacation, just remember, my family and I are NOT on one, because we can't afford it!

Hopefully when my spouse starts working again, she can fund vacations for us. And I want a car less than 12 years old...

[Daisey31]

Uh, how about those of us who paid taxes for our kids (mine are 20) AND won't have Social Security. I am 42 and feelin' it.

[Biscuits]

Originally Posted by Taterhead

Husband looked into this and said the rate is more like 8%, so in 30 years that would leave a bill of aprox. 600000. If we buy a home say for 250000, who knows if it will be worth 600000 when we die. I don't want to leave my children with a tax burden. Homes don't appreciate very fast in Texas imo, so that worries me. it looks to me like there is no way around this, we can't live near my kids plain and simple. I feel sorry for those who live there all their lives and have to deal with theses taxes after they retire and own the home outright. There should be a break for us who paid into school taxes our whole lifes when we retire.

Debbie

How will your heirs have a tax burden?

First, the home will be worth more than the taxes. You said the annual appreciation is close to 8% and we know that taxes have never been higher than 3%.

Second, assuming the house is somehow worth less than the taxes, what makes you think your heirs can be legally be held responsible for your past taxes? In that situation, the county will simply take the home and nothing will be left for your heirs.

Simply put, you have no financial excuse not to move if you or your husband is 65 or older.

[Taterhead]

Originally Posted by Biscuits

How will your heirs have a tax burden?

First, the home will be worth more than the taxes. You said the annual appreciation is close to 8% and we know that taxes have never been higher than 3%.

Second, assuming the house is somehow worth less than the taxes, what makes you think your heirs can be legally be held responsible for your past taxes? In that situation, the county will simply take the home and nothing will be left for your heirs.

Simply put, you have no financial excuse not to move if you or your husband is 65 or older.

The 8% I mentioned is the yearly interest rate charged by the state of Texas on unpaid taxes, not the appreciation. In thirty years unpaid taxes on a $200,000 home total $180000 at the rate of $6,000 per year for 30 years. Interest accumulated over 30 years @ 8% would be approximately $500,000. The total would be approximately $680,000. Even at 4% annual appreciation, the house would only be worth about $650,000 at the end of 30 years. There would be nothing to leave to the kids.

[Biscuits]

Originally Posted by Taterhead

The 8% I mentioned is the yearly interest rate charged by the state of Texas on unpaid taxes, not the appreciation. In thirty years unpaid taxes on a $200,000 home total $180000 at the rate of $6,000 per year for 30 years. Interest accumulated over 30 years @ 8% would be approximately $500,000. The total would be approximately $680,000. Even at 4% annual appreciation, the house would only be worth about $650,000 at the end of 30 years. There would be nothing to leave to the kids.

I didn't check your math but do have a firm number (see below) for the average appreciation of Austin homes. Feel free to factor the exact figures into a spreadsheet to come up with a precise number.

Regardless of the outcome, you and your children will have to pay nothing out of pocket for the property taxes you and your husband deferred while living in Texas from age 65 to 95.

If your goal is to make the most money for your kids to inherit, you could consider several strategies, like taking out a tremendous amount of life insurance and accidentally driving your car off 2222.

If your goal is to live near your children without having to pay one red cent in property taxes, I believe I have shown you the way.


"From 1979 to 2005, Texas home prices grew at an average annual rate of 4.7 percent (see table). Galveston ranks first in home price appreciation (5.5 percent) followed by Austin (5.2 percent), Killeen-Fort Worth (5 percent) and San Antonio (4.8 percent). Dallas and Houston experienced average annual home price appreciation rates of 4.4 percent and 4.2 percent, respectively."



http://recenter.tamu.edu/tgrande/vol13-1/1762.html (broken link)