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Old 01-09-2017, 12:32 PM
 
28 posts, read 36,415 times
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I live in Timbergrove Manor just north of I-10 and inside the loop. I've owned my home for a few years and the value of the land has skyrocketed. The current home is 66yrs old and 1240sq ft. I'm debating tearing it down and building a new home roughly 2,000sq ft. The cost actually works out where I'm not losing any value by doing so. I just recently started considering this option and wanted to ask a couple questions.

Shooting from the hip I think the tax rate for the area is 2.61%. Does that seem right? Are there any breaks or adjustments made to new builds? Any incentives to take advantage of? Homestead I believe takes 20% correct?

The taxes would surely hurt however the fact I could realize another $30k in property value by adding a new build on the land it seems like a pretty decent decision to consider. Still number crunching but believe the total mortgage to be around $475k (that's giving a $30k buffer on build costs so I could actually be lower. Assuming it is $475k I'm trying to see what the final out the door mortgage cost would be. I believe the home would sell for $600+ but not sure how the city would appraise it.
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Old 01-09-2017, 04:59 PM
 
34,648 posts, read 18,376,763 times
Reputation: 22159
Quote:
Originally Posted by FlyingTexan1 View Post
I live in Timbergrove Manor just north of I-10 and inside the loop. I've owned my home for a few years and the value of the land has skyrocketed. The current home is 66yrs old and 1240sq ft. I'm debating tearing it down and building a new home roughly 2,000sq ft. The cost actually works out where I'm not losing any value by doing so. I just recently started considering this option and wanted to ask a couple questions.

Shooting from the hip I think the tax rate for the area is 2.61%. Does that seem right? Are there any breaks or adjustments made to new builds? Any incentives to take advantage of? Homestead I believe takes 20% correct?

The taxes would surely hurt however the fact I could realize another $30k in property value by adding a new build on the land it seems like a pretty decent decision to consider. Still number crunching but believe the total mortgage to be around $475k (that's giving a $30k buffer on build costs so I could actually be lower. Assuming it is $475k I'm trying to see what the final out the door mortgage cost would be. I believe the home would sell for $600+ but not sure how the city would appraise it.
Go to HCAD website and look at similar situations.
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Old 01-09-2017, 05:39 PM
 
Location: The Greater Houston Metro Area
9,053 posts, read 15,601,846 times
Reputation: 15197
A 20% reduction for homestead is a very rough estimate. It has to do with a lot of factors that vary from subdivision to subdivision - and often comes in much lower than the 20%. As a resident taking the homestead exemption, you would be your own source of the percentage discount.

There is no discount for new construction.

Hang on to your cost info evidence - because they are going to say it's more. Don't forget that they will throw in land value for that neighborhood, which won't be cheap - roughly $265K for a normal lot - more if it's a big lot. Tax rate should be $2.53.

Last edited by cheryjohns; 01-09-2017 at 06:45 PM..
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Old 01-10-2017, 08:57 AM
 
1,834 posts, read 2,782,867 times
Reputation: 3759
Quote:
Originally Posted by FlyingTexan1 View Post
I live in Timbergrove Manor just north of I-10 and inside the loop. I've owned my home for a few years and the value of the land has skyrocketed. The current home is 66yrs old and 1240sq ft. I'm debating tearing it down and building a new home roughly 2,000sq ft. The cost actually works out where I'm not losing any value by doing so. I just recently started considering this option and wanted to ask a couple questions.

Shooting from the hip I think the tax rate for the area is 2.61%. Does that seem right? Are there any breaks or adjustments made to new builds? Any incentives to take advantage of? Homestead I believe takes 20% correct?

The taxes would surely hurt however the fact I could realize another $30k in property value by adding a new build on the land it seems like a pretty decent decision to consider. Still number crunching but believe the total mortgage to be around $475k (that's giving a $30k buffer on build costs so I could actually be lower. Assuming it is $475k I'm trying to see what the final out the door mortgage cost would be. I believe the home would sell for $600+ but not sure how the city would appraise it.
It does not matter what you could sell for it the first year - they will accept your cost to build + lot value as the appraised value for the new construction. They will put market value to the left of the appraised value. While you are only taxed on appraised value - the appraised value goes up 10% every year until the market value and the appraised value are the same number.

EXAMPLE: assuming 2.68% taxes

Cost of construction $500,000 = Appraised Value
Market Value = $1,000,000

Taxes year 1 = 2.68% of $500,000 = $13,400
Taxes Year 2 = ($500,000*1.1) = $550,000*.2.68% = $14,740
Taxes Year 3 = ($550,000*1.1) = $605,000*2.68%= $16,214
Taxes Year 7 = $885,780*2.68% = $23,738

You keep going until the appraised value = market value. Property taxes double every 7 years at that rate. As you can see it gets expensive FAST.

If you need the space, do it. If you want to build and sell for yourself, fine, but you have to hold it 2 years to move it to a capital gain...but just building more to have a more expensive home is not a good choice unless you want the newer home, the space, or plan to sell for a profit.
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Old 01-10-2017, 04:45 PM
 
3,562 posts, read 1,590,714 times
Reputation: 6572
Use HCAD to look for houses in Timbergrove that have a similar value to what you expect yours to be. Click on the tax bill link to see the taxes paid on that property. Most of the new build houses in Timbergrove sell for $650k+, so don't skimp on your value estimates.
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