Property tax issues (renters, mortgage, refinance)

[210]

Originally Posted by Navshirereeve

If you have 500,000 bexar county homeowners paying an average of $3000 in property taxes, that comes out to $1,500,000,000. I mean, damn, with that kind of money, the streets should be paved in gold but yet the infrastructure of the freeways are just awful. With a population of about 26 million and half of them being homeowners, and with the property taxes they pay, this state should never be in the red but yet somehow it is.

I agree, city leaders in the past have been backward minded when it came ot uprages and repairs to infrastructure.

Luckly that is changing with Sheryl Sculley.

[EdgarAllanPogi]

Originally Posted by 210

Luckly that is changing with Sheryl Sculley.

That's great to hear!

[wCat]

wow.....only one person replied to my original concern. Maybe taxes would be lower if there weren't so many people claiming deductions that shouldn't be....hmmmmm???

I agree that the property taxes are high, but we are being taxed on the PROPERTY itself, not the value. Figure square footage and lot/acreage and then compare taxes per square foot and we might have a "apples to apples" discussion.

Renters should NOT pay property taxes because they flat out do not OWN it. They walk away with NOTHING when they move. Property owners need to figure in taxes on top of maintenance and possibly covering a mortgage payment. The big winners are the ones who own the property free and clear.......lucky them!

[fierce_flawless]

Originally Posted by m95roadster

There's more expenses than just PITI. If you go with say the median price in SA of about $140k with 20% down, you're looking at negative cashflow.

Purchase price: $140,000 with 20% down
Mortgage Balance: $112,000

Rental income: $1200/mo - $14400/yr

Expenses:
Debt Service (mortgage): $745/mo - $8940/yr
Taxes: $4200/yr
Insurance: $960/yr
Vacancy Factor of 5% (conservative): $720/yr
Total: $14820
Cash Return: -$420

Keep in mind this does not include repairs/maintenance, management, advertising, water utilities, accounting, legal expenses, and most importantly your time.

I am not trying to be negative here, but this is the reality of owning rental property.

I'm not trying to be negative or argumentative either, but this scenario doesn't fly.. unless you're just not using your brain when getting into rental property in the 1st place.

My mom owns rental property in Texas (not SA specifically). She's no mogul, but she has 3. I've also rented for decades, and I check tax records: I know what my former landlords paid for the place (roughly) and what they charge me in rent. I also personally know several people in the business, and none of them are suffering from negative cashflow.

Why? Because they don't buy $140,000 homes to rent out, at least not if they pay market value. They buy cheaper houses with some "TLC", minor repairs, cosmetic stuff needing fixed, in lower income areas, fix 'em up to "habitable", and rent 'em out. Or buy old houses and chop them into apartments and rent them out. Or like my mom, they buy a $3000 (total) older 3 bedroom 2 bath mobile home on a lot (rented) that still brings in positive cash flow because it cost lest than a used car, took a few hundred to fix, and as a 3/2 still brings in $600 a month in rent, even for a trailer. Even with lot rent included. Even with repairs and taxes (Guadalupe county).

I'm saying that it doesn't make sense to buy something at full market and try and make money off of it as a rental.. in that case, yes, property taxes are a killer, but that's not the smart way to do it, either.

My current place that I live in rents for $565 a month... 2 story, 3 bedroom, 2 bath, about 1200 SF in a blue collar area. With a TINY bit of elbow grease she could get $750 easy but she doesn't care.... obviously she paid about $30000 for this place, slapped some paint on it and it works well for her. She owns about 10 just like it in neighborhoods just like mine. If she'd fix it up section 8 she'd get even more. She doesnt' provide A/C or heat, texas doesn't require it. She only has to worry about the occasional plumbing leak or electrical problem, really. In almost 2 years I've lived here I've called her out 2x and both times she was difficult about sending someone.... but I don't bother for anything less than major because I know she wont' do it anyway. That seems to be how the money is made!

And just to stay on the original topic (sorry!).... my mom doesn't claim any exemptions except on her actual residence.

[Steel Man]

Originally Posted by Navshirereeve

If you have 500,000 Bexar county homeowners paying an average of $3000 in property taxes, that comes out to $1,500,000,000. I mean, damn, with that kind of money, the streets should be paved in gold but yet the infrastructure of the freeways are just awful. With a population of about 26 million and half of them being homeowners, and with the property taxes they pay, this state should never be in the red but yet somehow it is.

Actually, the state does not get any property tax money. The counties and cities do though. The lion share goes to the school district. The state gets the largest part of sales taxes (I think it is 6%). Gasoline taxes are the biggest contributor to the road infrastructure (highways and freeways).

[EdgarAllanPogi]

Originally Posted by fierce_flawless

I'm not trying to be negative or argumentative either, but this scenario doesn't fly.. unless you're just not using your brain when getting into rental property in the 1st place.

My mom owns rental property in Texas (not SA specifically). She's no mogul, but she has 3. I've also rented for decades, and I check tax records: I know what my former landlords paid for the place (roughly) and what they charge me in rent. I also personally know several people in the business, and none of them are suffering from negative cashflow.

Why? Because they don't buy $140,000 homes to rent out, at least not if they pay market value. They buy cheaper houses with some "TLC", minor repairs, cosmetic stuff needing fixed, in lower income areas, fix 'em up to "habitable", and rent 'em out. Or buy old houses and chop them into apartments and rent them out. Or like my mom, they buy a $3000 (total) older 3 bedroom 2 bath mobile home on a lot (rented) that still brings in positive cash flow because it cost lest than a used car, took a few hundred to fix, and as a 3/2 still brings in $600 a month in rent, even for a trailer. Even with lot rent included. Even with repairs and taxes (Guadalupe county).

I'm saying that it doesn't make sense to buy something at full market and try and make money off of it as a rental.. in that case, yes, property taxes are a killer, but that's not the smart way to do it, either.

My current place that I live in rents for $565 a month... 2 story, 3 bedroom, 2 bath, about 1200 SF in a blue collar area. With a TINY bit of elbow grease she could get $750 easy but she doesn't care.... obviously she paid about $30000 for this place, slapped some paint on it and it works well for her. She owns about 10 just like it in neighborhoods just like mine. If she'd fix it up section 8 she'd get even more. She doesnt' provide A/C or heat, texas doesn't require it. She only has to worry about the occasional plumbing leak or electrical problem, really. In almost 2 years I've lived here I've called her out 2x and both times she was difficult about sending someone.... but I don't bother for anything less than major because I know she wont' do it anyway. That seems to be how the money is made!

And just to stay on the original topic (sorry!).... my mom doesn't claim any exemptions except on her actual residence.

This is a real life scenario for a lot of people that I described above using the median home price in SA.

Sorry for the thread jack wCat.

Now I'm not saying you can't cash flow buying rental properties. The key to real estate is of course buying well below market value (20-50%). You are correct that someone can make money buying a $30k house. However, with the current rents and the property tax here, you would need to purchase a home at around $70k and below to cashflow. And how easy is it to buy at least 10-20% below market, especially in SA with the real estate market doing very well? Not easy I can tell you that!

BTW, I moved here to be closer to my investments...real estate puts food on my table

[Steel Man]

Originally Posted by m95roadster

This is a real life scenario for a lot of people that I described above using the median home price in SA.

Sorry for the thread jack wCat.

Now I'm not saying you can't cash flow buying rental properties. The key to real estate is of course buying well below market value (20-50%). You are correct that someone can make money buying a $30k house. However, with the current rents and the property tax here, you would need to purchase a home at around $70k and below to cashflow. And how easy is it to buy at least 10-20% below market, especially in SA with the real estate market doing very well? Not easy I can tell you that!

BTW, I moved here to be closer to my investments...real estate puts food on my table

m95roadster,
I see a lot of rentals in my neighborhood. I'm guessing they are using these as tax write offs as many of them are vacant often, or could be that the rent is too high $950-$1200.

BTW, do you want fries with that shingle?

[EdgarAllanPogi]

Originally Posted by Steel Man

m95roadster,
I see a lot of rentals in my neighborhood. I'm guessing they are using these as tax write offs as many of them are vacant often, or could be that the rent is too high $950-$1200.

BTW, do you want fries with that shingle?

Yes, there will be lots of rentals due to the influx of investors that bought half of the development. Another bad thing is this will drive rents downward. Tax write off or not, the mortgage payments are still coming out of their pockets

Actually, I prefer adobo with that shingle!

[Hawaii_Corri]

Originally Posted by m95roadster

Properties tax are pretty high over here! I just recently moved to SA from CA and my monthly property tax bill will be close to $900 That's almost like 2 mortgages!

I realize there is no state income tax here, but in CA state tax is practically nothing. Looking at my wifes paystub with a $1420 net, CA state tax deduction is a whopping $9. I was paying only $3000/yr for property tax on a $700k home. Sales tax in San Diego is also cheaper @ 7.75%. I just don't get it.

I know there is a future tax reduction coming up, but I don't really see any savings because of yearly assessments. Oh well.

Whoa! Wait a minute. If you don't mind me asking approximately what did you pay for your home that your taxes are $900 a month?? That just scared the socks off of me.

We'll be looking to buy a home for about $150,000-175,000. About what would we be looking at as far as monthly tax dues. We plan on putting 30% down.

Thanks for your help.

[EdgarAllanPogi]

Originally Posted by Hawaii_Corri

Whoa! Wait a minute. If you don't mind me asking approximately what did you pay for your home that your taxes are $900 a month?? I just scared the socks off of me.

We'll be looking to buy a home for about $150,000-175,000. What would we be looking at as far as monthly tax dues. We plan on putting 30% down.

Thanks for help.

At $175K with 30% down you're looking at around $300/mo. Property taxes are approxiamately 3%. If you do the math you can figure out what I paid for my house