Property taxes...buying a home...help! (Austin: rentals, HOA fees, school)

[gator24765]

Do you most a larger tax return as a result of the higher taxes?

[AustinDude360]

Originally Posted by sunshineandflipflops

Hi! So my fiance and I moved to Austin in March from the east coast. We moved here for our jobs - which we love. We decided to look into buying a home - with our past luck and desire to not move for 10+ years, we are looking at new homes in the Cedar Park area.

However - the tax situation is incredibly confusing. For a 250k house, you're paying $6500 a year in taxes on your house at a rate of 2.6%? That's an extra $541 on your mortgage. Also - I understand the tax rate is based the evaluation of the house, not the price you pay? So potentially - down the line, if your home eval goes up in price by 50K you're looking at another $100ish dollars a month in taxes? We just don't want to be house poor.

We're concerned that the eval on the house down the line will be too expensive as far as taxes for us to afford living there.

Can anyone shed light into the tax situation? Also if people have opinions/views on Cedar Park for buying, I'd appreciate it! My fiance works about 8 miles away towards the city and I work night shift at Dell Children's Hospital.

Thanks!!!

Hi there. Yes, property taxes are expensive in Texas, but there is no state income tax which helps offset it. If you are concerned about the tax payments, you should attempt to buy under your budget so you have wiggle room to pay for tax increases or look for the lowest tax rate area you can find (e.g. - Round Rock can get you as low as 2.3%).

If you are in a situation where your home value is so high that you cannot afford the taxes, then that would mean you would have a large amount of equity. In those situations you can do one of several things:

1) Refinance your home and pay less monthly by extending the payment term of your home
2) Sell your home and cash out all the equity - move to a cheaper area and practically buy a home cash
3) Sell your home and cash out all the equity - buy two homes; a primary and a rental in a cheaper area (e.g. - Like a Californian)
4) Rent your home and profit off the rent - live in a rental and have steady cash flow long-term

#2 is what a lot of people in East Downtown Austin had to do and they moved into nice areas like Leander.

Anyway, I love Cedar Park. I live there now. Really depends on your home budget. What are your needs (# of Bedrooms, Square Footage, budget, etc) ? Feel free to PM me.

[sunshineandflipflops]

I understand the property tax is important and makes sense for those who bought their homes 20-30 years ago.... it wouldnt make sense for the tax not to change based on their property value. I guess that just sucks for older folks who have to now factor in higher taxes at a later point in life. My fear would be the evaluation of property resulted in something like 20k in property taxes versus 10k -- that's a very significant difference

[sunshineandflipflops]

Originally Posted by AustinDude360

Hi there. Yes, property taxes are expensive in Texas, but there is no state income tax which helps offset it.

If you are in a situation where your home value is so high that you cannot afford the taxes, then that would mean you would have a large amount of equity. In those situations you can do one of several things:

1) Refinance your home and pay less monthly by extending the payment term of your home
2) Sell your home and cash out all the equity - move to a cheaper area and practically buy a home cash
3) Sell your home and cash out all the equity - buy two homes; a primary and a rental in a cheaper area (e.g. - Like a Californian)
4) Rent your home and profit off the rent - live in a rental and have steady cash flow long-term

#2 is what a lot of people in East Downtown Austin had to do and they moved into nice areas like Leander.

Anyway, I love Cedar Park. I live there now. Really depends on your home budget. What are your needs (# of Bedrooms, Square Footage, budget, etc) ? Feel free to PM me.

Thanks! Even though there is no income tax, the lower wages here mean I'm taking home the same amount after taxes. We just wanted a 3 bed 2 bath house.... our ideal budget is 225k but we're weighing the cost of going up in price if it means we wont have to move in 5-8 years as we outgrow our home once we start a family. I lease my car because i have horrific luck with ownership - transmission repaired only to leave me stranded after it was fixed because the fuel line went..... multiple flat tires, random things happening like that - so I dont want to get myself into a situation where Im paying for a replacement AC unit as my friend did for 12k.

[scm53]

Originally Posted by sunshineandflipflops

My fear would be the evaluation of property resulted in something like 20k in property taxes versus 10k -- that's a very significant difference

Keep it long enough, it is almost a certainty.

[CBB_bear]

Originally Posted by Rynldsbr View Post
.People that purchased 20 years ago would be getting away with robbery if they still payed on sales figures from that era. Cost of providing services such as fire and police protection have gone up. Everyone gets to share in the burden when using a system based on property value.
Well, that's ONE way to look at it. On the other hand, the costs of providing services to our townhouse certainly aren't HALF of what we paid just down the street in the big house...same roads, same fire and police, same schools, etc. The cost of providing services to the ramshackle house that hasn't had a lick of improvement over the past 40 years isn't all that different from the cost of providing services to the up-to-date, energy efficient, safer home built just next door.

Not a huge burden because they are still mobile; but our former SIL and hubby just moved out of the house they have been in for over 25 years...a fairly modest wood siding home that cost much closer to $200K when they bought vs the over $800K the tax man says it's worth. Through no fault of their own, they were paying over $20K each year in property tax! Nothing like having to take out a mortgage just to cover your taxes!

I wouldn't have a problem with the original owner/occupant of a home having some more protection against crazy tax hikes AS LONG AS THEY REMAIN IN THE HOME. Same way I wouldn't have a problem with 'historic' properties and commercial properties paying closer to their "share".

Usually I'm not a fan of Texas' lack of any sort of progressive tax structure, but I think this time I'm with Rynldsbr. If you are curious what happens when the government tries to enforce a cap on property taxes, take a look at the effects of proposition 13 in California, which limits increases on property taxes to such a low level that people pay essentially the same amount on a house until it changes ownership or they refinance. So someone who bought a house for 300K in 1991 is essentially paying less than an inflation adjusted amount of property tax on a 300K house from 1991, even though it might be worth, say, 1.8 million today (which in certain areas, like the SF bay area, that level of appreciation is common).

This has completely messed up the state's finances and ability to bring in revenue, caused a lot of issues with funding to schools and the UC system, and completely distorted the real estate market.

[centralaustinite]

Yes, prop 13 was and is an utter disaster for the state of California. Real estate is an asset and if property tax is the main source of revenue, then it makes sense to assess its value every year.

I've been in my central house for over ten years and the property tax I pay has nearly doubled, but so has my equity. You are unlikely to see that sort of appreciation in Cedar Park but I wouldn't expect your property tax to stay level either. Plan for an annual increase.

[austin-steve]

Originally Posted by centralaustinite

Yes, prop 13 was and is an utter disaster for the state of California. Real estate is an asset and if property tax is the main source of revenue, then it makes sense to assess its value every year.

I've been in my central house for over ten years and the property tax I pay has nearly doubled, but so has my equity. You are unlikely to see that sort of appreciation in Cedar Park but I wouldn't expect your property tax to stay level either. Plan for an annual increase.

Prop 13 alone isn't the reason for the disaster. It, combined with other stupid things CA does, created the problems. Prop 13 is just one ingredient in the stew.

Texas would have to impose either an income tax or a consumption tax to make up for the property tax decrease if prop tax reform were to come about. Personally, I'm in favor of a high consumption tax, rigged to protect the people on the bottom end (exempt staple foods for example, but not alcohol), so that way all of these high income, high consumption people coming into Austin can start carrying their load instead of riding on the backs of those of us already here.

Steve

[machupichu12]

Question as a new home owner. If I understand correctly I can't apply for HS until year 1 of taxes? Please confirm.

For instance:
I purchase a home for 300k. It assesses at 290k.
Our upcoming tax bill will be at the sellers HS at 250k.
Next year will the home get reassessed at 290k or so and I pay tax on that. I can apply for HS exemption to not increase 10% every year from the 290 reassessment?

So assuming a 2.5% tax rate it'd be:
Year 1: $6,250 (I closed in late April so I would be able to utilize the seller's HS exemption)
Year 2: $7,250
Year 3: No greater than 10% of year 2

Thanks,

[AustinDude360]

Originally Posted by sunshineandflipflops

Thanks! Even though there is no income tax, the lower wages here mean I'm taking home the same amount after taxes. We just wanted a 3 bed 2 bath house.... our ideal budget is 225k but we're weighing the cost of going up in price if it means we wont have to move in 5-8 years as we outgrow our home once we start a family. I lease my car because i have horrific luck with ownership - transmission repaired only to leave me stranded after it was fixed because the fuel line went..... multiple flat tires, random things happening like that - so I dont want to get myself into a situation where Im paying for a replacement AC unit as my friend did for 12k.

For a 3/2 in that price range, you would want to look into the older areas of Cedar Park like Buttercup Creek, Cypress Bend, Cypress Creek, etc. I would say go with small and within your budget than move if you grow out of it. It's not worth stretching yourself now...especially with you concern with tax rates. I stretched myself when we got our first home and if I was reasonable in our size, we would have ended up in Cedar Park originally because we could have afforded it.

Also, many 3/2's have flex space where you can convert that space to a bedroom. Dining Room is a good example of that. Slap on french doors and for about $3500 you have a 4th bedroom. Many buyers don't care about the dining room space these days at that price range.

Round Rock will be slightly cheaper if you get priced out of Cedar Park. As long as you avoid homes zoned to Stony Point HS, you should be good.