Property tax (Bailey: real estate, apartment, renters)

[Ronnie555]

So I read that Texas has a 1.81 percent property tax.

It seems like owning a home in Texas is barely cheaper than renting a home in a more expensive place, like Boston where I currently live.

I'm not talking about mortgage payments. I'm assuming you pay cash for the house.

almost 2% in property tax seems like it would quickly get you to around 50-75% of what a rent payment would be. That's a lot to pay considering you're tied in, you have to buy home owners insurance and all kinds of stuff that renters don't need, etc.

Am I missing something here?

I know housing is cheap in texas. 200K can get you a lot in most areas. But even 1.81% of 200K is almost as much as renting in some places.

I've never owned a home. I still rent. But I always figured home ownership would be cheaper by a bigger margin once you own the house outright... why is everyone so eager to own?

[High_Plains_Retired]

Texas property taxes vary, sometimes significantly, from county to county. I was paying almost 3.5% (without any exemptions) on a small rental house in a small town in Bailey County, Texas. We have now sold all our rental properties we had there.

I always find it hilarious when I see Texas listed as a whole state in which to find low taxes. Some localities are, many are not. Texas has 254 counties, each with it's own taxing authorities. When I say authorities, I mean that in the context that a few poorer counties still even retain the 1950s style county property tax on POVs plus the regular county and municipal real estate property taxes.

It would be best to zero in on the taxes within a county you want to live in, then zero in on the taxes on the house you want to buy, then see if it is to your advantage to buy.

Why buy instead of rent you ask? I was as good a landlord as a family could possibly want but I wouldn't want me as my landlord.

[Willsson]

Why buy as opposed to rent? You have to buy home owners insurance and all kinds of stuff that renters don't need, etc.

Regardless of who owns the property, someone is going to pay for taxes and insurance. And in most cases, regardless of who sleeps under the roof of that property, it is likely that person is covering the cost of those taxes and insurance.

I'm the only person with a key to my door, and I don't have to ask if I can change the locks.

[FalconheadWest]

Not many places in Texas have a low tax rate of 1.8%. Most are in the 2+ range and some over 3%.

There is no state income tax so there is more money in your pocket. Rent is not cheap in many of the main areas of Texas. Where rent is cheap, houses cost less. Where rents are higher, prices are higher. When you pay a property tax, you have a tax write-off. When you pay rent, you pay for someone else's tax write-off. That means, with a tax write-off, imagine a tax refund at the end of the year, which divided out over the year means a reduced mortgage payment compared to no tax deduction when you rent thus keeping a higher rent payment.

Also, when you rent, you might not be able to paint the walls what ever color you want. You might not be able to remodel to what ever you want. You might not be able to plant pretty flowers in your landscaping... When you own a house, you can do whatever you want to it (with HOA approval on the exterior if you live in an HOA neighborhood).

Ownership is about pride.

[hoffdano]

Originally Posted by Ronnie555

So I read that Texas has a 1.81 percent property tax.

It seems like owning a home in Texas is barely cheaper than renting a home in a more expensive place, like Boston where I currently live.

I'm not talking about mortgage payments. I'm assuming you pay cash for the house.

almost 2% in property tax seems like it would quickly get you to around 50-75% of what a rent payment would be. That's a lot to pay considering you're tied in, you have to buy home owners insurance and all kinds of stuff that renters don't need, etc.

Am I missing something here?

I know housing is cheap in texas. 200K can get you a lot in most areas. But even 1.81% of 200K is almost as much as renting in some places.

I've never owned a home. I still rent. But I always figured home ownership would be cheaper by a bigger margin once you own the house outright... why is everyone so eager to own?

Just gonna be picky here.

The state of Texas does not have a property tax. The state constitution prohibits the levy of a property tax by the state.

Property taxes are levied by cities, counties, school districts, and a few other authorized municipal bodies (typically utility districts). Rates vary widely across the state. I'd say 2.5% of assessed value is pretty typical. Assessed value is not necessarily the same as appraised value. The math on that is simple - 2.5% of $200K is $5,000 per year. For most homeowners that is a Schedule A deduction so the final cost per year should be less.

Only you can decide whether buying a home makes sense for you vs. renting. Renting an apartment is one thing. Renting a house (which makes for a more valid comparison to buying) is another. I have a simple view of home ownership that unfortunately is not how the government views it. I think you should buy a home only if you want one and can afford it. The government shouldn't try to influence you by distorting the cost of buying.

I own because I want to. I want my own place, free of landlords. I want a consistent cost of housing, not one that rises and falls. I want to be able to paint it, change it, play loud music, work on my car in the driveway, etc.

[TheOverdog]

A $200k with 3% tax would be about $5-6k in taxes, or $500 a month. It's hard to find a rental for $500 a month, and if you did, it wouldn't be the equivelent of a $200k house, which could have 4 bedrooms and 2500 sq ft, and larger. A $500 a month apartment would be a 500 sq ft 1 bedroom on the rough side of town.

If you compare a $500 a month paid off house to a house with a mortgage ($1300 a month) or to a equivelent rental $1300-1500 a month, then it is much cheaper.