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4 Costs Renters Don’t Pay [But Homeowners Do]

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Ever want to know when it’s better to be a renter than a buyer. Our professionals have come up with 5 good reasons why renters should be rejoicing. There are so many expenses that homeowners are on the hook for.  These costs are often overlooked when purchasing a home or investment property.

Although we often hear the phrase from a renter “I am tired of throwing my money away”. But there is really so much more to take into account. Even after a homeowner pays off his or her mortgage, there are still more expenses that continue to accumulate.

The Black Hole of Maintenance

A renter simply will just call the apartment manager or their landlord when they need a repair. The owner of the home isn’t so lucky. There are many schools of thought. But 1% of the cost of the home is a good number to use as what repairs the home may need.  So if you purchased your home for 500,000 thousand, you would want to budget at least 5k a year for repairs.

This will vary from home to home. The older the home, generally the more maintenance will be required. When you purchase a new home, many builders will include a 2-year maintenance free guarantee.

HOA Fees

Also called Homeowners Association Fees, these can be quite costly and do add up. When a developer breaks ground on a new community they usually are in control of the HOA. When enough people move-in to homes, they will turn it over for the homeowners to a manager.

HOA fees may cover the cost of operating and maintaining a gate, lawn care for all homeowners, fencing,  and even water and cable in some instances. There are a few negatives when it comes to living in a community with an HOA. If there is a major repair needed and there isn’t enough money in reserves, then an assessment will be made. Also, HOA fees seem to go up over time.

Homeowners Insurance

This is another overlooked cost but usually not as large as the HOA fee. In the event of a catastrophic loss like a fire or another act of mother nature, the insurance policy will cover the cost of building an entire new home. This usually doesn’t cover flood insurance. This is covered in another policy. It will also cover the loss of your personal items due to left. Policies will vary greatly depending on the size of your home and what you need to be insured. Many apartments in Austin are now requiring renter’s insurance. Although it is much less expensive than homeowners insurance. The fees are pretty nominal.

Real Estate Fees

Often overlooked and not discussed are the real estate fees that are associated with buying and selling real estate. The buyer is not responsible for those initial fees, but most buyers at one point or another become a seller.

Commissions are not set in stone and are negotiable. Usually, this number hovers around 6%. Here is an example to review. Suppose you sell your home for 500k. Taking 6% of that total which equates to 30 thousand. Plus you have to add in closing costs as well. The latter is split between the buyer and the seller.

When you do rent an apartment, the amount you pay as many of these fees already factored in. But that’s something you won’t have to worry about.  Many people argue that real estate values go up over time. This really depends on the type of property you purchase and where it is located. But you can make a nice profit over time or if you buy in a hot market.

Be aware that home ownership has many expenses. And they certainly add up.

Resources:

https://www.investopedia.com/financial-edge/0411/7-homeowner-costs-renters-dont-pay.aspx

Why Texas Property Tax is so High

If you don’t already know, if you look at property taxes across the United States, Texas sure does have some of the highest. Did you know that the state uses the funds generated from property taxes to pay for things like schools, water systems, and even the local law enforcement.

Ever want to know how property tax appraisal works in your home city or state. How much your home is valued will have a direct impact on the amount of property tax you pay on a yearly basis. The lower the amount the less you pay. Unlike when you sell a home ,(the highest price you can receive is the best) you are looking for the lowest amount possible. According to the Texas comptroller’s website,

Tax Code Section 23.01 requires taxable property to be appraised at market value as of Jan. 1.

They deem the market value to the the amount that the property would transfer ownership given “prevailing conditions”

Property Tax Rates in Texas

Although high, you should know that the taxes on specific dwellings don’t change much on a year to year basis. But they are recalculated each year and the owners are contacted via the US mail.

Homeowners total tax is calculated by multiplying the appraised value of the home teimes the tax percentage. For example if your home is worth $500,000 and the rate is 1.5%, then the total amount due is a staggering $7,500 per year. This is due on January 31st of each calendar year. If you are late in your payments, then you will be assessed a penalty by the state. Many homeowners have the amount set in their monthly payments. For others, they are responsible for them on their own.


We have comprised a table for the more notable county’s tax rates. These will include the median home value, median annual property tax payment, and the effective rate. The latter, is amount of total tax compared to their home’s value as a percentage.

Austin

Dallas

El Paso

Fort Worth

Houston

San Antonio

Harris County

This includes Houston and the suburbs that surround it. You will find that Harris County has some of the highest property taxes in the entire state of Texas.

You will also find that the biggest charge comes from the Houston Independent School District. So residents in Harris County have to pay the large school tax, plus the additional city and county rates as well.

Dallas County

Although Dallas county is not as high as Harris County, you will find that it is still above the national average rate. The majority of the funds go to local schools.

Travis County

Home to the capital of Texas (Austin), and including some other cities and suburbs nearby, it isn’t as high as Harris or Dallas Counties. Some of the nearby towns like Pflugerville have even higher rates

El Paso County

Many people dont know that El Paso is pretty big. Yes it has more people than notable cities like Washington DC, Boston, and Detroit. It actually is a border town on the westernmost point of Texas and also borders New Mexico. Although tax rates are significantly higher than the rest of the nation, housing prices are not.

How Your Property Taxes are Finalized

The county is responsible for determining your appraisal on your home. The counties will have a website where you can login and few your property information. If you disagree with their assessments, you will have the opportunity to dispute their findings.

Appraisals are determined in the beginning of each year and are then followed up by letters sent around the first of October. And as listed above, bills are due by Jan 31st.

Now there are opportunities to reduce you roverall tax bill. These are accomplished by something called exemptions.

The Homestead Exemption will reduce your property value by $25,000. But this is only required to be offered by School Districts. People older than 65 get an additional 10k exemption.

Resources:

https://comptroller.texas.gov/taxes/property-tax/valuing-property.php