Special offer

California to Texas: Are the property taxes worth it?

By
Real Estate Agent with Tim Monciref 0374754

Though our market in Austin is currently made up with a very high percentage of buyers from California, the number one concern is the property taxes versus California.  (Moreover, our group has more buyers from California and Arizona than we do from Texas; and, Florida and Nevada are not far behind).  The concern is brought up as many Californians have a 1% property tax, excluding those with a Mella Roos taxation.  Those in a Mella Roos district should not be complaining at all as they are paying 2% or more of a home triple in value from what can be bought in Austin.

One comment is that much of the California market is in excess of 3 times the valuation of the Austin median market.  Thus, the $1.5mm fixer in Del Mar will buy a phenomenal custom built home in Austin, comparable to some of the home seen in Rancho Santa Fe, where the lot costs exceed that amount.  Last year we sold a 6,000 mansion on the water in the heart of Austin for less than $2mm.

All 3 of the owners of our company came from California, so we know the transition to this market quite well.  In reality the tough pill to swallow is that in California many tend to forget about the state income tax as it is typically taken from payroll taxes, whereas many write the check to pay for the property taxes.  It is the mental change from the income tax that one does not typically write a check for versus a property tax that one does pay a check for.  It takes about a year to adjust to the change in your mind. For most, the amount is very close to a wash on comparable priced homes with comparable incomes.  Obviously there are those living on municipal bonds that will take the biggest hit and they tend to buy a less valued home than they had in California; but, even though the home was less in value it was greater in either finish detail, size or location.

For investors, they have the same concern; but, in reality, the market has offset the property taxes with lower property values.  That is why there has been a virtual "gold rush" from investors to our market for the last 3 years.  The only change that we are seeing is that investors are now looking a higher valued homes than they did 3 years ago.  Our last personal condo purchase produced a tad over $100 negative cash flow on a mere 10% downpayment.  Since the purchase a year ago the home has increase in value roughly 20%. 

Outside income taxes Californians can buy 3 times the house for the same price, or buy the same house for 1/3 here in Austin.  Gas prices are substantially less as is labor cost, office space, etc....  I have a company moving here solely because the office space is one third of what it is in Southern California.  Then if you see that the median income of Austin is virtually the same as San Diego, and the weather is similar from October to May, then the decision is a no brainer.  Yes, the summers are warm, but that is your excuse to go back to see your friend in California.  Actually, the heat of summer make enjoying the water a true pleasure without having to wear a wet suit.

Comments (1)

Tricia Jumonville
Bradfield Properties - Georgetown, TX
Texas REALTOR , Agent With Horse Sense

Hi, Tim, just noticed your post and wanted to thank you for the very clear analysis and rebuttal of a complaint that we hear often.  I see your office on 620 often when I'm going to visit my daughter in Apache Shores.  (Yes, I DO notice very real estate office I happen to drive past!)

 

Feb 11, 2007 03:26 AM