Why Real Estate Tax Rates Matter –
I am often asked by prospective home buyers what the property tax rates are in the North Texas areas they are considering. Tax rates can affect qualifying for a mortgage, city services, investment property, rents and business decisions.
I used to tell clients that it didn’t really matter. If you found your dream home in your chosen city, that is just the cost of living there and enjoying that lifestyle. City services and local amenities are important, but I have come to realize how much rates really can make a difference.
For example, would you rather live in Frisco, Prosper, McKinney, Celina or Little Elm? One of my clients asked me to find a 250K home for him in any of those cities. While each city has homes and subdivision locations that will work, it would cost $85 more a month to live in Celina vs. Frisco.
Tax Rates -2019 (250K home)
Yearly Monthly
Little Elm 2.41 6,025 503
Celina 2.45 6,125 510
Prosper 2.34 5850 488
Frisco 2.04 5,100 425
McKinney 2.26 5650 471
(Rates From Republic Title)
That $85 a month may push someone to the edge of affordability. A company locating a business may decide a particular city next door is better for them and their employees. Investment property (rentals) profits are often pretty thin. Landlords frequently dispute property tax values on their rental properties yearly to keep costs in check. If the home value is the same, the landlord in Celina will have to charge a tenant $85 more per month.
PIDs & MUDs
It gets even worse in areas with PIDs and MUDs which are used by developers to build out infrastructure in new developments For instance, it will cost you $156 more per month in Celina- Light Farms than Frisco due to the higher taxes and the addition of a Mud tax @1.05 per $100. That is a huge difference if you are looking at investment property or as a tenant.
City Limits vs. Rural Taxes
Are you moving to a more rural lifestyle like Van Alstyne? When purchasing a home, a few miles can make a big difference. Living in the city of Van Alstyne vs. outside means you have to pay city taxes. Let’s take that same $250,000 home and look at the difference between a home in the city limits vs. owning a home outside the city limits.
That $250,000 home within the city limits of Van Alstyne will cost you about $6,450 ( 2.58 tax rate) vs. $4975 (1.99 tax rate) in taxes! You have to decide if living within the city limits is worth $123 per month for city sewer, police and fire, high-speed internet availability, zoning and other amenities provided by city governments. If you are an investor, gaining $123 to the bottom line may be worth crossing the city limit line.
(Rates From Grayson CAD – 2019)
When people hear that in real estate, it’s all about location, location, location they seldom think about the property taxes. Are you working with a knowledgeable Realtor? If you would like more information and advice on your next home purchase, contact Keith Laursen at 469.233.1234 or through my website at www.VanAlstyneHomes.com today.
