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Why Plano Real Estate Investors Must Analyze Property Taxes

Identifying perfect real estate investment properties is challenging. Real estate investors must find a property that is reasonable in price and in a good location to attract quality renters. Considering all of the factors needed to choose a property with excellent potential is difficult—but don't leave out property taxes! 

Plano property management professionals know that property taxes can have a significant impact on your long-term return on investment. Keep reading to learn why taxes must be part of your rental analysis and how to apply this information when choosing your next investment!

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Property Taxes Vary

When shopping for a real estate investment property in the Plano or North Texas area, no two locations will be alike. Even though the distance between two potential rental properties might not be significant, the property tax rates will vary across different counties and cities in the metroplex.

Focusing on the price of a property or comparing potential renovations are important things to consider, but they're not the only important factors when determining the best investments to maximize returns. Even a small variation in a tax rate percentage can translate into hundreds (or thousands) more in annual property taxes for a home. A bargain today could turn into an expensive nightmare in a few years.

Remember: property taxes are part of your ongoing expenses as the owner. Before you put in an offer on a new rental property, work with a DFW property management expert to analyze the potential impact on your bottom line long-term. The right local property managers understand how varying tax rates across this area can work in your favor (or against your ROI). 

Are High Taxes a Bad Sign for Rental Properties?

What does it mean when a property has high property taxes? High property taxes may seem like a bad thing initially, but they can also be good for your returns. High property taxes could mean that the property is in a fantastic neighborhood with a low crime rate. Often, higher taxes translates into better community services, resources, and facilities, too—making your property more attractive due to its location and nearby amenities. 

In many cases, high property taxes are a good sign that you're buying into an area that attracts good renters. Tenants look for properties in areas where they can rent for the long term. Potential renters find locations with low crime rates and overall safe settings very appealing. 

High taxes can also justify higher rental rates. However, it's important not to price a property too high in an effort to compensate for higher taxes. Overpriced properties can deter renters from applying to live in your rental. Work with a property management company to identify and avoid potentially bad investments in areas with high property taxes. 

Exercise Caution With Low Rental Property Taxes 

It can feel like a windfall to find a good rental property with relatively low property taxes in a nice area. However, you could purchase an investment in an area where property tax revenue is not as critical in that local municipality. When city revenue is low, and tax dollars aren't available to improve community resources and protect citizens, your property becomes less attractive to good renters—and you lose money. 

With low property taxes, you can put more investment dollars into rental properties and improvements—without also raising the rent too high for the area. However, before buying up multiple properties in a low-tax area, work with a property manager to assess the property and potential long-term financial implications of low taxes. 

Miniature house with a calculator

Gather the Right Resources and Think Long-Term

Tax rates today don't often stay the same for very long. Depending on the market and local city councils and governments, tax rates go up more often than down with bond elections and other market influences. 

Rental property owners must analyze property taxes over the long term. Talk to the municipality’s assessment office and gather information about how properties are appraised, recent changes to tax rates, and potential increases in the future. Owners can also review city council meeting minutes and talk with other local investors about tax trends in the area. 

Identify Excellent Properties With a Plano Property Management Company

Plano property management companies can help you analyze potential investments and review property tax information to make smart decisions. Starting with good properties that show potential for excellent returns requires putting in the time and effort to research property prices, taxes, and more—but that's not all!

Partnering with a full-service property management company means investors have the resources to find good properties, make sound investments, and managing rentals to maximize ROIs. RentHub has the Plano and DFW area experience property owners need to analyze properties and boost returns! Learn more about how our property management services can help you make more money as a real estate investor in the area.

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