Well, I just got the new 2022 tax appraisals from the district. About a 30% increase in values since 2021 which means about 30% more property taxes than last year. Texas collects property tax in lieu of income tax so it's a really hefty bill. I will now pay more in property taxes than I made at my day job just a hand full of years ago.

Today I also got my insurance renewal. That went up 30% as well. Seems like a theme here, my HVAC, plumber, and electrician are all up about 30% over the last year or so as well. I'm not really sure how they are claiming that inflation is only 7% when every major LL related expense I have is up 30%.

JAC, so you aren't a high-inflation denier anymore? That's different than a few months ago when we were discussing the trillions of corona benefits being handed out. So I'm assuming you now agree with me that handing out all those dollars was a bad idea since you now acknowledge that people spending all that money are the root of today's problem. Be careful, people might take you for a conservative in a liberals costume.

My costs are also up considerably.

Handyman was at $50/hour...now $70.

Plumber was $90...now $120.

Taxes went up 25%.

Insurance up 28% on average.

Even the lawncare guy bumped up $5, which on a $25 yard is 20%!

Somewhere in there.... "profit?" I'm doing my normal COLA increases of 2.9% by default. New leases go straight to market. I have no choice! Spending 20-30% more, collecting 2.9% - 15% more. Feels like I'm still on the deficit side of things.

But yeah, that's some folks' definition of "profit" I suppose. Everything is going up, so you must be making more. Nope, just covering costs, if I'm that lucky!

I do not know why Congress refuses to index capital gains to inflation and are actually considering eliminating the capital gains tax rate so that we pay taxes on "increase in value" due to the cost of stuff simply going up.

Insane! But what do you expect in a world where men can compete against and dominate women in their sports due to "feelz" and men can be pregnant "birthing persons?"

;-P

Sid, I’m seeing the same increases in labor and materials in my neck of the woods too. Raising rents just to keep up with cost.

Around 1990 the County came back with an appraisal for an income property of mine around $900,000. I thought this was great so I contacted Wells Fargo, Citibank and Bank of American and asked how much I could borrow on this property, it was paid off. The three banks gave me a $600,000 value so I could borrow $400,000 without a problem.

I then have my CPA contact the County Assessor and asked how they came up with $900,000 when all I could borrow was $400,000?

MikeA: I am curious -- in your area, for property taxes, can they be increased ANY amount in one year based on new property values?

Here, they cannot. If your house is appraised at $300,000 one year -- and then $400,000 the next year -- your property tax cannot jump based on that $100,000 increase. There is a set maximum increase per year. (It is capped at a maximum of 5%.)

Just curious if anything like that exists in your area? I did a quick Google search and it said that the maximum was 10%. But it doesn't apply to commercial, so maybe all of yours are commercial?

It looks like, for a normal homeowner and possibly even for landlords with residential properties, if the appraise went up 30% like you said, then the property tax would only go up 10%, not 30%.

But, again, maybe it doesn't apply to your properties? I am certainly not an expert in TX tax law. :)

-John...

Dave, yep.... reality is too that costs are rising faster than rents, and rents will follow. We get to boost rents once per year, typically. I remember when plywood went up in price 4 times in one year. Service providers will charge whatever they need to cover the cost of rising wages making it harder to get folks to show up.

Why work $20/hour as a

Are some businesses making out like bandits? But that was the plan, wasn't it? Give everyone tons of money to go spend. So many of them spent it, which means businesses who sold stuff made money, on top of all the federal gimmie money for slamming the doors shut on the economy. Getting paid not to work....getting paid not to sell goods and services...."loans" that are being forgiven left and right.

Especially anyone with lots of fixed rate debt is loving this environment. Even adjustable rate mortgages only adjust once per year, with a 2% cap usually, and a lifetime rate cap. My guess is any adjustable loan created in the past 3-4 years that has passed it's initial fixed rate period are still around 4-6% and will max out around 12%. Today's "official" (incorrect) inflation is hovering just below 9%. Reality as most of us know is prices are up anywhere from 15-25% from last year in many areas.

Some companies, like our blind Congress, base incentives on percentage of revenue increases and do not account for inflation. It's been low for so long, people thought double digit inflation was a thing of the past, a relic of a bygone era. Thus, CEOs are racking in record bonuses at a time when shortages persist. Anyone who took Econ 101 knew this was going to happen....and yet folks act surprised and "outraged" on social media! We KNEW this was coming. Because. It. Always. Does.

Sort of lik touching a hot stove. That's gonna burn you! Nah....it'll be just fin...OUCH, it BURNT ME! (goes online and whine about unfair stove...double down whining because it's a gas stove and killing the environment)

The invisible hand showed up. Takes its time occasionally, but it always reasserts itself. Too much funny money for the available goods and services to soak up = inflation. Too bad the people the politicians are screwing right now are the ones they claim to care about so much: the poor and the disadvantaged who don't own hard assets that will appreciate and lift those owning them along with the tide.

Dave, yep.... reality is too that costs are rising faster than rents, and rents will follow. We get to boost rents once per year, typically. I remember when plywood went up in price 4 times in one year. Service providers will charge whatever they need to cover the cost of rising wages making it harder to get folks to show up.

Why work $20/hour as a

Are some businesses making out like bandits? But that was the plan, wasn't it? Give everyone tons of money to go spend. So many of them spent it, which means businesses who sold stuff made money, on top of all the federal gimmie money for slamming the doors shut on the economy. Getting paid not to work....getting paid not to sell goods and services...."loans" that are being forgiven left and right.

Especially anyone with lots of fixed rate debt is loving this environment. Even adjustable rate mortgages only adjust once per year, with a 2% cap usually, and a lifetime rate cap. My guess is any adjustable loan created in the past 3-4 years that has passed it's initial fixed rate period are still around 4-6% and will max out around 12%. Today's "official" (incorrect) inflation is hovering just below 9%. Reality as most of us know is prices are up anywhere from 15-25% from last year in many areas.

Some companies, like our blind Congress, base incentives on percentage of revenue increases and do not account for inflation. It's been low for so long, people thought double digit inflation was a thing of the past, a relic of a bygone era. Thus, CEOs are racking in record bonuses at a time when shortages persist. Anyone who took Econ 101 knew this was going to happen....and yet folks act surprised and "outraged" on social media! We KNEW this was coming. Because. It. Always. Does.

Sort of lik touching a hot stove. That's gonna burn you! Nah....it'll be just fin...OUCH, it BURNT ME! (goes online and whine about unfair stove...double down whining because it's a gas stove and killing the environment)

The invisible hand showed up. Takes its time occasionally, but it always reasserts itself. Too much funny money for the available goods and services to soak up = inflation. Too bad the people the politicians are screwing right now are the ones they claim to care about so much: the poor and the disadvantaged who don't own hard assets that will appreciate and lift those owning them along with the tide.

A 30% increase in taxable value does not equal a 30% increase in property taxes. If everyone's property value went up 30% and the tax rate remains the same you would have 0% increase in actual taxes. If your valuation went up 30% and everyone else stayed flat then you could expect a significant tax increase. But that's unlikely to have happened.

Here valuation statements are mailed out in the spring and values have increased significantly. The actual tax bill comes out in the fall based on the new valuation. People on Nextdoor are freaking out that their taxes will go up in an equal percent as their valuation increase. Surprised so many people don't understand how property taxation works.

John, yes there is a limit of 10% on your homestead. The homestead is the property you claim as your primary residence. There are various benefits to declaring a homestead from tax benefits, limits on it being taken from you, and a max increase of 10% in a year. Unfortunately, that only applies to the one property you can declare as your homestead.

In our county, I spent an hour with our auditor a few years ago to understand our "system". He told me that they cannot reassess all houses annually...too much work. So what they do is annually they are allowed to adjust the rates...which may impact taxes somewhat but not to an extreme level. Then, they divide the county into 4 approximately-equal sized areas, and they do an actual re-assessment on those properties...which is about 25% of the houses in the county. Those folks could see substantial increases based on the re-assessment...the other 75% of the houses would only see changes based on the rate.

Using this method, each house gets a full re-assessment every 4 years. Knowing this, I can somewhat anticipate which of our houses will have minimal changes in a given year.

Hoosier, Interesting. Here, they break the district into neighborhoods. They do a detailed assessment on a few properties in each neighborhood. They use that as the basis for increase for the neighborhood. So lets say I have properties in the ABC neighborhood, their assessments of 20 houses in that neighborhood increased 30% on average from the previous year, that is then applied to all properties in that neighborhood. They do some other magic like looking at the building permits, mls data, drive by photo's and other things that then can adjust the value up or down. It's been pretty accurate year over year.

I wouldn't say that my overall costs have gone up that much, although I am in the process of roofing a few places (ouch).

But I disagree with the purchase being the most costly.

I have bought a lot of dumps and rehabbed them into fine places. Some I spent more on the rehab than the purchase price.

Also I don't typically buy the property outright, so I am only paying the out of pocket expenses for the purchase.

Robin, that argument will give you a false sense of security. Based on what happened in the early 1980's, this is likely to happen over the next year or two:

Those with adjustable rate mortgages will be hit first. Now imagine your $700 mortgage goes to $1200. You have already seen rents up 20%, costs went up 30%. The net of this is that your profit is declining. The same thing is happening to most businesses, the bottom starts to come loose. Businesses as a result start closing or scaling back. The unemployment rate begins to climb. People are forced to move back in with friends an family so rental demand goes down driving rents down. Expenses, including those generated by resetting ARM loans remains high. A fairly high percentage of properties switch to having a negative monthly cash flow. That causes some landlords to loose their properties.

Who the heck still has an adjustable rate mortgage in this day and age? Seriously, if people didn't move to a fixed rate between 2012 and 2021, then what where they thinking? Sure, there are some exceptions where they just couldn't do it, but most people with an adjustable rate really should have locked in at under 5% over the past decade.

I don't think it is "likely" at happen in the next year or two. Nothing as bad as the 80s, at least. Again, because ARMs are so rare. (A quick search says that in 2020, ARMS were only 3-5% of all mortgages. It looks like in the 1980s, it was many times that (again, a quick search says that in the 1980s, ARMs were 35-45% of all mortgages.)

I think that will be the huge difference between now and then. There just aren't as many ARMs to skyrocket. Like, 10 times fewer (or even less).

As for "time to do a couple of things" -- most of that time has passed. The time to refi out of adjustable was pretty much any time in the past decade up until now. :) I mean, sure, probably still a good idea if you have one, but like I said above, if you didn't move from an ARM to fixed over the past decade (and could have), then you really weren't paying any attention at all.

-John...

Typo. I meant: "What WERE they thinking?" of course. :)

John you are probably right on the traditional ARM mortgages but I have talked with several investors that are still using the heck out of HELOC's, lines of credit, or have 3-5 year balloon clauses on their commercial loans that will have to be refinanced at the then current rate, so not a ARM per se but has the same consequences.

I am one of the people who still have ARMS. One is with a small local bank and it doesn't do much at all. Five of them are with a bigger bank and are still at 3.75%.

Refinancing three of them to get cash out. Now I am looking at 6.1% non-owner occupied.

That is a heck of a difference, but I have had them for 18 years and I am still CF positive.

Zero, did a little research for the year 1981.

Assume your ARM's reset to 18%, major property expenses (taxes, material, labor)went up 25%, but rents only went up 10%. Would you still have a positive cash flow?

MikeA,

I would have to dig thru all my papers to get the exact terms but the ARMs are only allowed to go up or down by so much per adjustment. I think they can reset twice a year. Might only be once.

Like I mentioned they are only at 3.75% now, after all this time. Mostly they have gone down over the years. I realize that the market is getting ready to flip flop again but I do not see me getting into double digits any time soon.