Quick answer
Texas has no state personal income tax, so local property taxes tend to be high, and rentals get no homestead exemption or cap. Insurance can be expensive too — hail in the north, windstorm and flood near the coast. Both go into the PITIA payment that lenders divide into rent, so they can make or break a DSCR deal.
High property tax, and why rentals feel it more
Texas funds schools, counties, cities, and special districts largely through property tax. The total rate on a given parcel is the sum of every taxing unit it sits in — county, city, school district, and sometimes hospital, community college, or municipal utility districts. Two houses in the same metro can carry very different bills.
Owner-occupants can claim a homestead exemption and benefit from a cap on how fast their homestead’s taxable value can rise. A rental gets neither. When you buy a home from an owner-occupant, their exemption comes off, and the appraisal district may revalue the property after the sale. Underwrite the bill you will actually pay next year, not the one on the listing.
Appraisal districts and protests
Every Texas county has an appraisal district that sets property values each year and mails notices of appraised value. Owners — including investors and LLCs — can protest those values. The process usually starts with an informal review with appraisal staff and can proceed to a hearing before the Appraisal Review Board.
The general deadline is May 15 or 30 days after the notice is delivered, whichever is later, but always check the date on your own notice. Good evidence includes comparable sales, photos of condition problems, repair estimates, and for rentals, income information. Our landlord’s protest guide walks through it step by step.
Windstorm coverage and TWIA on the coast
Along the Gulf Coast, many private insurers exclude wind and hail. The Texas Windstorm Insurance Association (TWIA) is the state-created insurer of last resort for wind and hail coverage in designated coastal areas. Eligibility typically depends on the property meeting building code requirements, which may involve windstorm inspections and certificates of compliance.
For DSCR purposes, that means a coastal rental may carry a regular policy, a separate windstorm policy, and flood insurance — three premiums in the payment. Get quotes for all of them during your option period. Our coastal rentals guide goes deeper.
Texas home-equity rules don’t govern investment property the same way
Article XVI, Section 50(a)(6) of the Texas Constitution sets out detailed protections for home-equity loans on a homestead, including limits on how much can be borrowed and specific disclosure and closing requirements. These rules exist to protect families’ homes.
A rental property that is not your homestead is generally not subject to those restrictions, which is why business-purpose DSCR cash-out refinances on investment property are structured differently. The key practical step: never claim a homestead exemption on a rental, and if one was ever filed, get it removed before refinancing. Title companies will check. When there is any doubt, talk to a Texas real estate attorney. More in our cash-out refinance guide.
Vesting in a Texas LLC
Many investors hold rentals in a limited liability company formed with the Texas Secretary of State. Many DSCR lenders will close a loan in the LLC’s name, usually with a personal guaranty from the members. Expect to provide the certificate of formation, company agreement, EIN confirmation, and evidence that the entity is in good standing, including its franchise tax account status with the Texas Comptroller.
Texas also permits series LLCs, but lender acceptance of series structures varies. Talk to your attorney or CPA about structure, and to us about which lenders will work with it. See closing a DSCR loan in a Texas LLC.
Questions we hear about Texas taxes and insurance
Why is my Texas rental’s tax bill so much higher than the seller’s was?
The seller may have had a homestead exemption and the homestead appraisal cap, neither of which carries over to a rental. A sale can also prompt the appraisal district to raise the value. Budget on the likely post-sale bill, not the seller’s.
Can I protest the appraised value of a rental property?
Yes. Any Texas property owner can protest with the county appraisal district. Deadlines are printed on your notice of appraised value; the general deadline is May 15 or 30 days after the notice is delivered, whichever is later. Check your own notice.
Does TWIA coverage replace my regular insurance?
No. TWIA provides wind and hail coverage in designated coastal areas. You still need a policy for other perils, and many coastal owners also carry separate flood insurance.
Do Texas home-equity rules apply to a cash-out on my rental?
The constitutional home-equity rules in Section 50(a)(6) apply to homestead property. Business-purpose loans on non-homestead investment property are generally outside them. Confirm with your title company or a Texas attorney.
General education only, not legal or tax advice. Laws, deadlines, and insurance availability change; confirm current rules with the appropriate appraisal district, insurer, title company, or attorney. Nothing on this page is a DSCR loan rate or offer.