California and Texas are the main rivals when it comes to biggest and best climates to build and invest. Texas is one of the biggest, if not the biggest winner due the inpouring of human capital from multiple states, including California. Texas’ tax structure and economic opportunities make the state a magnet for individuals and investors alike.
It is much more difficult to build in California due to environmental, zoning and entitlement laws. For this reason, California tends to be under-supplied. Texas, on the other hand, is less stringent in its approach for new construction. However, if you can build in California and are willing to wait a little longer for approvals, you should consider building in California for the reason already mentioned.
Texas is aggressive when it comes to property taxation. The state revalues on an annual basis with no caps on tax increases. Whereas, California has caps in place on tax increases that date all the way back to 1978. This situation encourages investors to hold for an inordinate amount of time. Cashflows are high, but exit pricing is typically low. Texas does not have this issue upon exit.
The property tax law in California, commonly referred to as Prop 13, is under pressure. If Prop 13 is voted out or modified, assessments could ultimately reach market value. This creates an interesting strategy while navigating the investment market in California. So, the longer you hold a property in California, the lower your property taxes. An interested investor is unable to take advantage of lower property taxes as the property is revalued upon sale and a new tax base is set.
To learn more about how property tax issues can affect your investing strategies, please reach out to Tim Feagans directly at firstname.lastname@example.org.