Fix and Flip Loans in Texas: The Local Cost Lines That Decide Deals
The loan works the same here. The holding costs do not, and in Central Texas they are large enough to change which deals are worth doing.
Four local lines move flip economics materially. An investor using national assumptions will model a margin that is not there.
Programs: Fix and flip financing · The full cost model
Line 1: property taxes, and the exemption that disappears
Effective rates across Central Texas generally run 1.8% to 2.4% depending on the stacked jurisdictions — county, city, school district, and often a MUD or ESD.
On a $350,000 property that is roughly $525-$700 a month of holding cost. Over an eight-month project, $4,200-$5,600.
Two things that catch out-of-state investors:
The seller's tax bill is not yours. A sale resets the appraisal district's basis. If the seller has owned since 2014 with a homestead cap limiting annual increases, their bill may be far below what you will pay.
Exemptions do not transfer and do not apply. Homestead, over-65 and disability exemptions end at sale, and none apply to a flip. The 10% homestead appraisal cap does not apply either. Your assessment can move straight to market.
Model taxes on your purchase price at the full combined rate, and verify the jurisdiction stack for the specific parcel. Two properties a mile apart can differ meaningfully because of a MUD.
Line 2: insurance, which is now a real budget item
You need builder's risk or vacant dwelling coverage — a standard landlord policy generally excludes a vacant property under renovation, and a claim on the wrong policy can be denied.
Texas specifics:
- Hail exposure drives premiums across the region, and carriers have tightened
- Wind and hail deductibles are often percentage-based. A 2% deductible on a $350,000 property is $7,000 before coverage responds.
- Older roofs are a problem. Some carriers decline or exclude roofs past a certain age, which can send you back to the market mid-transaction.
- Vacant property surcharges apply while the house is empty
Budget more than you would elsewhere, and bind the policy early. Insurance is the most common cause of a Texas closing slipping at the last moment.
Line 3: foundations
The clay soils across Central Texas expand and contract with moisture, and foundation movement is common enough that it belongs in every budget as a possibility.
Get a structural evaluation before closing, not during rehab. An engineer's report costs a few hundred dollars and either clears the property or reprices it.
Where it matters most: pre-1980 slab-on-grade construction across central, east and south Austin, and anything with visible cracking, sticking doors or sloping floors.
Cost when it is needed: pier and beam leveling or slab piering commonly runs into five figures, and it is work that adds no ARV. Appraisers do not pay you for a fixed foundation — they penalize you for a broken one. This is the classic Texas line item that consumes a contingency without producing value.
Line 4: permits and timelines
Permit and inspection timelines vary sharply by jurisdiction, and interest accrues throughout.
City of Austin plan review and inspection scheduling can add weeks that surrounding jurisdictions do not. Round Rock, Cedar Park, Georgetown, Pflugerville, Kyle, Buda and the unincorporated county areas each run on their own schedule, generally faster.
Historic districts and neighborhood conservation overlays add design review. Properties in these areas can face months of additional process. Verify zoning and any overlay before you budget a timeline.
Pull the permits anyway. Unpermitted work is the most common problem discovered at resale — the buyer's appraiser may exclude unpermitted square footage entirely, and the buyer's lender may refuse the file. A permit that costs three weeks is cheaper than a sale that falls apart at closing.
The carry cost of delay: on a $280,000 balance at 11%, interest alone is roughly $86 a day. Add taxes, insurance and utilities and you are near $115 a day. Three weeks of permit delay is about $2,400.
What Central Texas housing stock actually gives you
Pre-1960, central and east Austin — the highest ARV potential and the most surprises. Cloth or knob-and-tube wiring, cast iron drain lines, asbestos in flooring and ceiling texture, original galvanized supply lines, and foundation movement. Budget 20% contingency, not 10%.
1960s-1980s, north and south Austin, older Round Rock — the sweet spot for many flippers. Solid construction, dated finishes, usually sound systems. Predictable scopes.
1990s-2000s suburban — less renovation opportunity, since the stock is newer than the margin requires. Usually better suited to rental acquisition than flipping.
Asbestos and lead are genuine considerations on pre-1978 property. Testing before demolition is cheaper than an abatement discovered mid-project, and disturbing either without proper handling carries liability.
Texas legal notes worth knowing
Non-judicial foreclosure. Texas allows foreclosure without going to court, typically on a much faster timeline than judicial states. Practically, that means lenders are comfortable here and pricing tends to be competitive — Texas is a market most national hard money lenders actively want.
Promulgated title rates. Title insurance premiums are set by the state, so shopping title companies saves nothing on premium. Shop on service and speed instead.
No transfer tax. Texas does not impose a real estate transfer tax, which meaningfully reduces closing costs relative to many states.
Prepayment penalties on business-purpose loans are generally enforceable. The homestead protections limiting them on primary residences do not reach investment property.
Contractor liens attach readily in Texas and are a frequent title surprise on recently renovated property. Get lien waivers with every draw payment — not at the end.
A Central Texas project budget
$310,000 purchase, $75,000 rehab, $470,000 ARV, eight months.
| Holding line | 8 months |
|---|---|
| Property taxes @ 2.1% on $310,000 | $4,340 |
| Builder's risk insurance | $2,400 |
| Utilities | $1,200 |
| Holding subtotal | $7,940 |
Plus financing: roughly $6,700 in points and $18,500 in interest on the average balance.
Holding and financing together: about $33,100 before a dollar of selling cost.
Against a $85,000 gross spread, that is 39% consumed before commissions. Add 7% selling cost on $470,000 — $32,900 — and the spread is nearly gone.
This deal needs a lower purchase price or a bigger ARV. Running the numbers this way, before offering, is what separates investors who flip profitably here from those who learn it once expensively.
Illustrative. Rates, taxes, insurance and costs vary by property and lender.
Frequently asked questions
Are Texas property taxes really that high for flippers? Yes. Effective rates commonly run 1.8-2.4%, and exemptions do not apply to investment property. On an eight-month hold that is thousands in carry.
Do I need special insurance for a flip in Texas? Yes — builder's risk or vacant dwelling coverage. Standard landlord policies generally exclude vacant properties under renovation, and Texas wind and hail terms add cost.
Should I worry about foundations? In Central Texas, yes. Clay soils cause movement, and foundation repair adds cost without adding ARV. Get an engineer's evaluation before closing.
How long do Austin permits take? Longer than surrounding jurisdictions, and historic or conservation overlays extend it further. Verify for the specific address and build it into the schedule.
Is Texas a good state for hard money lending? Generally yes. Non-judicial foreclosure and no transfer tax make it attractive to national lenders, so competition and availability are good.
How much contingency should I budget? 15% on 1960s-1980s stock, 20% on pre-1960. Central and east Austin properties routinely reveal wiring, plumbing and foundation issues.
Does title insurance cost more in Texas? Rates are set by the state, so they are consistent between companies. Shop on service and turn time rather than price.
Next steps
Model taxes from the appraisal district on your purchase price, bind insurance early, and get a foundation evaluation before the option period ends.
Have a deal you want looked at?
Send the property and the numbers — we shop it across lender programs and tell you honestly whether it works.
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Educational content, not a commitment to lend or an offer of credit. DSCR and fix-and-flip loans are business-purpose loans secured by non-owner-occupied property. Program parameters vary by lender and change over time. Figures are illustrative.