Can I Buy a House in Texas if I Live in California?

It is possible to purchase a house in Texas while maintaining your primary residence in California. This involves navigating distinct real estate practices, financial considerations, and the logistics of remote property ownership. The process requires careful planning and understanding of interstate differences for a successful transaction and long-term management.

Understanding the Texas Real Estate Market and Process

Purchasing a home in Texas as an out-of-state buyer begins with securing a local real estate agent with in-depth market knowledge. This professional guides you through current market conditions, influencing offer strategies and helping determine a competitive price. Your agent assists in crafting the written offer, detailing the proposed purchase price, specific contingencies, and a clear closing timeline. Understanding local comparable sales is important for making an informed offer and negotiating effectively.

A unique feature of Texas real estate contracts is the “option period,” typically 7 to 10 days, though negotiable. During this period, the buyer pays a non-refundable “option fee,” usually $100 to $500, directly to the seller for the right to terminate the contract for any reason. This window allows for thorough property inspections to assess the home’s condition without risking the earnest money deposit. Home inspections in Texas adhere to standards set by the Texas Real Estate Commission (TREC), covering structural elements, electrical, plumbing, and HVAC systems. Should significant issues be uncovered, the option period enables buyers to negotiate repairs, price reductions, or withdraw from the contract.

After the offer is accepted and the option period concludes, a title company becomes central to the transaction. In Texas, the title company acts as a neutral third party, holding funds and documents in escrow until all contract terms are satisfied. They perform a comprehensive title search to verify legal ownership and identify any liens or encumbrances. The title company also facilitates the closing process, ensuring all legal requirements are met, documents are signed, and funds are properly disbursed, ultimately providing title insurance.

Key Financial and Tax Considerations

Owning property in Texas entails specific financial and tax implications that differ from California. Texas does not impose a state income tax, so local governments rely heavily on property taxes to fund public services. Texas has higher effective property tax rates, averaging around 1.58% to 1.63%, compared to California’s approximate 0.71% to 0.77%. Property taxes are assessed annually by county appraisal districts based on the property’s market value as of January 1st.

Out-of-state owners should consider eligibility for the Texas homestead exemption. This exemption reduces the taxable value of a primary residence for school taxes, with a standard exemption of $100,000. To qualify for a general residence homestead exemption, the property must be the owner’s principal residence as of January 1st of the tax year, requiring the owner to live there. If the Texas property is not your primary residence, you will not be eligible for this tax reduction. Additional exemptions exist for the elderly, disabled, or veterans, but these also require primary residency.

Federal income from rental properties is reported on Schedule E of IRS Form 1040, subject to federal income tax after allowable deductions. California residents are taxed on all worldwide income, meaning rental income from a Texas property will be subject to California state income tax, even though Texas has no state income tax. While California does not have a reciprocal agreement with Texas, you may claim a credit for income taxes paid to another state on your California return to avoid double taxation. The California Franchise Tax Board (FTB) may also require property managers to withhold 7% of gross payments for out-of-state owners.

Practicalities of Remote Ownership

Managing a property in Texas while residing in California requires strategic planning. Engaging a professional property management company is often advisable. These companies offer services to alleviate the burdens of remote ownership, including marketing the property, conducting tenant screening, handling rent collection, providing financial reporting, and coordinating routine maintenance and repairs. This ensures the property remains in good condition.

Property management fees in Texas range from 8% to 12% of the monthly rent collected, though some may charge a flat fee. Many companies also charge additional fees for specific services, such as a leasing or tenant placement fee, which can be 50% to 100% of one month’s rent. These fees cover advertising, tenant background checks, lease agreement execution, and move-in inspections.

Property managers address unforeseen issues and emergencies, acting as the primary point of contact for tenants and service providers. This includes handling urgent repairs and coordinating with local contractors, minimizing direct owner involvement. They can also assist with setting up and managing utilities remotely, streamlining tenant transitions and ensuring continuous service. Utilizing a property management company provides a comprehensive solution for maintaining the property and managing tenant relations, allowing for a more hands-off ownership experience.