Fix-and-Flip Loans in Texas: The State Rules That Decide Your Margin

In the second quarter of 2026, the typical flipped house in San Antonio resold for 0.3% less than the flipper paid for it. The typical spread was 1.8% in Dallas, 2.8% in Austin and 3.7% in Houston, the 4 thinnest margins among U.S. metros with more than 1M people in ATTOM's Q2 2026 flipping report. The national figure was 21.5%. ATTOM measures resale price against purchase price, before a dollar of rehab or carry, so those numbers describe a market where the renovation has to create the profit and the holding costs decide how much of it survives.

A fix-and-flip loan is short-term financing for buying a house, renovating it and selling it, usually sized against both the total project cost and the after-repair value (ARV), the price the finished house should sell for. This guide covers the Texas rules that move those numbers: property tax, the January 1 appraisal, title premiums, sales tax on materials, trade licensing, lien deadlines and the current pace of Texas listings. For the rules that apply once a finished house becomes a rental, see the Texas DSCR guide.

Property tax is the largest holding cost a Texas flip carries after interest

Texas cannot tax individual income; the constitution has prohibited it since 2019 (art. VIII §24-a). Local services run on property tax instead, and every taxing unit at an address adds its own rate. Here is the stack for a house inside the City of Houston and Houston ISD, from the Harris County Tax Office's published rates:

That is about 2.13% of value a year. Many suburban subdivisions also sit in a municipal utility district (MUD), and the same tax office list shows several Harris County MUDs levying $0.80 to $1.50 per $100 on top. Pull the rate stack for the exact address before you write an offer.

On an illustrative flip bought for $260K, the Houston stack works out to about $5,526 a year, or $460 a month. Set that beside the interest: a $297K loan at 9.50% interest-only costs about $2,351 a month once fully drawn, so taxes add roughly 20% to the monthly carry.

The tax follows the calendar, whoever owns the house. A lien for each year's taxes attaches on January 1 (Tax Code §32.01), bills are due on receipt, and they become delinquent if unpaid before February 1 of the following year (§31.02). A flip bought in spring and sold in fall may never see a bill, but it pays its share of that year's tax through the closing statement on both ends.

The tax bill on the listing belongs to the seller, and it resets after you buy

Appraisal districts value property at market value as of January 1 (§23.01), and exemptions are set by the owner's qualifications on that date (§11.42). 3 rules make a seller's bill a poor guide to yours:

• The homestead exemption leaves with the seller. A homeowner gets $140K off the school district's taxable value (§11.13(b)). In Houston ISD that is worth about $1,230 a year, and an LLC buying a house to flip never qualifies for it.
• The 10% homestead cap leaves too. A homestead's appraised value can rise at most 10% a year, and that limit expires on the first January 1 when no qualifying owner holds the house (§23.23). A long-held house can carry a taxable value well below market.
• The 20% cap for non-homestead property never reaches a flip. Since 2024, the "circuit breaker" in §23.231 limits yearly increases on non-homestead real property, for property valued at $5.32M or less in 2026 per the Comptroller. It starts only on January 1 of the year after the owner first owns the property on a January 1, ends when the owner sells, and the section itself expires on December 31, 2026. The Harris County Appraisal District describes it as authorized for the 2024 through 2026 tax years only.

A flip still owned on January 1 gets appraised at market value in whatever condition it is in that day. If the renovation is finished and the illustrative house is worth $400K, the Houston stack puts the next year's tax at about $8,501, or $708 a month, up from $460. If your timeline crosses New Year's Day, budget the new year at that number. A house mid-renovation on January 1 has a better case for a lower value, and dated photos and the scope of work are the evidence a protest uses. The protest deadline is May 15 or 30 days after the appraisal notice is delivered, whichever is later (§41.44).

Texas charges no transfer tax, and the state sets the title premium

The 2 sales in a flip carry no state deed tax. The Texas Constitution bars any law enacted after January 1, 2016 from imposing a transfer tax on a conveyance of fee simple title (art. VIII §29).

Title insurance is the closing cost that does scale with price, and the Texas Department of Insurance sets it. The basic premium rates effective March 1, 2026 apply to every title company: for a policy between $100K and $1M, take the amount above $100K, multiply by 0.00494 and add $780. Under Rate Rule R-5, a loan policy issued with the owner's policy costs $100 when the loan is no larger than the owner's policy, which is usually written for the purchase price. A flip loan that also funds the renovation is often larger, and then the loan policy costs the basic rate on the loan amount, minus the basic rate on the owner's policy, plus $100.

Here is how that prices an illustrative flip: a $260K purchase, a $70K rehab and a $400K resale, financed with a $297K loan (90% of the $330K total cost, which also sits under 75% of the ARV).

The purchase and sale contracts decide who pays each policy. Endorsements, escrow fees and recording charges come on top, and the investment property closing cost guide walks through the rest of the statement.

Sales tax lands on the materials, and licensed trades do the regulated work

Texas does not tax the labor on a residential remodel. The Comptroller's guidance states that labor to repair, remodel or restore residential real property is not taxable, and that the property does not have to be the owner's residence, so an investment house qualifies. Under a lump-sum contract, the contractor pays sales tax on materials when buying them, at the 6.25% state rate plus up to 2% local, a combined maximum of 8.25% per the Comptroller. That tax is inside the bid. Nonresidential property works differently: the total charge for remodeling it is taxable, and the Comptroller asks contractors on mixed-use property to call for its guidelines, so a mixed-use flip should budget for the difference.

The state licenses 3 trades nearly every flip touches: electricians and air conditioning contractors through the Texas Department of Licensing and Regulation, and plumbers through the Texas State Board of Plumbing Examiners. Each licensing law has a homeowner exemption, and each one is written for an owner working on a home they live in:

• Electrical work by "a person who owns and resides in the dwelling" (Occupations Code §1305.003; TDLR)
• Plumbing "in the property owner's homestead" (§1301.051)
• Air conditioning work in a building owned solely by the person "as the person's home" (§1302.053)

A vacant house owned by an LLC for resale fits none of them, so electrical, plumbing and HVAC work on a Texas flip goes to licensed contractors. Cities add their own layer. San Antonio requires every city- and state-licensed contractor to register with Development Services before a permit issues, and its building contractor rules require a Home Improvement Contractor registration for non-structural remodeling and a Residential Building Contractor registration, with ICC certification and $500K per-occurrence liability coverage, for structural work and foundation repairs. Check the city's registration rules before you choose a general contractor.

Texas lien law gives unpaid subcontractors months to file, so every draw needs statutory waivers

Texas rewrote its mechanic's lien statute, Property Code chapter 53, through HB 2237, effective January 1, 2022. One definition decides which deadlines apply to a flip. A "residence" under §53.001 is a home owned by one or more adults and used or intended as a dwelling by an owner. A house an LLC is renovating for sale is outside that definition, so the general deadlines apply:

• A subcontractor or supplier must send notice of an unpaid claim by the 15th day of the 3rd month after the month it provided the labor or materials (§53.056).
• It then has until the 15th day of the 4th month to file the lien affidavit (§53.052).

Cabinets delivered in March can support a notice through June 15 and a lien filed through July 15, after many flips have listed.

The statute also gives the owner 2 tools. The owner must hold back 10% of the contract price for 30 days after the work is complete (§53.101), and an owner who skips that retainage faces liens of at least the amount that should have been held (§53.105). And a lien waiver counts only if it substantially follows 1 of the 4 statutory forms in §53.284: conditional and unconditional waivers on progress payments, and conditional and unconditional waivers on final payment. A release that departs from those forms is unenforceable (§53.281).

graph TD
    A[Contractor submits draw request] --> B[Attach conditional progress waivers from contractor and major subs]
    B --> C[Lender inspects completed work]
    C --> D[Draw funds released]
    D --> E[Contractor pays subs and suppliers]
    E --> F[Unconditional progress waivers collected]
    F --> G{Final draw?}
    G -->|No| A
    G -->|Yes| H[Final waivers, 10% retainage held 30 days]
    H --> I[Bills-paid affidavit ready for the resale]

Timing matters at the start as well. A mechanic's lien dates from the commencement of work or the delivery of materials visible on the land (§53.124), and a mortgage already recorded at that moment keeps its place ahead of it (§53.123). That is why many lenders want no work or deliveries on site before the loan closes. At the other end, your buyer can ask for an affidavit that every contractor and supplier has been paid (§53.085(b)). The draw process guide covers how lenders structure the inspections in between.

Texas treats a business-purpose flip and a homestead loan as 2 different worlds

The Texas Constitution protects a homestead from forced sale except for a short list of debts (art. XVI §50). A renovation lien on a homestead must be contracted in writing, with both spouses' consent on a family homestead, and the contract generally cannot be signed until the 5th day after the owner applies for the credit. Those protections attach to the house a family lives in. An LLC's investment house sits outside them, which is why a business-purpose flip loan can close on a business timeline.

Enforcement on non-homestead property follows Property Code §51.002: a public auction at the county courthouse between 10 a.m. and 4 p.m. on the first Tuesday of the month, after notice posted, filed and mailed at least 21 days ahead. The 20-day cure notice in the same section applies to property used as the debtor's residence. Counties must post filed sale notices on their websites, which makes the monthly list a public source of inventory for flippers who buy at auction.

Houston listings sell fastest among large Texas metros, and Austin's take longest

The exit is where interest and tax keep accruing. Realtor.com's metro data for September 2026 shows how far the pace varies across Texas:

Houston sells 6 days faster than the national median. Austin takes 80 days, its median list price is down 9.8% from a year earlier, and more than 1 listing in 4 carries a price cut, about the same share as Dallas–Fort Worth. El Paso is the outlier in the other direction: inventory down 17.2% and list prices up 6.0%.

Those gaps carry a price. On the illustrative $297K loan, each month after the final draw costs about $2,811 in interest and Houston-rate property tax, before insurance and utilities, so Austin's 25 extra days on market add roughly $2,300 to the same deal. ATTOM's typical U.S. flip took 161 days from purchase to resale in the second quarter. Build the listing period from the local median, add the time from contract to closing, and price the ARV from recent closed sales, which the ARV guide covers. The fix-and-flip calculator shows how each added month moves the return.

When a sale stalls, a finished Texas house can become a rental. That exit refinances into a long-term loan qualified on rent, and the tax bill at full market value becomes the line that decides it. The Texas DSCR guide walks through those numbers.

What to send for a Texas fix-and-flip file

A Texas file moves fastest when the state-specific questions arrive already answered:

• Purchase contract, or the payoff statement for a refinance of an active project
• Scope of work with line-item costs, noting whether bids are lump-sum (materials tax included)
• The full tax rate stack for the address, including any MUD, and the appraisal district's current market value
• Contractor names, TDLR and plumbing board license numbers for the licensed trades, and any city registration
• Confirmation that no work has started or materials been delivered, and the draw schedule with the waiver forms you will collect
• Comparable closed sales supporting the ARV
• Entity documents for the borrowing LLC

Sphinx Capital lends on fix-and-flip projects across Texas. The published fix-and-flip terms run from $200K to $10M+, up to 90% of cost and up to 75% of ARV, with up to 100% of renovation costs financed, rates from 9.50%, 12 to 24 month terms and closing within 10 days on qualifying files. A Texas flip that arrives with its tax stack, licensed trades and lien plan in order is the kind of file that can move on that timeline.

Sources

• Home Flipping Profits Continue Gradual Two-Year Decline (Q2 2026) — ATTOM
• Texas Constitution, Article VIII (§24-a, §29) — Texas Legislature
• Texas Constitution, Article XVI, §50 — Texas Legislature
• Tax Rates — Harris County Tax Office
• Tax Code Chapter 11 (§11.13, §11.42) — Texas Legislature
• Tax Code Chapter 23 (§23.01, §23.23, §23.231) — Texas Legislature
• Tax Code Chapter 31 (§31.02) — Texas Legislature
• Tax Code Chapter 32 (§32.01) — Texas Legislature
• Tax Code Chapter 41 (§41.44) — Texas Legislature
• Valuing Property — Texas Comptroller of Public Accounts
• Circuit Breaker Cap — Harris County Appraisal District
• Texas Title Insurance Basic Premium Rates, effective March 1, 2026 — Texas Department of Insurance
• Basic Manual of Title Insurance, Section III (Rate Rule R-5) — Texas Department of Insurance
• Real Property Repair and Remodeling — Texas Comptroller of Public Accounts
• Sales and Use Tax — Texas Comptroller of Public Accounts
• Occupations Code Chapter 1301, Plumbers — Texas Legislature
• Occupations Code Chapter 1302, Air Conditioning and Refrigeration Contractors — Texas Legislature
• Occupations Code Chapter 1305, Electricians — Texas Legislature
• Exemptions to Electrician Licensing — Texas Department of Licensing and Regulation
• Building & Home Improvement Contractors — City of San Antonio Development Services
• Property Code Chapter 53, Mechanic's, Contractor's, or Materialman's Lien — Texas Legislature
• Property Code Chapter 51 (§51.002) — Texas Legislature
• Inventory Core Metrics, Metro, September 2026 — Realtor.com Economic Research
• Inventory Core Metrics, Country, September 2026 — Realtor.com Economic Research