Insurance and Property Tax Increases a Pro Forma Misses

Why these two lines break pro formas

Insurance and property tax are fixed costs that rise whether the home is booked or not, and the seller's figures for both are often the wrong starting point.

Most of a short-term rental pro forma is about income: nightly rates, occupancy, seasonality. Costs get less attention, and the fixed ones get the least. Insurance and taxes look like the easy lines because they come with documents: the seller's declarations page and last year's tax bill. That is the trap. Those documents describe the seller's policy and the seller's assessment, and both can change the moment you close.

Three things make these lines dangerous:

• They are paid every month or year, booked or not. A slow season cuts income but not these costs.
• They often sit in escrow. If your lender collects them with the mortgage, an increase raises your monthly payment, sometimes with a shortage to make up.
• You control little of either. You can shop insurers and protest an appraisal, but you can't set the market rate or the tax rate.

A full pro forma review covers every line. This piece goes deeper on the two that most often surprise new owners.

What state insurance data shows in Texas

Texas homeowners rates rose sharply in 2023 and 2024 before slowing in 2025, according to the state's insurance regulator.

The Texas Department of Insurance publishes average statewide homeowners rate changes by year. Its page, dated January 22, 2026, shows:

TDI says these figures "include rate changes for owner-occupied homeowners, tenants, condos, and mobile homeowners policies." Two points matter for an investor.

First, the 2023 and 2024 increases compound. A policy that rose by the average in both years cost roughly 44% more at the end of 2024 than at the start of 2023. A pro forma built on a 2022 premium would have been far off by 2024.

Second, a short-term rental is often not insured on a standard owner-occupied homeowners policy at all. Many owners need a landlord, dwelling or short-term rental policy, which TDI's averages do not cover. Rental coverage can move differently from these averages, in either direction. The averages tell you the direction of the market; only a quote tells you your cost.

What state insurance data shows in Florida

Florida's average rate requests have turned negative, but premiums remain high, and wind coverage is most of the cost.

The Florida Office of Insurance Regulation (OIR) publishes a market overview. With data as of October 2026, it reports:

• An average admitted-market homeowners premium of $3,736 including wind, and $2,124 excluding wind.
• A 30-day average requested homeowners rate change of -2.3%, compared with -0.6% a year earlier.
• A 180-day average requested change of -1.7%, compared with 0.0% a year earlier.
• Twenty-one additional property and casualty insurers approved following legislative reforms.

In a January 13, 2026 release, OIR announced an 8.7% statewide average rate reduction for Citizens Property Insurance homeowners policies, and cited decreases filed by private insurers including Florida Peninsula (8.2%), Security First (8%) and Universal Property & Casualty (5.1%).

That is a real improvement, and it should be part of an honest analysis. It also does not make the line safe to ignore. The gap between the with-wind and without-wind averages shows how much of a Florida premium is wind risk, and wind risk does not go away. A single bad hurricane season can change the market again. And a short-term rental may need coverage that a standard homeowners policy does not provide, which can cost more than these averages.

For what a rental policy needs to cover, and where homeowners policies and platform protection fall short, see our guide to short-term rental insurance for owners.

Property tax reassessment after you buy

In both Florida and Texas, a sale can remove the limits that kept the seller's taxable value below market, so your first full tax bill may be much higher than theirs.

Florida

Florida law limits how fast assessed values rise, but resets them on a sale.

• Homestead property. Under section 193.155 of the Florida Statutes, the annual change in a homestead's assessed value may not exceed the lower of 3% of the prior year's assessed value or the change in the Consumer Price Index. After a change of ownership, the property "shall be assessed at just value as of January 1 of the year following a change of ownership."
• Non-homestead residential property. Under section 193.1554, annual increases are capped at 10% of the prior year's assessed value, but that cap applies to all levies other than school district levies. After a change of ownership or control, the property "shall be assessed at just value as of January 1 of the year following a change of ownership or control."

For an investor, this creates two common surprises. If the seller lived in the home as a homestead, their assessed value may have grown by 3% or less a year for a long time while the market rose much faster. Your rental won't qualify for that cap, and the value resets to just value on the next January 1. Even if the seller already rented it out, the 10% cap they had disappears at the sale, and school district taxes were never capped by it.

Texas

Texas appraises property at market value through local appraisal districts, and its limits also end when a property sells.

The Travis Central Appraisal District's page on the circuit breaker limitation explains that, beginning in 2024, "real property valued at $5.16 million or less will benefit from a 20 percent limitation on the net appraised value." To qualify, you "must own the property for at least one full calendar year (January through December)." If you sell, remove a homestead exemption or buy a new property, "any existing limitations on the property's value will be removed," and the value moves to current market value. The district also notes the Legislature has "only authorized the circuit breaker limitation for the 2024, 2025, and 2026 tax years."

So a buyer of a Texas rental should expect three things: the seller's capped value goes away at the sale, the buyer waits a full calendar year before any new limit can apply, and the limit itself is authorized only through the 2026 tax year unless the Legislature acts. A home in Houston falls under the Harris Central Appraisal District, so check that district's rules and values for your property.

How to stress-test a deal for both

Rebuild the insurance and tax lines from your own numbers, add a second, harsher case, and check whether the deal still covers its debt.

Work through these steps for every deal:

1. Get a written insurance quote before you commit. Ask a broker for the coverage you will actually carry as a short-term rental, with the deductible you can afford, including any wind or hurricane deductible.
2. Estimate the tax on your price. Look up the current tax rates for the property's location with the county property appraiser or appraisal district, and apply them to a value near your purchase price. Use the full rate, including school district levies.
3. Model the first-year reset. If you close mid-year, the reset may not show up until the next January 1. Your first-year cash flow can look fine and the second year can carry the jump.
4. Add a stressed case. Raise both lines again from your new base. TDI's 2023 and 2024 averages show that back-to-back double-digit years can happen.
5. Lower income at the same time. A bad storm season can raise premiums and cut bookings in the same year.
6. Check the debt cover. Lenders on rental loans often look at whether net income covers the loan payment. Run the stressed case through a debt service coverage calculation and see if you would still meet the lender's minimum.
7. Hold reserves. Keep cash for an escrow shortage, a higher deductible after a claim and a year of thinner income.

The example numbers are invented to show the method. Your own figures will depend on the property, the policy and the county.

Our free investor tools include a deal analyzer and a DSCR calculator, so you can run the base and stressed cases side by side.

What you can and can't control

You can shop, protest and plan; you can't stop a market-wide increase, and professional management won't lower these bills.

What helps:

• Shopping insurance every year with a broker who writes rental policies, especially in Florida, where OIR reports new insurers entering the market.
• Mitigation that insurers reward, such as a newer roof or storm protection. Ask your broker which improvements earn credits with the insurers they use before you spend money.
• Protesting an appraisal when the value is wrong. Both states have a process through the county or appraisal district, with deadlines; check yours.
• Buying with the real numbers, so an increase lands on a deal that had room for it.

What doesn't:

• Waiting for rates to fall. Florida's current direction is down; Texas slowed in 2025. Neither tells you what happens after the next storm.
• Professional management. A manager can raise income and keep the home in good shape, which may help with claims history, but it does not set your premium or your tax rate. Be honest with yourself about whether a deal works before management fees, not because of them.
• Hoping the reset is small. In a market that rose for years under a cap, it usually isn't.

The same discipline applies to the other risks a pro forma tends to skip, from regulation changes to new supply in the market.

The bottom line

The insurance and tax lines in a seller's pro forma describe the seller, not you. In Texas, state data shows homeowners rates rose 21.1% and 18.7% in back-to-back years; in Florida, rates are easing but wind still makes premiums high. In both states, a sale can remove the caps that held the seller's taxable value down. Get your own quote, estimate taxes on your price, stress-test both higher and make sure the deal still covers its debt. If you would like to learn about investing alongside us, see our investors page.

This is general information, not tax, legal or investment advice.