The True Cost of Living in Bee Cave, Lakeway, and Dripping Springs

So you found a home in Bee Cave for $700,000. You plugged it into Zillow’s mortgage calculator. It said your monthly payment would be around $4,200. You thought “we can swing that.”

Then you got your first property tax bill and realized the actual monthly cost is closer to $5,800.

This happens all the time. And it is not because Zillow is broken. It is because the true cost of owning a home in the Austin Hill Country has layers that no online calculator captures. Property tax is not just one number. It is city tax plus county tax plus school district tax plus emergency services district tax plus MUD or PID assessments plus HOA fees. Stack all of those up, and you are looking at a monthly cost that can be 30-50% higher than what Zillow showed you.

I have been selling real estate in Bee Cave, Lakeway, and Dripping Springs since 2009. The question I hear most often from buyers after closing is not about the home itself. It is “why is my tax bill so high?” So lets fix that before you close.

The Hidden Layers of Your Property Tax Bill

In Texas we do not have state income tax. That is the good news. The trade-off is that property taxes fund everything: schools, roads, emergency services, water infrastructure, parks. And in the Hill Country suburbs west of Austin, those taxes come from multiple overlapping taxing entities.

Here is what actually shows up on your tax bill:

Layer 1: County Tax

• Travis County (Bee Cave and Lakeway): $0.375845 per $100 of taxable value
• Hays County (Dripping Springs): $0.3999 per $100 of taxable value

Source: Travis County FY 2026 Tax Rate

Layer 2: School District Tax

This is the biggest piece of your tax bill.

• Lake Travis ISD (Bee Cave and Lakeway): $1.0397 per $100. The lowest rate in LTISD history.
• Dripping Springs ISD: $1.1052 per $100. Higher than LTISD.
• Eanes ISD (parts of Bee Cave and West Austin): $0.8322 per $100. The lowest of the three.

Source: Community Impact

Layer 3: City Tax

• Bee Cave: $0.02 per $100. One of the lowest city tax rates in Texas.
• Lakeway: $0.1696 per $100. Significantly higher than Bee Cave.
• Dripping Springs: Varies by whether you are in city limits or the ETJ (extraterritorial jurisdiction). Properties in the ETJ pay no city tax.

Source: City of Lakeway

Layer 4: Emergency Services District (ESD)

This funds fire and EMS services. Rate varies by district but typically adds $0.05-$0.10 per $100.

Layer 5: MUD and PID (The One That Gets People)

This is the layer that Zillow does not show and most buyers do not understand until it is too late.

A MUD (Municipal Utility District) is a special taxing district created by developers to fund water, sewer, and drainage infrastructure in new neighborhoods. The district issues bonds. Homeowners repay those bonds through an additional property tax that can range from $0.25 to $1.40 per $100 of taxable value. That is on top of everything else.

A PID (Public Improvement District) works similarly but the assessment is usually a fixed annual amount, not a percentage of home value. PIDs typically add $1,500-$3,000 per year.

Nearly every neighborhood built in the last 15 years in Bee Cave, Lakeway, or Dripping Springs has a MUD, a PID, or both.

Real Numbers: What You Actually Pay by Neighborhood

Here is where it gets real. This table shows the estimated total effective tax rate and monthly housing cost for a $700,000 home in different neighborhoods across all three cities.

*Estimated total monthly cost assumes $700K purchase, 20% down, 6.5% rate, includes mortgage + property tax + MUD/PID + HOA + insurance ($250/mo). Actual costs vary.

Look at the range. Saratoga Hills in Dripping Springs costs an estimated $4,870/month. Rough Hollow in Lakeway costs $6,280/month. That is a $1,410 per month difference on the same $700,000 home price. Over 30 years that is $507,600.

This is why you cannot just compare home prices. You have to compare total monthly carrying cost.

What Zillow Gets Wrong: Four Real Examples

Zillow’s estimated monthly payment is useful as a starting point but it misses critical costs. Here is what it looks like in practice.

Example 1: $600K Home in Caliterra (Dripping Springs)

• Zillow estimate: ~$3,800/month
• Actual cost: ~$5,200/month (includes 2.46% tax rate + $4,000 MUD + $1,500 HOA)
• Gap: $1,400/month Zillow does not show

Example 2: $800K Home in Rough Hollow (Lakeway)

• Zillow estimate: ~$5,100/month
• Actual cost: ~$6,810/month (includes 2.2% tax + $3,000 MUD + $5,928 HOA)
• Gap: $1,710/month

Example 3: $700K Home in Falconhead (Bee Cave)

• Zillow estimate: ~$4,400/month
• Actual cost: ~$5,010/month (lower tax rate, no MUD, modest HOA)
• Gap: $610/month (smallest gap because no MUD)

Example 4: $500K Home in Saratoga Hills (Dripping Springs)

• Zillow estimate: ~$3,200/month
• Actual cost: ~$3,810/month (low tax rate, no MUD, minimal HOA)
• Gap: $610/month

The pattern is clear: the newer the neighborhood and the more MUD/PID debt it carries, the bigger the gap between Zillow’s estimate and your actual monthly cost.

How MUD and PID Affect Resale Value

Here is the part most buyers do not think about until they try to sell.

MUD and PID assessments do not go away when you sell. They transfer to the next buyer. And savvy buyers are starting to factor these costs into their offers.

A home with a $4,000 annual MUD assessment is effectively worth less than an identical home without a MUD, because the buyer’s total monthly cost is higher. At current interest rates, that $4,000 annual cost is roughly equivalent to $50,000 in home value. Meaning if your home is “worth” $700K but carries a $4,000 MUD, a smart buyer might value it at $650K compared to an identical MUD-free home.

This does not mean you should avoid MUD neighborhoods. Many of the best new communities in the Hill Country have MUDs. But you should factor the MUD cost into your purchase price and understand that it affects your resale position.

Insurance Surprises

Flood Insurance

If your property is in a FEMA-designated flood zone (common near Lake Travis and creek beds), your lender will require flood insurance. Standard homeowners insurance does not cover flood damage. Flood insurance premiums range from $500 to $5,000+ per year depending on your property’s elevation relative to the base flood elevation.

Wildfire Risk

The Hill Country is wildfire country. Dry cedar, live oak, and grass create significant fire risk during drought. Some insurance companies have increased premiums or stopped writing new policies in high-risk Hill Country areas. If you are buying in a heavily wooded area, get insurance quotes before you commit to a home. Do not wait until the week before closing to discover your premium is $2,000 more than you expected.

Texas Homeowners Insurance Generally

Texas homeowners insurance rates have increased significantly in recent years due to weather events statewide. Budget $200-$350/month for a $700K home, depending on location, age, and construction type. Newer homes with impact-resistant roofs and updated electrical will get better rates.

The Lowest and Highest Cost Areas

Lowest total cost of ownership:

• Older Bee Cave neighborhoods without MUDs (Bee Cave Woods, established areas)
• Saratoga Hills in Dripping Springs (no MUD, minimal HOA)
• Old Lakeway neighborhoods without MUDs
• Properties in Eanes ISD (lowest school tax rate)

Highest total cost of ownership:

• Caliterra in Dripping Springs (2.46% total tax rate with MUD)
• Rough Hollow in Lakeway (high MUD + high HOA)
• Newer master-planned communities with active MUD bond repayment

The irony is that Dripping Springs, which has the lowest home prices of the three cities, can actually have the highest monthly carrying cost due to aggressive MUD rates in new developments. A $600K home in Caliterra can cost more per month than a $700K home in established Bee Cave.

How to Calculate Your True Monthly Cost

Before you make an offer, do this math:

1. Get the exact tax rate. Ask the listing agent for the property’s tax entity breakdown, not just the total rate. You can also look this up on the Travis County or Hays County tax assessor website.
2. Ask about MUD/PID. Is the property in a MUD or PID? What is the current rate or assessment? When were the bonds issued and when do they mature?
3. Get the HOA details. Monthly or annual dues. Any special assessments pending. What the HOA covers (some cover landscaping, some cover nothing useful).
4. Get insurance quotes early. Especially for flood zones and heavily wooded properties.
5. Add it all up. Mortgage + property tax + MUD/PID + HOA + insurance = your real monthly cost. Compare that to Zillow’s estimate. The gap is what you need to budget for.

If you want help running these numbers for a specific property, I am happy to do it. It takes me 10 minutes to pull the tax entities, MUD status, and HOA costs for any address in Bee Cave, Lakeway, or Dripping Springs. That 10 minutes can save you from a $1,000/month surprise.

Contact Ed Neuhaus for a personalized cost analysis on any Hill Country property.

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