Rental accommodation once retired

How to avoid signing your life over to a mortgage
Salathor
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Re: Rental accommodation once retired

Post by Salathor » Fri Mar 15, 2019 10:38 am

Mister Imperceptible wrote:
Thu Mar 14, 2019 11:12 pm
As one might advise someone considering a move to the most insolvent state of Illinois, a house paid in cash does not look so great when the state is drooling to tax the bejesus out of property owners to cover bankrupt pension systems. A paid off house is stress-free from a mortgage interest standpoint but is also a sitting duck for the state.
Urgh, no kidding. I've been enjoying CA's prop 13 prop tax rules for the last few years, but there's now some talk amongst CA's left about revising the rule. I suspect that, for politics' sake, the revision would impact commercial real estate only (at first), but it'll be a sure sign for us rats to flee a sinking ship.

George the original one
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Re: Rental accommodation once retired

Post by George the original one » Fri Mar 15, 2019 1:16 pm

Mister Imperceptible wrote:
Thu Mar 14, 2019 8:45 am
While interest rates are artificially low and asset prices are artificially high, take out as much fixed rate debt as you can against the house and load up on gold.
Mister Imperceptible wrote:
Thu Mar 14, 2019 11:12 pm
The idea is not to rent. It is to own (or borrow, if you prefer to insist that by taking out a mortgage I do not own the house), with a fixed monthly mortgage payment (mine is at less than 4% interest).
Actually, what I did, is to borrow when interest rates were VERY artificially low (e.g. 3%, significantly below today's rate) and asset prices were LOW. Asset prices have increased and tax free profits have been taken, so I have no need to be leveraged. Additionally, once I closed out the leveraged broker account, the calculations for leverage showed that I was not being sufficiently paid for the added risk even though the profit was greater.

Now property tax is a different problem. You've gotta live somewhere, whether renting or owning, so you're always paying property tax. The trick there is to pay as little as possible for the best location/quality/size/etc.

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Sclass
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Location: Orange County, CA

Re: Rental accommodation once retired

Post by Sclass » Sat Mar 16, 2019 12:04 am

Salathor wrote:
Fri Mar 15, 2019 10:38 am
Urgh, no kidding. I've been enjoying CA's prop 13 prop tax rules for the last few years, but there's now some talk amongst CA's left about revising the rule. I suspect that, for politics' sake, the revision would impact commercial real estate only (at first), but it'll be a sure sign for us rats to flee a sinking ship.
I wonder how this will play out in CA. It’s actually pretty sickening to me. I’ve avoided buying a home because I felt it discriminates against younger buyers. I have a tendency to walk away from what I perceive as unfair deals. You know the type “you just have to take this because we said so” deals.

If and when it is abolished it will send shockwaves across the real estate markets and create mass evictions of the older owners.

Or it will drag on.

Either way it won’t end well.

Salathor
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Joined: Fri Dec 18, 2015 11:49 am

Re: Rental accommodation once retired

Post by Salathor » Mon Mar 18, 2019 2:26 pm

@SClass

I can't see how it would do anything other than demolish property values in CA.

1) Taxes rise faster than inflation, in line with current CA housing prices
2) Older folks, fixed income, etc., are priced out and forced to sell due to taxes
3) The market floods, and housing prices become depressed
4) Housing values sink and taxes return to the lower values, so the state doesn't win and many folks were forced to move.

I don't see any upside to the plan.

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Sclass
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Re: Rental accommodation once retired

Post by Sclass » Wed Mar 20, 2019 8:57 pm

I think that pretty much sums it up. Most of the older people I know can not afford the current assessments in their own neighborhoods if they’d bought long ago.

I guess the other possibility is it can just drag on. The old owners will die off and the assessments will step up to current values. That’s kind of what has happened in my mom’s neighborhood in LA. 75% of the homes are owned by younger couples working like dogs to pay a $20,000 annual tax bill. Then there’s the ancients paying $1000 a year. They eventually die and their kids have to sell off the property. So there is a reset of sorts.

I’m debating what to do with my mom’s place. Keep it as a rental? Keep it as a retirement hedge against rising rents? Right now I’m just letting it sit vacant. Prop 13’s worst nightmare. The 1970 assessment that just won’t die.

Augustus
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Re: Rental accommodation once retired

Post by Augustus » Thu Mar 21, 2019 4:44 pm

I think that if property taxes were the same across the board instead of the low for old people thing property values would dip a bit in CA (old people would have to sell and downsize, freeing up larger homes for younger families), which would be nice for me. I'm surprised no one has ever mentioned LOWERING taxes in california, that must be an alien concept to the plebs.

Kriegsspiel
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Re: Rental accommodation once retired

Post by Kriegsspiel » Thu Mar 21, 2019 5:39 pm

Sclass wrote:
Wed Mar 20, 2019 8:57 pm
75% of the homes are owned by younger couples working like dogs to pay a $20,000 annual tax bill. Then there’s the ancients paying $1000 a year. They eventually die and their kids have to sell off the property. So there is a reset of sorts.

I’m debating what to do with my mom’s place. Keep it as a rental? Keep it as a retirement hedge against rising rents? Right now I’m just letting it sit vacant. Prop 13’s worst nightmare. The 1970 assessment that just won’t die.
Yikes. What a disconcerting situation.

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