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Did you consider scenarios with high inflation and high housing tax...

by yodsanklai 3y ago

wincy 3y ago
At least where I live the elderly can’t lose their house from failure to pay housing taxes.
- pc86 3y ago
  This sounds good in theory but what are the options? 1. You can forgive the taxes in which case everyone else in the tax jurisdiction just pays this person's taxes indirectly. 2. You can lien the property and pass the bill on to the estate, in which case you're either having the heirs pay the taxes (and late fees, and interest) with extra steps, or if no heirs the buyer pays less for the property and the end result is basically #1.
  - positr0n 3y ago
    I don’t see how a lien is the same as #1. Say retired couple owns a $500k home and can't pay $5k/yr property tax. They will live for 10 more years. With no lien, they are forced to sell and buy a cheaper $450k house, using the equity to pay property taxes. When they die, heirs get $450k. With the lien, in 10 years the estate sells the house and the heirs receive $450k after paying the back taxes. Obviously this is simplifying a lot, but I don't think the rest of society is being shortchanged by the lien mechanism. Except in the case where the unpaid taxes exceeds the value of the house.
dahfizz 3y ago
Inflation highly favors those who own a house. Their mortgage payment is fixed, your rent payment goes up every year.
- vinyl7 3y ago
  Property taxes will skyrocket though
  - wredue 3y ago
    Property taxes are built in to rents and then some. My property tax is considered “extremely high” at $4500 a year. Rent for $4500 a year is like a closet, even in a cheap place.
    - pc86 3y ago
      Where is $4500/yr "extremely high?" We are basically middle-of-the-road for taxes in our area and it's over $11k/yr.
      - BizarreByte 3y ago
        I'm located in Nova Scotia and outside of the HRM 4500/year would be an absolute obscene tax rate in all except the biggest towns.
      - wredue 3y ago
        My properties taxable assessment value is only in the 250,000 range. So the property taxes are considered quite high. Property taxes aren’t a flat rate.
  - xeromal 3y ago
    Depends on the state.
  - stetrain 3y ago
    I pay $2500/mo to rent a house that was purchased for $280k in 2015 and is now worth about $550k. That's comparable rent to what I would pay for a decently desirable 2bd apartment. Property taxes county + city are about $4300 per year. They have increased recently, and so has the rent. If they owner put down a 10% down payment, I estimate their total monthly payment for mortgage + taxes + insurance is about $2000, and will likely remain in that ballpark. That means rent is currently paying the entire mortage/tax/ins plus $6k per year. At the end of their mortgage that monthly cost drops to about $700, and they will own an asset likely worth $500k+.
- ghaff 3y ago
  It's all unrealized however until you sell it and downsize/move to a lower CoL area.
  - hef19898 3y ago
    Ever hear of cash flow?
  - stetrain 3y ago
    Not paying increasing rent ever year is actualized money in your pocket to save or invest how you see fit. The unrealized part is the gain in property value, and your equity in it by paying down the mortgage. But if you consider never selling the house, paying $2k/mo in rent vs $2k/mo in (mortgage + insurance + property tax) is going to start out break-even, improve as the rent climbs to $3k for the equivalent place to live, and then be a larger benefit after 30 years when that housing payment drops to just tax and insurance.
- turdprincess 3y ago
  My property taxes, maintenance costs and insurance all go up every year too, so ownership costs are also not fixed
BizarreByte 3y ago
My property tax is 700$/year and the yearly increase is capped. I already pay less in tax than what my house is assessed at because of the cap. If I paid the assessed value my taxes would be ~800$/year. In terms of inflation? Owning the house has already made that a lot less painful.

Did you consider scenarios with high inflation and high housing tax...

wincy 3y ago

At least where I live the elderly can’t lose their house from failure to pay housing taxes.

pc86 3y ago
This sounds good in theory but what are the options? 1. You can forgive the taxes in which case everyone else in the tax jurisdiction just pays this person's taxes indirectly. 2. You can lien the property and pass the bill on to the estate, in which case you're either having the heirs pay the taxes (and late fees, and interest) with extra steps, or if no heirs the buyer pays less for the property and the end result is basically #1.
- positr0n 3y ago
  I don’t see how a lien is the same as #1. Say retired couple owns a $500k home and can't pay $5k/yr property tax. They will live for 10 more years. With no lien, they are forced to sell and buy a cheaper $450k house, using the equity to pay property taxes. When they die, heirs get $450k. With the lien, in 10 years the estate sells the house and the heirs receive $450k after paying the back taxes. Obviously this is simplifying a lot, but I don't think the rest of society is being shortchanged by the lien mechanism. Except in the case where the unpaid taxes exceeds the value of the house.

dahfizz 3y ago

Inflation highly favors those who own a house. Their mortgage payment is fixed, your rent payment goes up every year.

vinyl7 3y ago
Property taxes will skyrocket though
- wredue 3y ago
  Property taxes are built in to rents and then some. My property tax is considered “extremely high” at $4500 a year. Rent for $4500 a year is like a closet, even in a cheap place.
  - pc86 3y ago
    Where is $4500/yr "extremely high?" We are basically middle-of-the-road for taxes in our area and it's over $11k/yr.
    - BizarreByte 3y ago
      I'm located in Nova Scotia and outside of the HRM 4500/year would be an absolute obscene tax rate in all except the biggest towns.
    - wredue 3y ago
      My properties taxable assessment value is only in the 250,000 range. So the property taxes are considered quite high. Property taxes aren’t a flat rate.
- xeromal 3y ago
  Depends on the state.
- stetrain 3y ago
  I pay $2500/mo to rent a house that was purchased for $280k in 2015 and is now worth about $550k. That's comparable rent to what I would pay for a decently desirable 2bd apartment. Property taxes county + city are about $4300 per year. They have increased recently, and so has the rent. If they owner put down a 10% down payment, I estimate their total monthly payment for mortgage + taxes + insurance is about $2000, and will likely remain in that ballpark. That means rent is currently paying the entire mortage/tax/ins plus $6k per year. At the end of their mortgage that monthly cost drops to about $700, and they will own an asset likely worth $500k+.
ghaff 3y ago
It's all unrealized however until you sell it and downsize/move to a lower CoL area.
- hef19898 3y ago
  Ever hear of cash flow?
- stetrain 3y ago
  Not paying increasing rent ever year is actualized money in your pocket to save or invest how you see fit. The unrealized part is the gain in property value, and your equity in it by paying down the mortgage. But if you consider never selling the house, paying $2k/mo in rent vs $2k/mo in (mortgage + insurance + property tax) is going to start out break-even, improve as the rent climbs to $3k for the equivalent place to live, and then be a larger benefit after 30 years when that housing payment drops to just tax and insurance.
turdprincess 3y ago
My property taxes, maintenance costs and insurance all go up every year too, so ownership costs are also not fixed

BizarreByte 3y ago

My property tax is 700$/year and the yearly increase is capped. I already pay less in tax than what my house is assessed at because of the cap. If I paid the assessed value my taxes would be ~800$/year. In terms of inflation? Owning the house has already made that a lot less painful.