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You pay property tax either way, it just might be rolled into your rent. You probably have years to pay missing property taxes, while landlords will wait nowher

by dahart 2y ago

You pay property tax either way, it just might be rolled into your rent. You probably have years to pay missing property taxes, while landlords will wait nowhere near that long. Eminent domain is only exercised rarely, and doesn’t even compare to how often rents are increased, or how often people are evicted.

JumpCrisscross 2y ago
> You probably have years to pay missing property taxes Anywhere that gives a delinquent property owner years also tends to have strong tenant protections.
- dahart 2y ago
  That’s misleading and mostly irrelevant. My sampling of states so far yields an answer in years, looks like around 2-5 years depending on state. Rental evictions are measured in months, typically perhaps 1-3.
  - JumpCrisscross 2y ago
    > misleading and mostly irrelevant This entire discussion is as it's ignoring mortgages, where the entire security argument for homeownership breaks down beyond being an emotional comfort object. Homeownership is statistically more secure because home owners are richer. The home doesn't make a homeowner more secure, their wealth does. Remove the wealth effect and homeowners are about as precariously perched as renters. In the past decades, home-price appreciation contributed significantly to that wealth. Someone making the smae purchase today is less likely to similarly benefit. Particularly if they're conceding they're making a bad financial decision for emotional reasons.
    - dahart 2y ago
      > Remove the wealth effect and homeowners are about as precariously perched as renters. How so? I just showed that’s not true for evictions due to non-payment, at least for the property taxes issue you raised. When it comes to mortgages vs rent, maybe they’re similar risk, but in that case, the mortgage is not riskier, so the benefits of a house seem worth it, especially considering that as long as you keep up the payments, you are highly likely to eventually get your money back with a house, and 100% guaranteed to lose all your rent. > In the past decades, home-price appreciation contributed significantly to that wealth. Right, home ownership has historically been a vehicle for wealth building. > Someone making the smae purchase today is less likely to similarly benefit. Why’s that? Are you assuming that real estate inflation might slow down, but the market won’t? A house is a leveraged loan until you pay it off. If the price goes up, you get the leveraged return. People who paid $200k down payment on a $1M house in 2019 can sell today for $1.5M and walk away with more than double their money, or around 4x the profit that someone who invested the $200k in the stock market and got the same (incredibly good) returns. I don’t agree that buying a house is a bad financial decision, how do you justify that claim? There is certainly a distribution of outcomes, but on average I think most people profit from buying a house… especially when you compare it to paying rent.
      - JumpCrisscross 2y ago
        > Why’s that? We’re at record price to income levels amidst a stable versus growing population. (Note: I own a home.) > house is a leveraged loan until you pay it off. If the price goes up, you get the leveraged return Crazy how 2006 this pitch is. (Together with the “you are highly likely to eventually get your money back with a house.” Maybe we need a housing recession, both so people can buy in and others reminded there is no free lunch.)
        dahart 2y ago
        > Maybe we need a housing recession, both so people can buy in and other reminded there is no free lunch. Jesus, that’s a bit dark. Getting your money back from the sale of something you owned isn’t a free lunch. It’s just 100% better than dropping most of your money into a hole called rent, and never owning anything, and being beholden to landlords. If my argument is too old and hasn’t adapted to the 2024 economy, which is entirely possible, then show me what it takes to do better than buying $420k a house on a $75 income with $84k in savings. (I’m just picking the “median” numbers from the article.) A 2-bedroom apartment where I live is anywhere from $2500 to $4k, so let’s say $36k/year in rent. Rent is much higher than this in SF or NYC of course. How long do you have to rent for the interest on $84k in ETFs to cover $36k/year in rent, assuming your rent doesn’t go up? Edit: I’m not certain that did the calculation correctly, but it looks to me like on a 5% market return it would take 69 years for an $84k investment to break even against $36k in rent.
        JumpCrisscross 2y ago
        > It’s just 100% better than dropping most of your money into a hole called rent You take the difference between rent and ownership costs, not just the down payment, leverage that (2x max), and calculate the difference. The Times has a good tool for this [1]. (It doesn’t lever. Securities-based loans are almost always cheaper than mortgages.) The sucker in the present math is the individual, aspirational, emotionally-motivated buyer. The winner, the sellers and first-lien lenders. > assuming your rent doesn’t go up? I’d actually argue this is what most people pay for with homeownership. You may become a bit poorer, but your future is more certain. If you’re savvy you can use that certainty to take more risk in other parts of your life. Buying a home, for most Americans, is buying insurance. The problem is few see it that way, which is pretty great for the real estate industry. [1] https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...
rcpt 2y ago
> You pay property tax either way, it just might be rolled into your rent. No you don't. Property taxes are not incident on renters. Extreme example in California https://prop13.wtf/2023/05/06/prop13-is-not-passed-on-to-renters.html https://prop13.wtf/2023/05/06/prop13-is-not-passed-on-to-ren...
- dahart 2y ago
  Right. Property taxes are paid by landlords, who then charge it back to you in rent. Your example article indirectly says the same thing: tax cuts were not passed on, landlords kept them.
  - rcpt 2y ago
    Rent is set by supply and demand. If you give landlords a tax break they don't cut the rent. Not all taxes are passed on to consumers https://en.m.wikipedia.org/wiki/Tax_incidence https://en.m.wikipedia.org/wiki/Tax_incidence Edit: ok it looks like you're editing your comment to change what you had earlier. So I'll just leave you with a ton of reading on this exact topic https://gameofrent.com/content/can-lvt-be-passed-on-to-tenants https://gameofrent.com/content/can-lvt-be-passed-on-to-tenan...
    - dahart 2y ago
      Landlords not cutting the rent supports my claim that renters are effectively paying the property tax. You can argue that not all taxes are passed on, but the reality is that landlords have a set of costs, one of which is taxes, and they have a set of incomes from renters, and the income rent will always be higher than the costs, unless we’re talking about rent control or something like that. If the costs exceed the rents, then landlord goes out of business. I edited before you replied, and just clarified. I didn’t change my point at all.
      - Panzer04 2y ago
        Rents are certainly not always higher than costs. Plenty of "investor" landlords buying properties that return less in rent than the mortgage expenses of said property (or the cost of capital). Making 4% in rent isn't great when the mortgage interest is 6%. The difference is made up out of the landlord's pocket, and they gamble on capital gains to make up the shortfall (or rising rents vs a mostly fixed mortgage expenses)

by dahart 2y ago

JumpCrisscross 2y ago

> You probably have years to pay missing property taxes Anywhere that gives a delinquent property owner years also tends to have strong tenant protections.

dahart 2y ago
That’s misleading and mostly irrelevant. My sampling of states so far yields an answer in years, looks like around 2-5 years depending on state. Rental evictions are measured in months, typically perhaps 1-3.
- JumpCrisscross 2y ago
  > misleading and mostly irrelevant This entire discussion is as it's ignoring mortgages, where the entire security argument for homeownership breaks down beyond being an emotional comfort object. Homeownership is statistically more secure because home owners are richer. The home doesn't make a homeowner more secure, their wealth does. Remove the wealth effect and homeowners are about as precariously perched as renters. In the past decades, home-price appreciation contributed significantly to that wealth. Someone making the smae purchase today is less likely to similarly benefit. Particularly if they're conceding they're making a bad financial decision for emotional reasons.
  - dahart 2y ago
    > Remove the wealth effect and homeowners are about as precariously perched as renters. How so? I just showed that’s not true for evictions due to non-payment, at least for the property taxes issue you raised. When it comes to mortgages vs rent, maybe they’re similar risk, but in that case, the mortgage is not riskier, so the benefits of a house seem worth it, especially considering that as long as you keep up the payments, you are highly likely to eventually get your money back with a house, and 100% guaranteed to lose all your rent. > In the past decades, home-price appreciation contributed significantly to that wealth. Right, home ownership has historically been a vehicle for wealth building. > Someone making the smae purchase today is less likely to similarly benefit. Why’s that? Are you assuming that real estate inflation might slow down, but the market won’t? A house is a leveraged loan until you pay it off. If the price goes up, you get the leveraged return. People who paid $200k down payment on a $1M house in 2019 can sell today for $1.5M and walk away with more than double their money, or around 4x the profit that someone who invested the $200k in the stock market and got the same (incredibly good) returns. I don’t agree that buying a house is a bad financial decision, how do you justify that claim? There is certainly a distribution of outcomes, but on average I think most people profit from buying a house… especially when you compare it to paying rent.
    - JumpCrisscross 2y ago
      > Why’s that? We’re at record price to income levels amidst a stable versus growing population. (Note: I own a home.) > house is a leveraged loan until you pay it off. If the price goes up, you get the leveraged return Crazy how 2006 this pitch is. (Together with the “you are highly likely to eventually get your money back with a house.” Maybe we need a housing recession, both so people can buy in and others reminded there is no free lunch.)
      - dahart 2y ago
        > Maybe we need a housing recession, both so people can buy in and other reminded there is no free lunch. Jesus, that’s a bit dark. Getting your money back from the sale of something you owned isn’t a free lunch. It’s just 100% better than dropping most of your money into a hole called rent, and never owning anything, and being beholden to landlords. If my argument is too old and hasn’t adapted to the 2024 economy, which is entirely possible, then show me what it takes to do better than buying $420k a house on a $75 income with $84k in savings. (I’m just picking the “median” numbers from the article.) A 2-bedroom apartment where I live is anywhere from $2500 to $4k, so let’s say $36k/year in rent. Rent is much higher than this in SF or NYC of course. How long do you have to rent for the interest on $84k in ETFs to cover $36k/year in rent, assuming your rent doesn’t go up? Edit: I’m not certain that did the calculation correctly, but it looks to me like on a 5% market return it would take 69 years for an $84k investment to break even against $36k in rent.
        JumpCrisscross 2y ago
        > It’s just 100% better than dropping most of your money into a hole called rent You take the difference between rent and ownership costs, not just the down payment, leverage that (2x max), and calculate the difference. The Times has a good tool for this [1]. (It doesn’t lever. Securities-based loans are almost always cheaper than mortgages.) The sucker in the present math is the individual, aspirational, emotionally-motivated buyer. The winner, the sellers and first-lien lenders. > assuming your rent doesn’t go up? I’d actually argue this is what most people pay for with homeownership. You may become a bit poorer, but your future is more certain. If you’re savvy you can use that certainty to take more risk in other parts of your life. Buying a home, for most Americans, is buying insurance. The problem is few see it that way, which is pretty great for the real estate industry. [1] https://www.nytimes.com/interactive/2024/upshot/buy-rent-calculator.html https://www.nytimes.com/interactive/2024/upshot/buy-rent-cal...

rcpt 2y ago

> You pay property tax either way, it just might be rolled into your rent. No you don't. Property taxes are not incident on renters. Extreme example in California https://prop13.wtf/2023/05/06/prop13-is-not-passed-on-to-renters.html https://prop13.wtf/2023/05/06/prop13-is-not-passed-on-to-ren...

dahart 2y ago
Right. Property taxes are paid by landlords, who then charge it back to you in rent. Your example article indirectly says the same thing: tax cuts were not passed on, landlords kept them.
- rcpt 2y ago
  Rent is set by supply and demand. If you give landlords a tax break they don't cut the rent. Not all taxes are passed on to consumers https://en.m.wikipedia.org/wiki/Tax_incidence https://en.m.wikipedia.org/wiki/Tax_incidence Edit: ok it looks like you're editing your comment to change what you had earlier. So I'll just leave you with a ton of reading on this exact topic https://gameofrent.com/content/can-lvt-be-passed-on-to-tenants https://gameofrent.com/content/can-lvt-be-passed-on-to-tenan...
  - dahart 2y ago
    Landlords not cutting the rent supports my claim that renters are effectively paying the property tax. You can argue that not all taxes are passed on, but the reality is that landlords have a set of costs, one of which is taxes, and they have a set of incomes from renters, and the income rent will always be higher than the costs, unless we’re talking about rent control or something like that. If the costs exceed the rents, then landlord goes out of business. I edited before you replied, and just clarified. I didn’t change my point at all.
    - Panzer04 2y ago
      Rents are certainly not always higher than costs. Plenty of "investor" landlords buying properties that return less in rent than the mortgage expenses of said property (or the cost of capital). Making 4% in rent isn't great when the mortgage interest is 6%. The difference is made up out of the landlord's pocket, and they gamble on capital gains to make up the shortfall (or rising rents vs a mostly fixed mortgage expenses)