Sunday, July 22, 2012

Peter Schiff and Craig Kamman Walk Into a Bar...

Not to put Mr. Kamman on par with Peter Schiff, but does anybody in the real estate world of economists consider property taxes or am I the only one?

The recovery in housing prices and the housing market (if you can even call it that-"recovery" i mean) is going to be moot unless people are allowed to own said houses without a punishing tax bill at the end.  Currently I am renting out a place for 200% the property taxes on my old place back in Minneapolis.  In short I pay only twice what my property taxes were per month to rent out a similar size swelling.  ie- I believe landlords are subsidizing renters (for a whole host of reasons I don't care to explain now).  So tell me, if you pay to own an asset every year, is that really an asset?  Or is it a liability?

Because I'm no economic genius (well, actually, I am, and a good looking one to boot), but unless the rents you generate exceed the cash flows you're paying out OR the money you'd save on renting is more than the property taxes you pay, then that piece of land with a structure on top of it is NOT an asset, it's a liability.  ie- homeowners are really nothing more than voluntary donors to the local and state governments.

I guess my larger point is that unless there are some laws passed that will limit how much local governments can extort from property owners, in the end I doubt ANY property in the US will have ANY value...a dream most marxists and communists would love.

Oh well, you voted for these communist f*cks.

Enjoy the decline!


sth_txs said...

I don't live in the most expensive part of the country by any means, but my property taxes have gone up $200 since I bought my home 4 years ago.

Insurance as well though they do insure more than the house and the things in it are worth.

Plus the repairs I've made on stuff that just needed to be done. 60 feet of wooden fence is a few hundred in material, AC repairs have come up and you gotta have that in South Texas, a window here and there.

Meanwhile, my fellow 'Merikan chums in public housing got nice new houses, sodded grass, car port, etc... Grrrrr!!!!!!

Anonymous said...

I live in a small modest house in a nice neighbourhood. The taxes I pay are extortionate. (about 3600 a year on a 225k property.) I could afford to buy a bigger house but there is no way in hell that i am prepared to pay 6 or 7k a year to have my garbage picked up every other week and the snow plowed three days after a storm. - minuteman

James Wolfe said...

I realize that property taxes are the counties primary source of revenue but I've never understood the logic of paying a yearly tax on something you bought 30 years ago. It's like paying for food years after you consumed it. Unless you work out of your home it's not generating revenue, it doesn't pay a dividend and unless you put hundreds or thousands of dollars into maintaining it year it depreciates in value. And if you are unable to pay they take it from you.

If one should have to pay property tax then at the very least the amount should go down every year until it is paid off. Then when you're an old fart living off a tiny retirement check you at least won't lose your home. And when you die your relatives won't have to sell the home or the business just to pay the taxes. to the radio said...

Someone somewhere sees what I see.
I happily rent a house in Winnipeg.
Paying eleven hundred bucks a month for a three bedroom split level side by side.
The roof had to be replaced last month.
I didn't have to pay for it.

When we lived in Saskatoon, everybody urged us to buy a house.
We paid eleven hundred bucks a month for a three bedroom apartment.
My buddy, who borrowed four hundred grand to build his million dollar house with his own hands is paying six grand a year in property taxes and it isn't even finished, yet.
He still doesn't know if he wants to sell it when he's done.
I said if you net five hundred grand on the sale that's thirty seven years of my rent.

Property taxes in Saskatoon are set to rise in a big way when they finish spending all that borrowed infrastructure money.
Saskatoon had a debt of forty million in 2003.
They have more than one hundred and fifty million in 2012 and a two hundred and fifty million debt ceiling which just got raised from one hundred and eighty very quietly last year.
Saskatoon has two hundred thousand people.
And a wicked case of the housing bubble.

When I got laid off last year and we moved back, I gave my landlord thirty days and split.
My other buddy, an engineer who believes in global warming, 'owns' two houses and is still there because he can't afford to sell unless he gets more money from the bank of mom and dad.
He was forced to take a lower paying job instead of pursuing opportunities elsewhere.

Lots of opportunity cost there that I avoided by renting.
You don't have to vote for communists to screw yourself.
Just 'buy' something like a house because everyone else does it.

Anonymous said...

unless the rents you generate exceed the cash flows you're paying out OR the money you'd save on renting is more than the property taxes you pay, then that piece of land with a structure on top of it is NOT an asset, it's a liability

I would refine this slightly by saying that unless net rent income exceeds all expenses except for actual loan principle - that is to say interest, taxes, insurance, upkeep and so on - by a significant amount, then it is a liability. That is to say, if the amount by which equity is increasing is significantly higher than out-of-pocket expense (if any), and if said out-of-pocket expense is not a burden, then it can be considered an "investment" rather than a money sink.

Anonymous said...

I know my rent only covers taxes and fuel/water. It hasn't gone up in over 10 years. My landlord use to live in the other half of the duplex until his wife persuaded him to buy another house. The folks in the other side of the place are paying half again what I am.

Of course, whenever anything breaks I just fix it. A couple years ago when we replaced all the doors, windows, siding and insulation my roommate and I were out working on it every day after work until it was done so I thin we are a bit better tenets then most.

Dave said...

Who cares about property tax? You get the taxes back with interest when you rent the place out to Section 8 tenants. An easy way to turn your savings into cash flow.

It sucks if you're looking to rent, though. You literally can't find a two-bedroom anything anywhere in the US for less than $800/month, because that's what Section 8 pays.

Carnivore said...

Don't get me started. I like how assessments went down but rates went up to preserve the cash flow. Government parasites are certainly not stupid - in the short term.

Borepatch said...

This is one of the things driving population loss in the Blue states. We moved from the Boston suburbs to the Atlanta suburbs 18 months ago. Our property taxes fell by $9000 a year.

We have a house that's about as nice as we had before. We also de-leveraged by about 80%. State taxes are lower, too.

And we can walk to the funky restaurants nearby, carrying my commander-length 1911. I can't see why anyone would want to live in Massachusetts.

Anonymous said...

The power to tax is the power to destroy.

Anonymous said...

You are not the only one to consider this - heck it is a throwback to feudalism. You pay the Lord of the land an annual duty so as to stay on the land you are supposed to own. If you don't, you lose the land. This isn't ownership. Ownership means you own it, and you don't have to pay some fat cow behind a government desk a monthly premium to be able to continue to own it.

Anonymous said...

Cappie you are not the only one who has told people constantly that owning property is a liability and not an investment. Investments make you money,liability takes your money and if you are paying taxes on your property then it is a liability and not an investment. So basically in the end you are just renting and not owning. which is why i think property prices keep dropping. its just too much of headache and to shell out so much money out front makes it nearly impossible for anyone to own a home or should i say "RENT" a home.

AuricTech said...

Have you seen this Liberty's Torch blog post on the subject of how property taxes lead to real estate devaluation?

James Wolfe said...

Welcome to Georgia Borepatch! When I moved here 16 years ago I smiled as soon as I crossed the border. The speed limit back home was 55 here it was 70, gas was 30 cents less taxed per gallon, it was the then home of the House majority leader, and the home of Coca-Cola. I was in heaven. I'll never move back to the Socialist States of America.

craig said...

If you want to avoid property taxes, better live in a houseboat or RV...
Renting is no safer from Taxation than Owning... Ultimately the landlords will pass this tax down to the renter - when market conditions allow for it..

Thank Obamacare for this nice little gift to renters..

Rachel & Robert said...

Of course someone has to own it, or there is no one to rent from.

Renters do pay property tax after all, economics is zero sum. Picking a state/county with low property taxes helps (I pay $525 for a 1,000 sq ft 2-bedroom, not subsidized).

The big advantage to buying is stability. Ask all the old timers from western North Dakota. They decided it was "cheaper" to rent, until the oil boom began and they got priced out of the market.

aczarnowski said...

Owning a home certainly isn't an investment. I had to learn that the hard way. And Minneapolis taxes (of all kinds including property and "fees") are a stone cold bitch.

But lets say I get to retirement age (ha, ha, I know but imagine with me). Paying inflated $$ rent out of non-inflated fixed income $$ looks pretty scary. I'm not making money on the house, and I could certainly get taxed out of it (we're working to sell and move into less a tax stupid jurisdiction), but not having the rent payment at all in 13 years feels like a good position to be in...

I've always wondered why sales tax wasn't good enough. I know it's because the up front number would kill too many deals, but at least "doing business" in a tax jurisdiction has some basis in the value add of where you're doing the business.