Nothing quick about getting rich with real estate

Re: Nothing quick about getting rich with real est

Anyone know real-estate books that cover subtleties and variations between States?

i.e. Is California the only state with little or no property tax?

Getting rich on real-estate isn't so easy when property Tax + Assessments eat away at single digit growth.
 
Re: Nothing quick about getting rich with real est

Its possible the "boom" could be sustained in a bad way.  I'm seeing this around this area where median home prices are >$600k in santa clara county and >$300k in the sacramento area.

40 year mortgages and interest-only loans.

Basically it would extend the boom by allowing people to still 'afford' to buy these homes at these valuation levels.
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Silicon Valley (Santa Clara Valley) has differences in the income distribution that are not normal.  The income distribution here is bimodal (like a bactrian camel - the two humped camel).  The median family income is ~$75K but there are likely few families actually making that.

There's a large number of people working in lower paying (or relatively lower paying) jobs whose average family income is low enough that they will never buy a house here and likely haven't been able to for 20 or 30 years.  Many of them that have houses here got it because they bought long enough ago that this area was outside the "core" desirable area to live.  That "core" seems to be roughly centred on Palo Alto with prices decreasing as you spread further away.  However, to do that today means going much further away.  At the bottom of this lower income tier they rent or at the top they own a home far away and commute in (driving up the prices in the community they do live in).

The real house buying segment of the population in Silicon Valley works in the tech industry in some capacity.  Not neccesarily even in some high powered jobs.  Imagine a couple where he's a junior software engineer making $80K / year (about average) and she's a QA tester (quality assurance) making $60K / year.  That $140K / year for the couple and with traditional lending practices they can allocate ~35% of their income to mortgage payments.  That will allow them to buy a $500K home.  We're only talking about a couple at the bottom of the tech industry income ranges too.  Start looking at a couple where she's a senior engineer making $150K / year or more and he's a financial analyst making the same  for a total family income of $300K and we're talking about real house buying power.

The market here is a lot different than some big flat midwest town where the wages are more evenly distributed and it's easy enough to just go another 100 metres (~328 feet for the Americans) down the road and build another house.
 
Re: Nothing quick about getting rich with real est

Anyone know real-estate books that cover subtleties and variations between States?

i.e. Is California the only state with little or no property tax?

Getting rich on real-estate isn't so easy when property Tax + Assessments eat away at single digit growth.
Click to expand...

Do a search here for keywords like "best state retirement tax". Or do the same on MSN's articles area...MSN ran some bits showing tables by state of the "best states to retire to". The tables included property tax, sales tax etc.

There are many, many better places than CA for taxes. It seems that they get you one way or another, but finding a state with high income tax and low property/sales tax would be good for a LBYM early retiree. If you're pulling down a big annual withdrawal rate though, a high income tax state like CA might be bad.

I'm paying ~ 1800 a year property tax against a home I bought 2 years ago for $252k thats worth ~350k right now. My wifes house which she's owned for 14 years...$481 this year in property taxes. Our "proposition 13" limits property tax to a percentage of the original purchase price + a small uptick per year. 7.5% sales tax and a 6% state income tax at our (intentionally) reduced income levels.

Some areas are oddly expensive...I forget if its wyoming or montana (I think montana) is one of the most expensive tax states in the country. Weird.

Texas and some states in the southeast have very inexpensive homes and low tax rates.

I dont think theres a reasonably priced home anywhere in the state of CA unless you really get out in the boonies. Even there I'm not so sure. When I moved to the fairly farmy, rural area I live in now the prices were ok. Today they're silly high and I can tell you that anything within an hours drive of me is just as expensive, even though there is NO commute option to any major city, NO big job houses unless you're a farmer or work in the retail/food service business, and no chance of those property values hanging in there over the long haul. Just not enough infrastructure.

Edit: heres the article...very easy to find...
http://moneycentral.msn.com/content/RetirementandWills/P45875.asp

Note that the numbers given in this article are based on a hypothetical scenario that may not match yours, and there are several 'breaks' factored in that only work if you're over 65.
 
Re: Nothing quick about getting rich with real est

It would be great if a similar list included another expense, our health insurance.

If you compare one state to another, you might determine that in one state you could save $2k less in taxes while your health insurance might be $3k more.

MJ
 
Re: Nothing quick about getting rich with real est

Bpp dropping in here from NFB.

I read in the paper the other day that residential real estate prices in my area went down only 1-2% last year. Compared to the 8-9% drops typical in the surrounding areas, I'm living in a boom town. :) Overall, the tone of the article was upbeat, as the national yearly declines are gradually becoming smaller and smaller since the peak 13-14 years ago, and some big-city areas have actually seen slight increases lately.

Just some notes from the other side of a bubble.

Bpp in Japan
 
Re: Nothing quick about getting rich with real est

Is anyone worried about banking/mortgage stocks? I'm starting to get a little edgy since I own one and a half, IndyMac Bancorp and H&R Block.
 
Re: Nothing quick about getting rich with real est

It would be great if a similar list included another expense, our health insurance.
MJ
Click to expand...

A link off that page includes a wizard that covers other factors such as Health Insurance. The property-tax rates look questionable to me? But it would be interesting to see if others find this tool useful :-

http://www.bestplaces.net/fybp
 
Re: Nothing quick about getting rich with real est

I dont think theres a reasonably priced home anywhere in the state of CA unless you really get out in the boonies.
Click to expand...
Puzzling how its ongoing as CA has had the greatest home appreciation in the US (after DC) for years. And it doesn't seem to putting people off either moving there or up-scaling late before the Fed rate onslaught.

Has CA always had an x-factor regarding popularity?Attractions like Proposition 13 might has been a draw in the past, but that seems redundant now as high sale prices will cripple new buyers with high property tax.
 
Re: Nothing quick about getting rich with real est

ER@40 -

I have read a lot of reports that support people moving out of CA. Older, retired people & many businesses are fleeing the area to nearby states. People are being priced out of the market. However, the young dreamer crowd & immigrants continue to move in but the imbalance points to a net outlfow of people.
 
Re: Nothing quick about getting rich with real est

Couple of fun dynamics in CA real estate...people who are selling their $1M plus homes in LA and SF areas and moving to places like visalia and sacramento and doubling the RE prices there.

And 6 singles or 2-3 couples working in service industries buying a house together in the 'expensive' areas.

Throw in 40 year mortgages and interest only loans.

There does have to be a brick wall in here somewhere though...
 
Re: Nothing quick about getting rich with real est

Bought our house in Orange County, CA in 1987 for $170,000 and now worth over $600,000 and fully paid. The housing market/prices in Southern California have skyrocketed the past few years. A local news article stated only 13% of the population can afford to buy a home in this area. The young marrieds in my office have creative financing (second mortgages, second jobs) and strapped to the hilt trying to pay the mortgage.
 
Re: Nothing quick about getting rich with real est

Bought our house in Orange County, CA in 1987 for $170,000 and now worth over $600,000 and fully paid.  The housing market/prices in Southern California have skyrocketed the past few years.  
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According to FreddieMac Property prices have doubled or better in CA in the last 5 years, and have been going up 20% per year of late.
What's the considered view of forum members regarding CA:- Will we still be seeing 20% two years from now, how about 5 years from now?
 
Re: Nothing quick about getting rich with real est

Bought our house in Orange County, CA in 1987 for $170,000 and now worth over $600,000 and fully paid.  The housing market/prices in Southern California have skyrocketed the past few years.   A local news article stated only 13% of the population can afford to buy a home in this area.  The young marrieds in my office have creative financing (second mortgages, second jobs) and strapped to the hilt trying to pay the mortgage.    
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Ginger: If you paid $170,000 for your home in 1987, my guess is that it is also a very modest home. (We sold our home in So. Calif. in 1987), and moved to the Sierra Foothills in No. Calif.
You must appreciate prop 13 :)
 
Re: Nothing quick about getting rich with real est

What's the considered view of forum members regarding CA:- Will we still be seeing 20% two years from now
Click to expand...
No.
how about 5 years from now?
Click to expand...
No.
 
Re: Nothing quick about getting rich with real est

Ex-Jarhead,

Our home is modest, a one-story home in a great location, good school district. Taxes on house approximately $2,200 a year... Pretty great considering it is worth $600,000 --
 
Re: Nothing quick about getting rich with real est

Ginger,

In North Texas you can buy a very nice new home
for less than $100/ft sq,  Here I sit in slack-jawed
amazement at the inflated housing prices in your
neck of the woods.

I don't know your situation, but if it were me I
would take the money and rent until the bubble
burst.  

I think you people out in La La Land have really,
really gone bonkers sometimes ......  :D

Cheers,

Charlie  
 
Re: Nothing quick about getting rich with real est

I agree with Charlie...

If the Californians with huge equity sell their homes and move to the Dallas area they could buy an exceptionally nice home AND retire early with the difference.

There is a lot to be said for the Dallas area. It is much nicer than Houston and there is plenty to do for entertainment and recreation. There is also cheap travel (because of Southwest Airlines) to neighboring states like New Mexico for vacations.

It is a great place to call home!
 
Re: Nothing quick about getting rich with real est

There goes the neighborhood! :D :D

Cheers,

Charlie
 
Re: Nothing quick about getting rich with real est

In North Texas you can buy a very nice new home
for less than $100/ft sq,  Here I sit in slack-jawed
amazement at the inflated housing prices in your
neck of the woods.
Click to expand...

As they say, the three most important things in real estate are location, location and location.

The price isn't higher because somebody mandated it so. It's higher because more people want to buy than there are places available. When that changes the prices will come down.
 
Re: Nothing quick about getting rich with real est

I doubt there is a lot more appreciation left in CA for the next 5+ years as well. Which is why we're selling the wifes old place instead of hanging on to it.

In fact, I would expect the air to come out of the 'less desireable' non-urban areas. LA and SF will hang on, but I cant see some of the podunkier areas that are now commanding $350k+ for a fixer upper to hold that.

On the other hand, in 1996 I said I thought Bay Area real estate was highly overpriced and couldnt go any higher. I also said the IBM PC was "overpriced, had more memory than anyone would ever need and has a lousy keyboard...plus it runs that lousy 'MS-DOS thing nobody's every heard of instead of CP/M ...it'll never sell!" and "Theres no way we'll ever get networks to run over phone wire...hell, they barely work over coaxial cable!".

So dont listen to me... ;)
 
Re: Nothing quick about getting rich with real est

In fact, I would expect the air to come out of the 'less desireable' non-urban areas.  LA and SF will hang on, but I cant see some of the podunkier areas that are now commanding $350k+ for a fixer upper to hold that.
Click to expand...

I think that a lot of that depends on how the tech industry keeps doing at least for northern California home prices.  There's still net inflow of people to the bay area, community planning departments are planning on fewer new residential spaces (homes and rentals) than new jobs, and it's becoming hard to hire computer geeks again.

This is pushing up the prices of homes not just in Santa Clara Valley but all areas within a 2-3 hour driving radius.  I know people here at my company that drive in from Sacramento once a week, stay overnight, then return home to work the other 3 days there.  Some drive in from Dublin 2 or 3 days a week.  They could afford to live here but they've made the choice to have a bigger home than they could afford in the centre of Silicon Valley at the cost of the commute.  As you get further out than that though the number of people who'll commute drops a lot.
 
Re: Nothing quick about getting rich with real est

Yeah, I'm talking about Barstow, Red Bluff, Redding, Oroville...uncommutable to the major urban areas, not a lot of non-farm business going on. You would be stunned to see what real estate is selling for in areas that are a 2 hour drive to Sacramento, let alone the bay area...
 
Re: Nothing quick about getting rich with real est

Yeah, I'm talking about Barstow, Red Bluff, Redding, Oroville...uncommutable to the major urban areas, not a lot of non-farm business going on.  You would be stunned to see what real estate is selling for in areas that are a 2 hour drive to Sacramento, let alone the bay area...
Click to expand...

TH: The housing prices in Chico, are mainly fueled by well to do move-ins. (L.A., Bay area retirees).
The stance that Chico has taken is to keep a green-belt, and attempting to limit growth.
Again, supply and demand.
Take a drive some-time to Lake Almanor (60 miles east of Chico.) Prices there are starting to approach Lake Tahoe $$$$$$$$$'s. Anything close to the lake is over $l,000,000.00. (Most of these are 2nd. homes, as they don't want to be there when the snow flies).
 
Re: Nothing quick about getting rich with real est

And then there is our house. I paid 68K in 2001
for 1200 SF with 100 feet of water frontage.
Our Texas condo (1000 SF in a luxury resort property
within a nine iron of the biggest lake in Texas) was even
less. These are not fixer-uppers, but are in the upper
layer for their neighborhoods. There are quite a few
cars that would go for more than our homes. But, do you need that. Of course not.

JG
 
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