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Old 08-24-2019, 06:16 AM   #35
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You have an interesting point of view.

If your point is that an investment in property is not a good investment because of the costs involved, I would agree with you. If the point were to make money I would rather have money in a reliable stock. Property has taxes, maintenance, insurance, utilities, and other costs, all of which tend to proportionately rise over time and take a larger piece of the returned sale value. Further, a lot of the costs are out of your control and beyond your planning. You don't buy property as an investment, not if you want to maximize your returns. You buy property to use. THAT is it's value. The cost to own, including taxes, are associated with ownership.

As to the rising proportional amount of taxes, THAT is because the town keeps raising spending. Some of it is due to rising costs but other things are because the town planners want to provide shiny new things to its citizens and the resident, voting citizens agree. As far as I know, anyone in the country that uses property (unless you live in your parent's basement) pays taxes on it; either directly as the owner, or indirectly through rent. It's a way to pay the costs of running a town. And as far as I know, everyone gripes about the amount of taxes paid. It's the true national sport.

However, some of the tax increase, based on where you live and the rate of value increase compared to the rest of the town, is due to increase of value. That value is additional money in your pocket at the time of sale and New Hampshire funds its local spending based on that value. The reality that it is a part of the cost structure of property ownership doesn't diminish the fact that you are paying more because your property is more valuable. If your grandfather bought a lake front property for $50,000 and you sell it for $2,000,000, that's still $2,000,000 in your pocket no matter how much tax has been paid through the generations. If the property wasn't lakefront and only increased to $300,000 in value, you would have paid a lot less in tax and get a lot less in your pocket from the sale. I am OK with paying the addition required tax to live on the more valuable lake property. Just like I was OK with paying more to buy the property in the first place.

What I said is I don't begrudge the tax paid over the years, any more than I begrudge the propane I had to buy and the new roof I had to put on, AND I got a higher return on my lake property than I would for non lake property. The tax is not causative of the value increase, just a necessary evil associated with it. I knew the tax was part of the ongoing costs when I bought the property. I knew taxes would increase over time and I knew some of it would come from increasing valuation.

My only concern through the years has been that I am being taxed equitably compared to others with similar property. At one point, I realized they were taxing me on an inaccurate description of the house and I had two other valuations done that came in lower than my appraisal. I won an adjustment. But to be honest, at the time of sale, I wondered if the lower appraisal also lowered the sale price of the property. If so, I would have happily paid the increased tax to get a higher sale price. There's no way to be sure.

Originally Posted by MAXUM View Post
That's interesting math but does it actually work out in your favor?

Taxes are an annual expenditure that directly erode any gain in value meaning that the value of the property has to exceed the growth of the taxes paid annually in order for you to come out on top.

For example if your tax bill is 8K per year that would mean your property would have to beat that year over year in value increase. Since the taxes paid are on an upwards sliding scale so too must the property value. Keep in mind that if your property value goes down, stagnates or basically doesn't keep up with the annual taxes you're in the red.

So for a real world example my primary residence has doubled in value in 20 years of ownership... yay right? Nope! Now my property assessment has been fairly accurate in tracking the actual market value so no complaint there per say BUT my property taxes have gone up just shy of 5X over in that same time frame and have consistently outpaced the actual annual increase in home value so I have essentially spent the equivalent to all that increase in value incrementally in the form of taxes. What a deal.

The problem is people don't look at the cost to hold property just look at what it's worth when it's sold versus what it was purchased for. It's not zero sum game. In NH, property is not the best of investments in fact if at the end of owning a piece of property you end up breaking even after calculating all the holding and transaction costs consider yourself lucky.
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