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Old 12-02-2020, 01:57 PM   #1
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Default Property taxes

Anyone know (not speculation) why the Alton tax rate jumped 11.5% ($13.95 vs $12.51). Certainly the approved town budget didn't increase that much. FYI - Property values do not appear to have changed

Just askin'
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Old 12-02-2020, 02:16 PM   #2
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you can have Laconia's 19.22 rate if you want it?

joking aside, its either the rate or the value that goes up, sometimes both, I have never seen a reason other than wasted tax payer dollars.
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Old 12-02-2020, 02:27 PM   #3
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Have the Meredith Tax bills gone out yet ?
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Old 12-02-2020, 02:32 PM   #4
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Ask your Friend Mr. Ben Dover at the city/town hall.

He may introduce you to his close friend Ky Jelly.
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Old 12-02-2020, 02:49 PM   #5
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Originally Posted by smith point boater View Post
Anyone know (not speculation) why the Alton tax rate jumped 11.5% ($13.95 vs $12.51). Certainly the approved town budget didn't increase that much. FYI - Property values do not appear to have changed

Just askin'
The major part of the tax bill is the school budget, I don't know what happened there.

In a previous year, maybe last year, the BOS voted to use a large sum out of "undesignated reserves" to reduce taxes. In general this feel good action is not a good idea. The reserves, also know as "surplus", are both an emergency fund and also to keep the town from having to take short term loans to meet expenses between tax collections. The reserves are not unlimited so come the next year...............
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Old 12-02-2020, 02:50 PM   #6
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Certainly the approved town budget didn't increase that much.
My guess would be the school district budget has increased.
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Old 12-02-2020, 03:01 PM   #7
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Originally Posted by smith point boater View Post
Anyone know (not speculation) why the Alton tax rate jumped 11.5% ($13.95 vs $12.51). Certainly the approved town budget didn't increase that much. FYI - Property values do not appear to have changed

Just askin'
That brings it back almost exactly to the 2018 rate (within a couple cents) - basically they negated the 2019 reduction. If I were in command I'd look around and figure some extra reserve $ would be nice to have right about now.

Tax rate doesn't mean too much in and of itself, however if they wildly raised your assessment then you have a real problem (that just got 11.5% worse)
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Old 12-02-2020, 03:09 PM   #8
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Have the Meredith Tax bills gone out yet ?
Mailed on Monday. Due Jan.6th I think.
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Old 12-02-2020, 10:11 PM   #9
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Have the Meredith Tax bills gone out yet ?
I have not got mine but the 2020 rate is $14.02

The state has posted all the town rates here: https://www.revenue.nh.gov/mun-prop/...-tax-rates.pdf
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Old 12-03-2020, 07:40 AM   #10
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Tax rate detail (TY vs LY):

Municipal $4.25 vs 3.21 +32.4%
School $6.41 vs 5.95 +7.7%
State $2.02 vs 2.07 - 2.4%
County $1.27 vs 1.28 -----

Assume Municipal is "town spending" - Not sure what we got for our money. And believe me I understand that this years revenue cannot be less than LY for the town to continue to run (nor do I not expect a rate or assessment increase annually but 11.5% total?) With all the new multiple multi million dollar homes that have been built or renovated (and I'm not begrudging anyone for building them) one could assume that if properly assessed and taxed these would have covered much of the needed increase without a rate increase
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Old 12-03-2020, 08:45 AM   #11
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I have not got mine but the 2020 rate is $14.02

The state has posted all the town rates here: https://www.revenue.nh.gov/mun-prop/...-tax-rates.pdf
We got our Meredith bill yesterday. Our evaluation went up $83k on Bear.
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Old 12-03-2020, 10:11 AM   #12
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We got our Meredith bill yesterday. Our evaluation went up $83k on Bear.
Just got mine this morning it only went up 4K I can live with that, I think Meredith does a great job.
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Old 12-03-2020, 10:23 AM   #13
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.....The state has posted all the town rates here: https://www.revenue.nh.gov/mun-prop/...-tax-rates.pdf
I don't see Wolfeboro's entry. Any ideas why? Not available yet?
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Old 12-03-2020, 01:50 PM   #14
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Just got mine this morning it only went up 4K I can live with that, I think Meredith does a great job.
I just found out based on a survey we have done that we have 20% less frontage and 25% less acreage than our purchase and sale agreement, deed and tax card all indicate. I'll be finding out how good they are when I have to get it all corrected soon.
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Old 12-03-2020, 06:51 PM   #15
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I don't see Wolfeboro's entry. Any ideas why? Not available yet?
No clue, this time of year I usually peek at what the state has reported since it seems to be well ahead of any towns updating their web sites. Frankly I don't get why this is not made available as soon as it is known. I mean how much effort does it take to update a web site?

Guess you will either have to call the town or wait for your bill to arrive in the mail.
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Old 12-03-2020, 06:59 PM   #16
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I just found out based on a survey we have done that we have 20% less frontage and 25% less acreage than our purchase and sale agreement, deed and tax card all indicate. I'll be finding out how good they are when I have to get it all corrected soon.
Isn't your survey based off the deed? Tax maps are notoriously inaccurate but not your deed.
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Old 12-03-2020, 08:51 PM   #17
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Isn't your survey based off the deed? Tax maps are notoriously inaccurate but not your deed.
They are both wrong. The points and measurements listed do not total the actual acreage and frontage that it measures out to be.
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Old 12-04-2020, 06:20 AM   #18
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I just found out based on a survey we have done that we have 20% less frontage and 25% less acreage than our purchase and sale agreement, deed and tax card all indicate. I'll be finding out how good they are when I have to get it all corrected soon.
It's up to the landowner to look out for their own interests. The people who do the assessments are not paid to survey your property. They take available public documents and do a quick comparison, if the town actually pays them to visit the property. Most of the time they assume that the interior layout and descriptions are as listed on the existing property card. It would be an enormous cost to do a detailed assessment on all the property in a town so they just don't do it.

Further, even if you get the assessment corrected, I have seen errors creep in as they review over the years and somehow insert erroneous information, perhaps from some inaccurate public record.

I would like to see a law that says you can (owner's choice) get your assessment description "certified" by a survey and a full, on site review of your home. Once certified, no descriptive changes would be allowed until reviewed and approved by the homeowner or through owner approved documents like a building permit. Proposed changes would have to specifically called out.
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Old 12-04-2020, 08:19 AM   #19
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Our evaluation went up ~$400k (33%). Total tax rate dropped $2.00 (10%) to $20.69 So our taxes went up around $4500.00/yr to $22.5K/yr
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Old 12-04-2020, 09:13 AM   #20
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Default The cycle will continue...

The increase in property tax will cause some people to sell their properties. I have seen this over the last 40 years to several (almost all) of my neighbors. Some bought a plot of land for $5k in 1960. Today the same land is worth over $1mm. Taxes went from a couple hundred to several (as in many) thou$and$.

The incentive for local municipalities is upside down. When an owner has to sell because of unaffordable property tax, the new buyer/owner will be wealthier... Will afford the municipal expansion... Eat at more restaurants... Shop more locally and probably can't vote locally...What a one-sided win for the towns.

California has a politician's nightmare - Prop. 13. In San Francisco I have a property worth three times that in Meredith. My taxes in SF are 1/4 of that in Meredith...Oh, here in SF I have a few things I don't have in Meredith...Paved road, city water, sewage system, trash pick-up, mail delivery I don't have to walk to. A driveway I can use in the winter. No snow plowing where I am in Meredith...We pay extra for that to have done privately.

I love The Lake life more than anything. If I did not enjoy a February afternoon sitting OUTSIDE on my deck in shorts, having a cold beer instead of the winter trauma of New Hampshire, I'd move back there in an instant.

My taxes in Meredith are now very close to my breaking point. This year's increase was beyond what I thought would be needed for that new municipal public works building with that gorgeous kitchen to make lunch in. In my opinion, Meredith is making me pay for the whole building!!!
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Old 12-04-2020, 09:30 AM   #21
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Arrow ..... growing Goldy Old in Meredith, NH!

Is really good that Meredith is going for the gold with some more new town construction projects, happening; the Meredith DPW and the Meredith Public Library projects.

Both the new proposed Meredith DPW home building and the new Meredith Library expansion are totally super-duper, long term ..... like very one hundred year long term improvments for the town. While it may seem a wee bit pricey right now, both are wise investments, and long-term smooth moves!

What's next ..... maybe an indoor heated and climate controlled, 82-84-degree, 25-meter swim pool, out back behind the community center ..... today's expensive improvement is a smart investment for tomorrow ..... with a 3' shallow area that's perfect for a water zumba class ..... with a super sound system! Hey, the winter lasts for a long time, here in Meredith!

People live a lot longer today, than what they used to live, back there then the then there, in those there then olde days from the past, a while ago, ayup! ....

You know what ...... as each year goes by ...... you get a year older ...... did you know that! .....
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Old 12-04-2020, 10:13 AM   #22
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No one should be "taxed" out of their home.

Probably one of the only things Calicornucopia has got right!

A town should "grow" according to affordability of it's voting residents...Not according to the vision of it's politicians.

The new public works building, I'm sure, will house snow plows that have never been on my street.
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Old 12-04-2020, 10:32 AM   #23
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My street, the asphalt paved Cattle Landing Rd is always the very first on the list for that big green Meredith town plow w/ a side-wing to get on it and clean that snow ....... yes ....... totally perfect snow removal on Cattle Landing Rd .......... cheers! .... !
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Old 12-04-2020, 10:36 AM   #24
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I think Meredith does a great job with my tax dollars with all that they provide.
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Old 12-04-2020, 11:53 AM   #25
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It is sad that long time residents get priced out. Many of the new wealthy home buyers don't have the feelings for the area that the long time property owners do but I guess that's the price of progress.

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Old 12-04-2020, 12:12 PM   #26
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It is sad that long time residents get priced out. Many of the new wealthy home buyers don't have the feelings for the area that the long time property owners do but I guess that's the price of progress.
I'm not sure if "progress is the right word, but it's as good as any other.
I think CA Prop 13 mentioned by Gary above provides some tax protection for long term residents in a primary home. I tease my friends who own a place on Lake Sagandaga, NY that their area is ripe for abusive development, same as the NH Lakes Region. The hang up is that, at least on that lake, NY retained ownership of most of the shorefront. Towns in NH won't let that happen, even allowing "current use" on small shorefront parcels that would help protect water quality. They just won't give up the high property taxes for shorefront.
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Old 12-04-2020, 12:55 PM   #27
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I'm not sure if "progress is the right word, but it's as good as any other.
I think CA Prop 13 mentioned by Gary above provides some tax protection for long term residents in a primary home. I tease my friends who own a place on Lake Sagandaga, NY that their area is ripe for abusive development, same as the NH Lakes Region. The hang up is that, at least on that lake, NY retained ownership of most of the shorefront. Towns in NH won't let that happen, even allowing "current use" on small shorefront parcels that would help protect water quality. They just won't give up the high property taxes for shorefront.
Getting a new Library and a new DPW building is progress even though some may feel those facilities aren't needed.
No one likes taxes but NH residents don't want a sales tax so the revenue has to come from somewhere.
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Old 12-04-2020, 01:07 PM   #28
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Towns in NH won't let that happen, even allowing "current use" on small shorefront parcels that would help protect water quality. They just won't give up the high property taxes for shorefront.
Individual New Hampshire towns don't have much say in the matter, as current use requirements and rules are spelled out in state law. It shouldn't be a surprise that "small shorefront parcels" don't qualify for current use designation, since the law requires that to be eligible for current use status, the parcel must either be at least 10 acres in size or provide $2500 in annual agriculture or horticultural products.
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Old 12-04-2020, 03:58 PM   #29
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No one should be "taxed" out of their home.
Sorry, that dog won't hunt.

Supply and demand in a capitalistic society sets both the price of property and the tax rate.

If people feel the property and services offered by the gov't aren't worth the asking price then they won't buy.

Sure, it might be nice to be immune from tax increases but I for one have no problem both paying higher taxes and understanding why things are the way they are, and if I did I'd sell to someone who didn't mind.
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Old 12-04-2020, 05:24 PM   #30
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Default California got it wrong?

I would not say California got it right. We pay $10,000 on our house there which we bought in 2009. My sister, having lived there since 1962 is paying $1,500 in taxes. Not a shabby house either. Elderly woman across the street pays $800 in taxes and her son and grandson live there also. So, when she passes her son will also be paying $800 in taxes. Nothing like screwing anyone new to the state. Might be good if there were an equitable tax. Offer an abatement for elderly and possibly disabled persons to keep them in their homes. Wouldn't it be something if there were a fire or medical emergency at my sisters house and since the tax is so low, the help wouldn't be able to
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Old 12-04-2020, 06:00 PM   #31
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No one should be "taxed" out of their home.

Probably one of the only things Calicornucopia has got right!

A town should "grow" according to affordability of it's voting residents...Not according to the vision of it's politicians.

The new public works building, I'm sure, will house snow plows that have never been on my street.
I agree that no one should be taxed out of their home. But it's hard to summon outrage when it's a second home that has appreciated hundreds of thousands (a million?) in value, and the town is asking for a piece of that appreciation back. People in this situation are WAY ahead financially.
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Old 12-04-2020, 06:03 PM   #32
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I would not say California got it right. We pay $10,000 on our house there which we bought in 2009. My sister, having lived there since 1962 is paying $1,500 in taxes. Not a shabby house either. Elderly woman across the street pays $800 in taxes and her son and grandson live there also. So, when she passes her son will also be paying $800 in taxes. Nothing like screwing anyone new to the state. Might be good if there were an equitable tax. Offer an abatement for elderly and possibly disabled persons to keep them in their homes. Wouldn't it be something if there were a fire or medical emergency at my sisters house and since the tax is so low, the help wouldn't be able to
arrive .

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Agreed--the California formula that allows full appraisals only when a house is sold is grossly unfair to those who have purchased more recently
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Old 12-05-2020, 10:48 AM   #33
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I agree that no one should be taxed out of their home. But it's hard to summon outrage when it's a second home that has appreciated hundreds of thousands (a million?) in value, and the town is asking for a piece of that appreciation back. People in this situation are WAY ahead financially.
Actually they are not. Most property owner end up on the loosing end, secondary properties are by far the worst.

Towns don't just take all the appreciation of a piece of property they actually take MORE than that. Example, my primary residence has a little more than doubled in value over the last 20 years. 100% increase in value means I'm a rich guy huh? Um NO! While my property value may have increased by 100% if I add up all the property taxes I have paid over the past 20 years I have forked out the equivalent of 137% meaning I am in the hole 37% JUST IN TAXES. Now if I were to sell I'd be out another about 9% off the top between RE transfer tax and real estate commission.

Secondary homes are far worse as using the same numbers... add in an additional 15% tax on cap gains. LOL yes the gains you have already paid the equivalent out to the town in the form of taxes.

Bottom line real-estate is a terrible investment to hold - in fact I wouldn't call it an investment at all - it's a way to park money that is relatively safe, and the town via property taxes gets all the interest earned and then some.
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Old 12-05-2020, 11:28 AM   #34
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Actually they are not. Most property owner end up on the loosing end, secondary properties are by far the worst.

Towns don't just take all the appreciation of a piece of property they actually take MORE than that. Example, my primary residence has a little more than doubled in value over the last 20 years. 100% increase in value means I'm a rich guy huh? Um NO! While my property value may have increased by 100% if I add up all the property taxes I have paid over the past 20 years I have forked out the equivalent of 137% meaning I am in the hole 37% JUST IN TAXES. Now if I were to sell I'd be out another about 9% off the top between RE transfer tax and real estate commission.

Secondary homes are far worse as using the same numbers... add in an additional 15% tax on cap gains. LOL yes the gains you have already paid the equivalent out to the town in the form of taxes.

Bottom line real-estate is a terrible investment to hold - in fact I wouldn't call it an investment at all - it's a way to park money that is relatively safe, and the town via property taxes gets all the interest earned and then some.
A secondary home is usually a poor financial investment but your primary home, depending on what part of the country you live in, is usually a great investment as is most rental property.
You have to live somewhere so if you rent you have to deduct that from what ever your costs are from owning. I wouldn't have what I have today without my real estate investments.
I have 3 children , 48, 37, and 33. The two youngest have had multiple homes and made money selling all of them when they moved up. They both have over 1 million dollars in net worth. My oldest who is a RN and has always had a great income but has rented all her life has a negative net worth. We tried to convince her to buy many, many years ago and now she's priced out of the market unless we help.
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Old 12-05-2020, 11:58 AM   #35
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A secondary home is usually a poor financial investment but your primary home, depending on what part of the country you live in, is usually a great investment as is most rental property.
You have to live somewhere so if you rent you have to deduct that from what ever your costs are from owning. I wouldn't have what I have today without my real estate investments.
I have 3 children , 48, 37, and 33. The two youngest have had multiple homes and made money selling all of them when they moved up. They both have over 1 million dollars in net worth. My oldest who is a RN and has always had a great income but has rented all her life has a negative net worth. We tried to convince her to buy many, many years ago and now she's priced out of the market unless we help.
Your points are well made.
The difference from Maxum is that one of his points is that "holding" a real estate investment is not advantageous.
Otherwise, your two youngest have followed Maxum's idea- and obviously done very well!!!
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Old 12-05-2020, 12:26 PM   #36
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Actually they are not. Most property owner end up on the loosing end, secondary properties are by far the worst.

Towns don't just take all the appreciation of a piece of property they actually take MORE than that. Example, my primary residence has a little more than doubled in value over the last 20 years. 100% increase in value means I'm a rich guy huh? Um NO! While my property value may have increased by 100% if I add up all the property taxes I have paid over the past 20 years I have forked out the equivalent of 137% meaning I am in the hole 37% JUST IN TAXES. Now if I were to sell I'd be out another about 9% off the top between RE transfer tax and real estate commission.

Secondary homes are far worse as using the same numbers... add in an additional 15% tax on cap gains. LOL yes the gains you have already paid the equivalent out to the town in the form of taxes.

Bottom line real-estate is a terrible investment to hold - in fact I wouldn't call it an investment at all - it's a way to park money that is relatively safe, and the town via property taxes gets all the interest earned and then some.

I bought five years ago, I'm pretty sure that if I sold now I would come out ahead financially after 5 unbelievably great years of enjoyment.

But I pretty much agree on all of this. I would not describe a second home as a good investment or even an investment at all. I would describe it as a magnificent luxury that a few lucky and/or hardworking people are able to afford, and just maybe, due to appreciation, might not cost very much in the end or might even make some money.
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Old 12-05-2020, 12:37 PM   #37
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I'm sorry but I would have to disagree. You did reduce your overall tax bill by deducting your property taxes.
In my 50 years of property ownership and investment I have only lost money on 2 pieces of property and I'm still collecting money in retirement. Of course a lot depends on when you buy and when you sell. Just like any investment, buy low and sell high.
There is a difference in mindset between a real estate investor and just a home owner. Most home owners spend way more on a property than it will ever be worth. Investors will only spend up to the value of the neighborhood.
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Actually they are not. Most property owner end up on the loosing end, secondary properties are by far the worst.

Towns don't just take all the appreciation of a piece of property they actually take MORE than that. Example, my primary residence has a little more than doubled in value over the last 20 years. 100% increase in value means I'm a rich guy huh? Um NO! While my property value may have increased by 100% if I add up all the property taxes I have paid over the past 20 years I have forked out the equivalent of 137% meaning I am in the hole 37% JUST IN TAXES. Now if I were to sell I'd be out another about 9% off the top between RE transfer tax and real estate commission.

Secondary homes are far worse as using the same numbers... add in an additional 15% tax on cap gains. LOL yes the gains you have already paid the equivalent out to the town in the form of taxes.

Bottom line real-estate is a terrible investment to hold - in fact I wouldn't call it an investment at all - it's a way to park money that is relatively safe, and the town via property taxes gets all the interest earned and then some.
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Old 12-05-2020, 09:50 PM   #38
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I'm sorry but I would have to disagree. You did reduce your overall tax bill by deducting your property taxes.
In my 50 years of property ownership and investment I have only lost money on 2 pieces of property and I'm still collecting money in retirement. Of course a lot depends on when you buy and when you sell. Just like any investment, buy low and sell high.
There is a difference in mindset between a real estate investor and just a home owner. Most home owners spend way more on a property than it will ever be worth. Investors will only spend up to the value of the neighborhood.

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True BUT deducting your property taxes only means you're not paying income tax on the money used to pay for property taxes.
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Old 12-06-2020, 08:56 AM   #39
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True BUT deducting your property taxes only means you're not paying income tax on the money used to pay for property taxes.
If you spent your life just paying rent and never bought a primary home, like my oldest daughter, then you would not be better off financially unless you were exceptional at picking stocks. Just sayin!
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Old 12-06-2020, 09:14 AM   #40
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True BUT deducting your property taxes only means you're not paying income tax on the money used to pay for property taxes.
But remember your rent includes the property tax and mortgage interest if any that the owners pays. As a result you pay rent he deducts the taxes and interest and you don’t get any deduction.

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Old 12-06-2020, 12:40 PM   #41
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If you spent your life just paying rent and never bought a primary home, like my oldest daughter, then you would not be better off financially unless you were exceptional at picking stocks. Just sayin!
So you peaked my interest further so I ran the numbers and here's what I came back with.

If you want to look at the cost comparison of renting vs owning then you have to take the entire cost of owning into consideration, not just taxes. So I did a quick calculation on my primary residence, if I calculate in interest paid on the mortgage over the past 20 years I have paid out 137% of the original purchase price in taxes and 128% in interest.

Had I taken the interest and taxes paid and used that for rent (averages to $2200 per month) and look took the principal and put that into a decent growth mutual fund I would have ended up better off renting. So let me show you -

Owning house value is purchase price - 265% in JUST carrying costs = - 65% in total returns based on -165% of the purchase price + current market value of the house which has increased 100%. I don't calculate principal paid because that is reflected in the value being claimed

Renting + Investing = The total cost of PRINCIPAL only invested in a growth fund dollar cost averaging over 20 years results in total average return of 9.5% leaves me with the current value of the house as it sits now + roughly 200K! Rent was calculated on the total amount of interest paid plus property taxes so that is a wash as in both cases that money is gone either way. Now you may question the 9.5% average return as being a lot, well that is a real number derived from three funds growth funds I have owned over the same period of time. Granted the gains are yet to be taxed as they would be unrealized.

If I am wrong on how I calculated this I'm all ears.
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Old 12-06-2020, 02:05 PM   #42
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You can't compare everyones personal situation to your own. I've seen these calculations done before but I have never met anyone that has rented their whole life that is better off financially than someone that has purchased their own home. I'm sure there could be someone out there but I've never met them. But I have met people that put more money into a home than they should have.
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So you peaked my interest further so I ran the numbers and here's what I came back with.

If you want to look at the cost comparison of renting vs owning then you have to take the entire cost of owning into consideration, not just taxes. So I did a quick calculation on my primary residence, if I calculate in interest paid on the mortgage over the past 20 years I have paid out 137% of the original purchase price in taxes and 128% in interest.

Had I taken the interest and taxes paid and used that for rent (averages to $2200 per month) and look took the principal and put that into a decent growth mutual fund I would have ended up better off renting. So let me show you -

Owning house value is purchase price - 265% in JUST carrying costs = - 65% in total returns based on -165% of the purchase price + current market value of the house which has increased 100%. I don't calculate principal paid because that is reflected in the value being claimed

Renting + Investing = The total cost of PRINCIPAL only invested in a growth fund dollar cost averaging over 20 years results in total average return of 9.5% leaves me with the current value of the house as it sits now + roughly 200K! Rent was calculated on the total amount of interest paid plus property taxes so that is a wash as in both cases that money is gone either way. Now you may question the 9.5% average return as being a lot, well that is a real number derived from three funds growth funds I have owned over the same period of time. Granted the gains are yet to be taxed as they would be unrealized.

If I am wrong on how I calculated this I'm all ears.
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Old 12-06-2020, 02:28 PM   #43
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So you peaked my interest further so I ran the numbers and here's what I came back with.

If you want to look at the cost comparison of renting vs owning then you have to take the entire cost of owning into consideration, not just taxes. So I did a quick calculation on my primary residence, if I calculate in interest paid on the mortgage over the past 20 years I have paid out 137% of the original purchase price in taxes and 128% in interest.

Had I taken the interest and taxes paid and used that for rent (averages to $2200 per month) and look took the principal and put that into a decent growth mutual fund I would have ended up better off renting. So let me show you -

Owning house value is purchase price - 265% in JUST carrying costs = - 65% in total returns based on -165% of the purchase price + current market value of the house which has increased 100%. I don't calculate principal paid because that is reflected in the value being claimed

Renting + Investing = The total cost of PRINCIPAL only invested in a growth fund dollar cost averaging over 20 years results in total average return of 9.5% leaves me with the current value of the house as it sits now + roughly 200K! Rent was calculated on the total amount of interest paid plus property taxes so that is a wash as in both cases that money is gone either way. Now you may question the 9.5% average return as being a lot, well that is a real number derived from three funds growth funds I have owned over the same period of time. Granted the gains are yet to be taxed as they would be unrealized.

If I am wrong on how I calculated this I'm all ears.
Your method is not standard, so I can't tease out all the information needed, but you have at least one fatal flaw--you have assumed the the rental cost equals your taxes plus interest. There is no reason why this is necessarily so. The rental cost should be what it would cost to rent an identical house--this is based on market conditions, not your personal situation. Furthermore, as you might expect, even if this was correct the first year you owned your home, the rental equivalent price would climb much faster than the taxes plus interest total.

As BiggD points out--almost everyone who has bought a home over the past several decades has come out ahead compared to renting.
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Old 12-06-2020, 04:45 PM   #44
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In simpler terms,. if I take out a mortgage at age 25 as 30% of my income, the monthly cost is flat over 30 years. If I rent an equivalent single family home, I have many of the same maintenance responsibilities, and expenses, but the rent increases every time I renew the lease. As an owner with fixed costs the % of income decreases and I have more disposable income. As a renter, my disposable income may grow, but at a substantially lower rate than the owner's. Thirty years later, the mortgage is paid and the owner has a major increase in disposable income. The renter, thirty years later, has to renew the lease at an ever increasing amount.
Assuming the owner and the renter are equally adept investors, the owner has more disposable income to invest and should come out ahead. The owner also has equity which can be leveraged favorably to improve his standard of living. The renter has no equity to leverage and must withdraw from his investments and pay capital gains taxes. From a slightly different perspective, banks and real estate interests have strong lobbies. Who lobbies in DC for tenants? Who do you think will win that race? Obvious example: Mortgage interest is tax favored, rent is not.
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Old 12-06-2020, 04:48 PM   #45
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In simpler terms,. if I take out a mortgage at age 25 as 30% of my income, the monthly cost is flat over 30 years. If I rent an equivalent single family home, I have many of the same maintenance responsibilities, and expenses, but the rent increases every time I renew the lease. As an owner with fixed costs the % of income decreases and I have more disposable income. As a renter, my disposable income may grow, but at a substantially lower rate than the owner's. Thirty years later, the mortgage is paid and the owner has a major increase in disposable income. The renter, thirty years later, has to renew the lease at an ever increasing amount.
Assuming the owner and the renter are equally adept investors, the owner has more disposable income to invest and should come out ahead. The owner also has equity which can be leveraged favorably to improve his standard of living. The renter has no equity to leverage and must withdraw from his investments and pay capital gains taxes. From a slightly different perspective, banks and real estate interests have strong lobbies. Who lobbies in DC for tenants? Who do you think will win that race? Obvious example: Mortgage interest is tax favored, rent is not.
Obviously location makes a huge difference. Property on the West coast and the East coast have appreciated much faster than over mid-America.
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Old 12-06-2020, 09:26 PM   #46
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Another simpler way of looking at it:

Rent for 30 years, end lease, move out and you show nothing......

Own for 30 years, leave property, and you have an asset (presumably paid off).

Happy Holidays to all.
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Old 12-07-2020, 09:57 AM   #47
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Here is another way to think about this that takes all the complicated calculations out of the way. When you rent, the owner has all the costs involved that you would if you owned the house. The rent he charges you will recoup ALL his costs PLUS he will want to make a profit, let's say 5%. Your extra cost while renting is his profit margin. This extra cost is money that you cannot invest in your 9.5% return investment. You are paying a "middle man" and that always adds expense; to you.

For argument, lets accept rent on a single family, 2 bedroom home worth $300,000 is $2500/month. At a 5% markup, you are paying ~$125/mo./$1500/yr. profit to your landlord, money that as an owner you would NOT have to pay. You would also lose $142.50 (9.5%) on not being able to invest this money = $1642.50 lost per year x 30 years (life of a mortgage) = $49,275 lost at the end of 30 years. This ignores compounding effects so it's really far worse than that, a quick spreadsheet calc for compound losses came up with $120,000 after 30 years. PLUS, at the end you have no asset while the owner has a $300,000+ value escalated asset. PLUS+, the above treats rent as fixed while it certainly will NOT be vs. the owner has a fixed, predictable mortgage. PLUS++ at the end of 30 years if you rent, you would still be paying an ever increasing rent while if you owned, your mortgage would be paid off. That's a nice perk as you head toward retirement and a decreased income.

I don't care how you work your numbers. If you come to the conclusion that paying a middle man landlord will be cheaper than owning yourself and building an asset in value, you are missing something BIG. Your rental costs will be the same as his PLUS his profit. Your rent also gains you NOTHING permanent while it funds paying off his mortgage and building his asset value which is also increasing due to inflation. He meanwhile gets to charge you inflating rent prices.

Oh, BTW, when you get around to selling your house (primary residence), you can write off $250,000 ($500,000 joint return) of capital gain on your federal taxes. Try THAT with your 9.5% investment. FURTHER, you can do this every 2 years. Over time, you could shelter $$millions of home value growth from capital gains taxes. $2 million sheltered @22% tax (or more) would save you $440,000. Project that back 30 years and it is worth almost $15,000 per year! As a renter, you get ZIP when you change apartments.
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Old 12-07-2020, 12:14 PM   #48
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Here is another way to think about this that takes all the complicated calculations out of the way. When you rent, the owner has all the costs involved that you would if you owned the house. The rent he charges you will recoup ALL his costs PLUS he will want to make a profit, let's say 5%. Your extra cost while renting is his profit margin. This extra cost is money that you cannot invest in your 9.5% return investment. You are paying a "middle man" and that always adds expense; to you.

For argument, lets accept rent on a single family, 2 bedroom home worth $300,000 is $2500/month. At a 5% markup, you are paying ~$125/mo./$1500/yr. profit to your landlord, money that as an owner you would NOT have to pay. You would also lose $142.50 (9.5%) on not being able to invest this money = $1642.50 lost per year x 30 years (life of a mortgage) = $49,275 lost at the end of 30 years. This ignores compounding effects so it's really far worse than that, a quick spreadsheet calc for compound losses came up with $120,000 after 30 years. PLUS, at the end you have no asset while the owner has a $300,000+ value escalated asset. PLUS+, the above treats rent as fixed while it certainly will NOT be vs. the owner has a fixed, predictable mortgage. PLUS++ at the end of 30 years if you rent, you would still be paying an ever increasing rent while if you owned, your mortgage would be paid off. That's a nice perk as you head toward retirement and a decreased income.

I don't care how you work your numbers. If you come to the conclusion that paying a middle man landlord will be cheaper than owning yourself and building an asset in value, you are missing something BIG. Your rental costs will be the same as his PLUS his profit. Your rent also gains you NOTHING permanent while it funds paying off his mortgage and building his asset value which is also increasing due to inflation. He meanwhile gets to charge you inflating rent prices.

Oh, BTW, when you get around to selling your house (primary residence), you can write off $250,000 ($500,000 joint return) of capital gain on your federal taxes. Try THAT with your 9.5% investment. FURTHER, you can do this every 2 years. Over time, you could shelter $$millions of home value growth from capital gains taxes. $2 million sheltered @22% tax (or more) would save you $440,000. Project that back 30 years and it is worth almost $15,000 per year! As a renter, you get ZIP when you change apartments.
Landlords don't buy property to lose money.
The vacation home market is a whole different animal. It happens to be great right now but when a recession hits those are the first properties to take a beating.
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Old 12-07-2020, 02:33 PM   #49
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Here is another way to think about this that takes all the complicated calculations out of the way. When you rent, the owner has all the costs involved that you would if you owned the house. The rent he charges you will recoup ALL his costs PLUS he will want to make a profit, let's say 5%. Your extra cost while renting is his profit margin. This extra cost is money that you cannot invest in your 9.5% return investment. You are paying a "middle man" and that always adds expense; to you.

For argument, lets accept rent on a single family, 2 bedroom home worth $300,000 is $2500/month. At a 5% markup, you are paying ~$125/mo./$1500/yr. profit to your landlord, money that as an owner you would NOT have to pay. You would also lose $142.50 (9.5%) on not being able to invest this money = $1642.50 lost per year x 30 years (life of a mortgage) = $49,275 lost at the end of 30 years. This ignores compounding effects so it's really far worse than that, a quick spreadsheet calc for compound losses came up with $120,000 after 30 years. PLUS, at the end you have no asset while the owner has a $300,000+ value escalated asset. PLUS+, the above treats rent as fixed while it certainly will NOT be vs. the owner has a fixed, predictable mortgage. PLUS++ at the end of 30 years if you rent, you would still be paying an ever increasing rent while if you owned, your mortgage would be paid off. That's a nice perk as you head toward retirement and a decreased income.

I don't care how you work your numbers. If you come to the conclusion that paying a middle man landlord will be cheaper than owning yourself and building an asset in value, you are missing something BIG. Your rental costs will be the same as his PLUS his profit. Your rent also gains you NOTHING permanent while it funds paying off his mortgage and building his asset value which is also increasing due to inflation. He meanwhile gets to charge you inflating rent prices.

Oh, BTW, when you get around to selling your house (primary residence), you can write off $250,000 ($500,000 joint return) of capital gain on your federal taxes. Try THAT with your 9.5% investment. FURTHER, you can do this every 2 years. Over time, you could shelter $$millions of home value growth from capital gains taxes. $2 million sheltered @22% tax (or more) would save you $440,000. Project that back 30 years and it is worth almost $15,000 per year! As a renter, you get ZIP when you change apartments.
While I agree, there are some caveats to this 30 years is a very long time and in that you have:
roof is 20-30 year replacement
windows
maintenance to the property
included utilities
Landscaping costs -even a decent lawn mower is $350 and up
and more you name it,

some might wager that 5% if that is the case, is less than a $20,000 roof and $15,000 for windows or $5,000 for a furnace and $500 or so for a water heater. pipe bursts, re-tile of the tub and shower, flooring refinishes

It would cost far more than $49,000 over 30 years to maintain the property if owned by yourself, think of what you spend in maintenance every year on your property, more than $1500 that is for sure.

It all depends on rent cost versus ownership costs for now, and location location location.

I actually rent in MA and own my lake property. Just happened this way, but at my rent numbers it makes zero sense for me to buy and my rent has not changes in years, have a great landlord and property to use. To buy would cost me about $1,000 more a month.

Yes I will not have the asset at the back end, but I am investing what I am saving now over the months. Since this time my landlord has replaced the roof, the water heater, fixed a retaining wall that was washed out in a bad storm, will be painting the house in the Spring, replaced an appliance or two, had a leak in the shower wall from tile needing to be re-grouted, and has painted when I have asked to change things. (this has been over the past 9 years). He has owned the property for 26 years. - 9 years at $1,000 a month is $108,000 (no accounting for fluctuations in the market on rates and prices). Money that helped me rebuild our lake property out of pocket. In that time his taxes have gone up. why my rent has not I do not know, I am not going to ask, but I have a number in my head and on paper that if it ever gets to that is the time I decide to buy/move.
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Old 12-08-2020, 12:42 AM   #50
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Here is another way to think about this that takes all the complicated calculations out of the way. When you rent, the owner has all the costs involved that you would if you owned the house. The rent he charges you will recoup ALL his costs PLUS he will want to make a profit, let's say 5%. Your extra cost while renting is his profit margin. This extra cost is money that you cannot invest in your 9.5% return investment. You are paying a "middle man" and that always adds expense; to you.

For argument, lets accept rent on a single family, 2 bedroom home worth $300,000 is $2500/month. At a 5% markup, you are paying ~$125/mo./$1500/yr. profit to your landlord, money that as an owner you would NOT have to pay. You would also lose $142.50 (9.5%) on not being able to invest this money = $1642.50 lost per year x 30 years (life of a mortgage) = $49,275 lost at the end of 30 years. This ignores compounding effects so it's really far worse than that, a quick spreadsheet calc for compound losses came up with $120,000 after 30 years. PLUS, at the end you have no asset while the owner has a $300,000+ value escalated asset. PLUS+, the above treats rent as fixed while it certainly will NOT be vs. the owner has a fixed, predictable mortgage. PLUS++ at the end of 30 years if you rent, you would still be paying an ever increasing rent while if you owned, your mortgage would be paid off. That's a nice perk as you head toward retirement and a decreased income.

I don't care how you work your numbers. If you come to the conclusion that paying a middle man landlord will be cheaper than owning yourself and building an asset in value, you are missing something BIG. Your rental costs will be the same as his PLUS his profit. Your rent also gains you NOTHING permanent while it funds paying off his mortgage and building his asset value which is also increasing due to inflation. He meanwhile gets to charge you inflating rent prices.

Oh, BTW, when you get around to selling your house (primary residence), you can write off $250,000 ($500,000 joint return) of capital gain on your federal taxes. Try THAT with your 9.5% investment. FURTHER, you can do this every 2 years. Over time, you could shelter $$millions of home value growth from capital gains taxes. $2 million sheltered @22% tax (or more) would save you $440,000. Project that back 30 years and it is worth almost $15,000 per year! As a renter, you get ZIP when you change apartments.
There is one really bad assumption in all this and a few things that are not part of your calculation.

First to the assumption that the property can actually fetch rent above and beyond what the total cost of ownership is plus a little extra. That is not always the case. In time that is likely to be true but not a forgone conclusion. I have known a few who have dabbled in this and none have been able to recoup all of the carrying costs - however for the owner of a rental, even if you're throwing in the difference it's still buying a house at a substantial discount as the bulk of the property is being paid by the tenant.

So back to your example of a 300K house. For a person looking to buy... let's look at all the costs associated with buying that property. A 300K mortgage at 3% will fetch a total interest payment over the life of the loan of $155,332. That is a net loss to the owner. Now let's take an average tax rate in NH - I chose to use $25 per thousand per year based on a 300K assessment. That comes out to $7500 per year. Now it's really hard to calculate what that will do over the course of 30 years but you can bet on two things. The assessment of the property will increase as will the taxes paid. My property taxes have increased 5X's over in 20 years. Since I can't really accurately calculate that, let's say it remains at that $7500.00 per year. After 30 years that comes out to $225,000. So between the interest on the loan adding a fixed tax burdon which we know is never going to happen I'm still at $380K to hold that property for 30 years. Even if the property were to double in that time frame what you essentially have is a net loss of 80K. This does not include any upkeep which also is a huge variable but let's say the house such as mine started out as brand new and nothing elective was done far as improvements go, just upkeep, add in the cost of a roof, interior floors, paint, appliances etc... that all would need to be replaced during that time period. It further erodes that number eating into the principal cost of the house. So yes at the end of the day you may in this illustration end up with a house that is worth 600K but it cost you how much to have it during all that time of ownership?

To me it's a wash if renting the landlord passes off the cost of repairs and upkeep to a tenant via rent, if you own the same still needs to be done and sucked up by the owner. The only difference is the renter is paying a smaller amount monthly to cover this where as the owner to say put a new roof on, put in new appliances, refinish floors, pave the drive way, paint the house or whatever will do that in a lump sum when it is done.

As also mentioned before - yes there is the ability to write off some interest paid as well as some property taxes, but all this does not erase the fact the money is paid out. So writing off 10K a year in property taxes doesn't mean you never paid 10K in taxes, just that it wasn't used for that purpose after it has already been taxed as income.

If you happen to live in the house for a lifetime (most do not) and after 30 years it is paid off and thus free of principal and interest, it will take a long time to start making up for all the money lost in the 30 years of prior ownership and doesn't erase the never ending annual tax bill to hold it. However it is true that entering into retirement with a house that is paid off is certainly beneficial when faced with a smaller fixed income.

Now speaking of cap gains on the house when sold, hell you should get that tax free considering how much has been spend already in property tax and interest which in every calculation that I have done typically far exceeds the amount of gain of the property over the period of time of ownership. All this is doing is preventing you from being taxed yet again on the value that has already been lost to the aformentioned.

In low property tax states holding property can be a better asset as the total cost to hold is less. Of course that only means the tax burden per capita is collected from other sources such as income, sales, cap gains or other broad based taxes.
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Old 12-08-2020, 06:19 AM   #51
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Sorry, you both skip right by the main point and start dropping details like maintenance into the conversation. If a roof needs to be replaced at $15000, both an owner and landlord have to face the same costs. The owner pays it directly. The landlord has either been planning for such costs all along (if they are smart) or MUST raise rent to cover their costs. Either way, the renter pays for it and if the landlord is smart it comes with a bit of a markup to the renter. Either that or they are subsidizing their tenants, which is absurd. You can argue about how much a landlord can make on a property but none of them are renting a property to pay the tenant's bills. That's government's job.

Issues like not staying in a house for 30 years don't matter. The only way a discussion like this makes sense and matters is if the conditions, like the size of the property, the location, etc. are held equal. If I own and sell my house (and take whatever appreciation of value it has made with me) and move to another, I would also rent and change to an new but equivalent house to the owner situation. Otherwise, we might as well try to compare the cost of a one bedroom rental to a 4 bedroom home that is owned. It is pointless. Of course the one bedroom apartment is cheaper.

There are advantages that are built into home ownership that, all other things (size, location, condition of house, ..., ad infinitum) being equal, beat out renting every time. You can argue that some of those things are NOT equal but then you are trying to compare apples to bananas and that, while perhaps meaningful to your individual situation, is pointless as a general comparison.

If you think that for your individual situation you are better off renting, knock yourself out. You may be right. But it is not true in general. If most people couldn't make a profit renting property there would be little available rental property. That is NOT the case and THEIR profit is YOUR added cost.
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Old 12-08-2020, 06:41 AM   #52
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Have the Meredith Tax bills gone out yet ?
I haven't received my tax bill yet. I called last week and Meredith clerk said they were to be mailed out November 30. I will call again today.
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Old 12-08-2020, 07:40 AM   #53
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I haven't received my tax bill yet. I called last week and Meredith clerk said they were to be mailed out November 30. I will call again today.
You should be able to download a copy online. I know we can in Laconia

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Old 12-08-2020, 08:12 AM   #54
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Those are some interesting theories posted above about renting out property as a landlord.

One thing that stood out to me is the statement that the landlord would raise the rent if something like a new roof or other expense were needed. That sounds good but really doesn't work in the real world. The rent can only be the fair market rent for the property, not what the landlord would like to get to make a profit. The tenant will not care what your expenses are and will move if they can get a better deal somewhere else.

The biggest source of negativity about being a landlord only comes from either tenant damage or non-payment. In those cases, the courts, especially Laconia District Court, will not help a landlord but will bend over backwards to help a tenant. That has been my experience.

As an investment, I have had several two families going back to 1978. In each case, after a down payment in the 20% range the rental income paid the principal, interest, taxes, and insurance. After about 5 to 10 years each one was making a significant profit every year, even after any necessary maintenance. Also, due to depreciation, my income taxes were reduced substantially. When I sold each one, after 25 to 30 years of ownership, the mortgage had been paid off and the selling price was approximately 15 times my original down payment.

Real estate as an investment, and even a personal residence, remains a good long term investment. That is especially true for waterfront properties because of a limited supply and a growing demand that will only drive prices up over the long term.
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Old 12-08-2020, 08:23 AM   #55
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Those are some interesting theories posted above about renting out property as a landlord.

One thing that stood out to me is the statement that the landlord would raise the rent if something like a new roof or other expense were needed. That sounds good but really doesn't work in the real world. The rent can only be the fair market rent for the property, not what the landlord would like to get to make a profit. The tenant will not care what your expenses are and will move if they can get a better deal somewhere else.

The biggest source of negativity about being a landlord only comes from either tenant damage or non-payment. In those cases, the courts, especially Laconia District Court, will not help a landlord but will bend over backwards to help a tenant. That has been my experience.

As an investment, I have had several two families going back to 1978. In each case, after a down payment in the 20% range the rental income paid the principal, interest, taxes, and insurance. After about 5 to 10 years each one was making a significant profit every year, even after any necessary maintenance. Also, due to depreciation, my income taxes were reduced substantially. When I sold each one, after 25 to 30 years of ownership, the mortgage had been paid off and the selling price was approximately 15 times my original down payment.

Real estate as an investment, and even a personal residence, remains a good long term investment. That is especially true for waterfront properties because of a limited supply and a growing demand that will only drive prices up over the long term.
Use to have a cousin who owned multiple rental properties, he would go and physically throw out tenants for nonpayment. I use to tell him you’re going to get ya self arrested or in trouble and his rebuttle was always my court and lawyer fees for being arrested for this would be cheaper than spending 9 months fighting them in court to evict and then repair my destroyed house...
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Old 12-08-2020, 09:01 AM   #56
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Sorry, you both skip right by the main point and start dropping details like maintenance into the conversation. If a roof needs to be replaced at $15000, both an owner and landlord have to face the same costs. The owner pays it directly. The landlord has either been planning for such costs all along (if they are smart) or MUST raise rent to cover their costs. Either way, the renter pays for it and if the landlord is smart it comes with a bit of a markup to the renter. Either that or they are subsidizing their tenants, which is absurd. You can argue about how much a landlord can make on a property but none of them are renting a property to pay the tenant's bills. That's government's job.

Issues like not staying in a house for 30 years don't matter. The only way a discussion like this makes sense and matters is if the conditions, like the size of the property, the location, etc. are held equal. If I own and sell my house (and take whatever appreciation of value it has made with me) and move to another, I would also rent and change to an new but equivalent house to the owner situation. Otherwise, we might as well try to compare the cost of a one bedroom rental to a 4 bedroom home that is owned. It is pointless. Of course the one bedroom apartment is cheaper.

There are advantages that are built into home ownership that, all other things (size, location, condition of house, ..., ad infinitum) being equal, beat out renting every time. You can argue that some of those things are NOT equal but then you are trying to compare apples to bananas and that, while perhaps meaningful to your individual situation, is pointless as a general comparison.

If you think that for your individual situation you are better off renting, knock yourself out. You may be right. But it is not true in general. If most people couldn't make a profit renting property there would be little available rental property. That is NOT the case and THEIR profit is YOUR added cost.
Again normally I agree with you, but in my direct case, my rent has not increased in 9 years. Abnormality for sure, but I also know those that own that keep rent relatively stable with good tenants
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Old 12-08-2020, 10:21 AM   #57
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Again normally I agree with you, but in my direct case, my rent has not increased in 9 years. Abnormality for sure, but I also know those that own that keep rent relatively stable with good tenants
Right. Every time a tenant moves, there are fix up costs, advertising, no rent while vacant, etc. People don't want to move in December, so if a tenant moves out in November, you may lose 2-3 months rent. Or, as in today's market where few rentals are available, you may get somebody to move in quickly. This is all unpredictable, so you can't be a successful landlord if you don't have some reserves and some fiscal management skills.
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Old 12-08-2020, 12:57 PM   #58
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One thing that stood out to me is the statement that the landlord would raise the rent if something like a new roof or other expense were needed. That sounds good but really doesn't work in the real world. The rent can only be the fair market rent for the property, not what the landlord would like to get to make a profit. The tenant will not care what your expenses are and will move if they can get a better deal somewhere else.
I would argue that a landlord that does not plan for maintenance issues and adjust the rent to deal with it is a poor financial planner. I fully understand the financial constraints on the amount of rent. However, if the roof on a house is 15 years old and you are not setting aside some money to replace it sometime in the next ten years you are foolish. A well maintained rental property should draw a higher rent. That's why landlords paint their properties, if needed, between tenants. If a window pane cracks, they replace it. A $10,000 roof expensed over 20 years is about $40 a month. That shouldn't drive away most tenants, especially if they see the overall property is well maintained. Maybe the rent is set $80 per month higher to be ready for all maintenance issues.

Maybe a landlord who is only in it for a short term may minimize the rent to attract people, figuring he will be long gone by the time the roof needs replacement and the heating system goes dead. Eventually however, the work will have to be done and the owner at that time will have to pay for it and if renting the property will need to recoup his costs through rent.

Overall, it's a business and the landlord needs to make enough money to pay all his costs AND make a profit or it's not worth being in that business. Instead he would be better off investing in a nice 9.5% return growth fund with dollar cost averaging.
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Old 12-08-2020, 02:01 PM   #59
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You should be able to download a copy online. I know we can in Laconia

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Thanks. I called Meredith and found they had mailed my notifications to Bear Island. So I just got the info from the tax clerk and mailed a check
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Old 12-08-2020, 02:03 PM   #60
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You should be able to download a copy online. I know we can in Laconia

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Thanks. I called Meredith and found they had mailed my notifications to Bear Island. So I just got the info from the tax clerk and mailed a check. We're in south Georgia for the winter. Emailed my correct address to them.
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Old 12-08-2020, 04:14 PM   #61
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The same thing goes for business rentals. I was in business at 3 different locations for the past 33 years. The first location was privately held and the landlord kept the rent reasonable. The second location was a franchise and the rent went up 100% in ten years which no matter how good the location was the rent squashed any increase profits.
So after 20 years I finally bought my own property and spent the last 13 years with a fixed monthly mortgage.
March 1st I retired and leased the property out. Now I collect rent to subsidize my retirement.
My biggest mistake was not buying 30 years ago. The opportunities where there but I just didn't make the move.
I'm thankful I finally did because if I didn't I wouldn't have the extra income in retirement.
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Old 12-08-2020, 05:44 PM   #62
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The same thing goes for business rentals. I was in business at 3 different locations for the past 33 years. The first location was privately held and the landlord kept the rent reasonable. The second location was a franchise and the rent went up 100% in ten years which no matter how good the location was the rent squashed any increase profits.
So after 20 years I finally bought my own property and spent the last 13 years with a fixed monthly mortgage.
March 1st I retired and leased the property out. Now I collect rent to subsidize my retirement.
My biggest mistake was not buying 30 years ago. The opportunities where there but I just didn't make the move.
I'm thankful I finally did because if I didn't I wouldn't have the extra income in retirement.
The tough part is saving up for the huge down payments banks require for commercial or investment properties, while you are still young enough to take advantage of long term equity growth. One strategy is to buy an apartment building as your first home, and as owner occupied, you get favorable down payment/financing. If you get past image and drive a junker jalopy instead of leasing or financing a new car, you can be in a cash paying lifestyle very quickly. Wish I'd done that. I'm cash now, but didn't buy my first investment real estate until 1980. Sold that and bought a two family that now has no mortgage and makes a nice contribution to retirement cash flow.
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Old 12-08-2020, 06:44 PM   #63
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I would argue that a landlord that does not plan for maintenance issues and adjust the rent to deal with it is a poor financial planner.
I am not sure if you have any actual experience owning rental properties but I would tell you that is just not correct.

The tenant couldn't care less what your expenses are, or have any interest in helping you to make a profit. Tenants will stay as long as they think they have a good deal and like where they live. As soon as you raise the rent to cover YOUR expenses, if it does not reflect fair market value, they will move along. From a tenant perspective your costs of ownership and maintenance mean nothing.

For the last 42 years I have followed the rental market closely to establish fair rents. I have reviewed numerous ads both in print media and on many websites to determine the market value of a property and determine what amount I could charge. That determination is what works in the real world, not what my expenses are.
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Old 12-08-2020, 07:18 PM   #64
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I am not sure if you have any actual experience owning rental properties but I would tell you that is just not correct.

The tenant couldn't care less what your expenses are, or have any interest in helping you to make a profit. Tenants will stay as long as they think they have a good deal and like where they live. As soon as you raise the rent to cover YOUR expenses, if it does not reflect fair market value, they will move along. From a tenant perspective your costs of ownership and maintenance mean nothing.

For the last 42 years I have followed the rental market closely to establish fair rents. I have reviewed numerous ads both in print media and on many websites to determine the market value of a property and determine what amount I could charge. That determination is what works in the real world, not what my expenses are.
I absolutely agree. Tenants could care less about your expenses and expenses never determine rental charges. They are strictly what the market will dictate.

Before purchasing the buyer needs to do his due diligence and investigate market rates and his expenses to determine if the property will yield the desired cap rate for the property.

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Old 12-08-2020, 10:59 PM   #65
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Despite some published books, I wish I had read this thread 40 years ago. Could have made the learning curve a lot easier.
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Old 12-09-2020, 06:38 AM   #66
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I am not sure if you have any actual experience owning rental properties but I would tell you that is just not correct.

The tenant couldn't care less what your expenses are, or have any interest in helping you to make a profit. Tenants will stay as long as they think they have a good deal and like where they live. As soon as you raise the rent to cover YOUR expenses, if it does not reflect fair market value, they will move along. From a tenant perspective your costs of ownership and maintenance mean nothing.

For the last 42 years I have followed the rental market closely to establish fair rents. I have reviewed numerous ads both in print media and on many websites to determine the market value of a property and determine what amount I could charge. That determination is what works in the real world, not what my expenses are.
I agree if you raise the rent $150 a month to pay for a roof that had to be repaired the tenant is NOT going to be OK with it. What I am saying is that BEFORE you rent out a property you should be including a maintenance buffer into the rent. If you as the landlord have a mortgage on the property, wouldn't you make sure the rent covers that? You know you will have to do some cleanup (paint touch ups, etc.) between renters. Shouldn't the rent or damage deposit cover your costs? You should be able to estimate your required maintenance expenses using expected lifetimes of roof, heating system, appliances, flooring, etc and add that coverage to a planned monthly rent.

If you do not, do this, you are planning to subsidize your tenants and THAT is not smart business. Maybe in certain areas you can't get the rent you would need to cover your costs. IMO, if would be business foolish to rent out a property in that area. You would be far better off to sell the property and invest your money in the market where you can get a 9.5% return with a LOT less hassle.
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Old 12-09-2020, 12:10 PM   #67
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I agree if you raise the rent $150 a month to pay for a roof that had to be repaired the tenant is NOT going to be OK with it. What I am saying is that BEFORE you rent out a property you should be including a maintenance buffer into the rent. If you as the landlord have a mortgage on the property, wouldn't you make sure the rent covers that? You know you will have to do some cleanup (paint touch ups, etc.) between renters. Shouldn't the rent or damage deposit cover your costs? You should be able to estimate your required maintenance expenses using expected lifetimes of roof, heating system, appliances, flooring, etc and add that coverage to a planned monthly rent.

If you do not, do this, you are planning to subsidize your tenants and THAT is not smart business. Maybe in certain areas you can't get the rent you would need to cover your costs. IMO, if would be business foolish to rent out a property in that area. You would be far better off to sell the property and invest your money in the market where you can get a 9.5% return with a LOT less hassle.
I agree with Tilton BB. You could buy a house in 2005, and get a fair rent. In 2008, the bottom falls out of the economy. Big loss if you sell, if you can even find a buyer. Banks are foreclosing even on performing loans. If you were getting $1500/mo, when the lease runs out, or maybe before, the tenant leaves. Nobody wants to pay, or can afford to pay, $1500, so you finally rent it for $1250 and swallow the losses. 2-3 months, no rent? Raising the rent because you might want to replace the roof in 15 years is out of the question. Yes, you want to make those calculations before you buy, but if your calculations plan on raising the rent 5% a year, you'll have a lot of turnover and fix ups that come out of pocket. And more vacant months where you collect no rent. BTW, landlords don't make lots of money on rents, at least in the beginning. Real estate can be a shelter of sorts, depreciation, leverage, deductible mortgage interest, maybe travel (to Orlando?) to inspect and maintain the property.

Sounds like the mutual fund is perfect for you. I hope you're not paying a financial planner 1.5% to tell you to buy a mutual fund. Remember, you'll pay taxes on the capital gains distribution and more taxes when you make withdrawal to pay the first tax, or to move to a different fund. 9.5% is just a raw number.
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