Replies: 38
| visibility 507
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
Fleeing Crushing Taxes for a Better Life
Jul 27, 2015, 11:03 AM
|
|
http://www.nationalreview.com/article/421625/states-new-jersey-south-taxes
He didn’t remember his first property-tax bill, because it was so low. There was no state income tax in New Jersey back in 1961, and no state sales tax until 1966. The only taxes individuals paid to the state were on gasoline, tobacco, and alcohol.
He called one day not long after his wife died, to let them know he was thinking of selling his house. He didn’t say why.
But his kids knew why. The property taxes on the house their dad purchased for $32,000 back in 1961 had swelled, from a number so low he couldn’t remember it to a number he could not forget: $12,000 a year.
The home my father thought he owned outright had a co-owner: the local city council and school board. And it was a co-owner with an appetite for spending.
New Jersey went from having no state income tax to having one of the highest in the country... and from having no sales tax to having one of the highest rates in the country... It was all too much for him to handle.
Saddled by taxes and worried that future tax increases would eat up his retirement income and his savings, this lifelong New Jersey resident, at age 81, did what so many folks in high-tax states like New Jersey are forced to do: He sold his house and moved.
My dad didn’t leave his country, but he left his home state. And he left because leaders there treated its residents like an ATM...
Moving isn’t something most adults choose to do, or like to do. It’s something we feel compelled to do. Moving routinely ranks near the top of any top-ten list of stress events in a person’s life.
...businesses are fleeing New Jersey for the same reason so many residents are fleeing: the high cost of doing business there. Indeed, New Jersey ranked 50th, dead last, in the Tax Foundation’s 2015 State Tax Business Climate Index.
The country watched in disbelief as one of our great American cities, Detroit, created over a million refugees over five decades, as its population fell from a peak of nearly 1,700,000 in 1960 to its current 680,000. It spent, mismanaged, and shrank itself into bankruptcy.
How states, cities, and nations treat capital — the human kind and the money kind — matters. How leaders think about capital matters too. The ability to manage, nurture, and preserve it, and to grow a healthy tax base (not destroy it), is what will separate winners from losers.
|
|
|
|
Oculus Spirit [98177]
TigerPulse: 100%
Posts: 65143
Joined: 7/13/02
|
Similar thing happened to my parents here in SC
Jul 27, 2015, 11:48 AM
|
|
When they were young adults, they started buying real estate, mainly rental properties. At one time they had about 12 such properties when I was a kid. The long-term plan was to rent the apartments, pay off the loans over several decades, and retire with no mortgages, and a steady income.
Sounded great. Not so in practice. First, you had the headaches of being a landlord and keeping everything rented. You had the expense of evicting someone who doesn't pay rent. And let me tell you, you NEED a 2-month security deposit unless you plan on doing credit checks and that hassle. This is necessary because it takes at least two months to evict someone who suddenly decides they will stop paying rent. Then you have to wait for a day with no rain, then the cops go in and you clean the place out. THEN you have the repairs, cleaning, new carpets, appliances, and everything they ruined.
Second, you have the mortgage AND insurance AND taxes to pay, along with the water.
THEN, you have the maintenance (painting, carpets, etc.)
When you're done, you're barely scraping by while you have the mortgage. But my parents feared not, because once the mortgage was gone, it was money in the bank. As they retired and owned almost everything outright, then they realized that property taxes were as high as the mortgage payments were 30 years ago. So you're still scraping by....goodbye retirement.
Oh, and one property was lost to the RCSD due to a drug bust. One of their best renters (never late) was busted in a RCSD/DEA raid. Have you seen an apartment after it's been raided by the cops. Might as well have burned it.
Lesson I learned....you need your money free and clear when you retire. They have sold everything and have a nest egg now, but thankfully they did that (mostly) before 2008. But ask them and they will tell you the taxes were the killer. They, retired with no income other than SS and pensions, had to pay over $30K a year in property taxes (more than they paid on most of the original mortgages). And the schools in their area suck more than ever.
PS. I can only imagine why the rent is too #### high in New York.
Message was edited by: Tiggity®
|
|
|
|
|
110%er [9107]
TigerPulse: 100%
Posts: 14107
Joined: 11/5/05
|
Almost everyone I've talked to has a similar story.
Jul 27, 2015, 12:06 PM
|
|
There are two people I can think of that are doing OK with rentals...one is a guy here in GVille that mumbo knows that has 60+ properties and also many other income producing ventures.
The other is a guy on TI that I've never met that owns multiple trailers/parks.
Both of these folks seem to be doing well with having rental properties - at least from an outside perspective.
Other than that it's mostly horror stories. Even my step-dad, who has multiple paid off rentals in the Shandon area of Columbia doesn't make a bunch on them, and the pain that goes with dealing with tenants is something he hates.
My wife and I have thought about doing this, but the more I learn - no thanks.
|
|
|
|
|
110%er [8243]
TigerPulse: 100%
Posts: 7408
Joined: 2/20/04
|
I've owned quite a few rentals over the years
Jul 27, 2015, 12:19 PM
|
|
Right now, I only own one, and have the perfect tenants. They only call if something major is broken, they pay rent on time, they just agreed to a rent increase, and when I drove by this weekend, I noticed that they had just mulched the flower beds. Down sides include $4500/yr property taxes, and I bought it in 2007, so if I were to sell it now (which I will when they move out), it would probably be for a loss.
When I owned and rented out a unit in the Woodlands of Clemson, the tenants turned off the power for the summer when the freezer was full of meat. The slime that oozed from the fridge flowed across the kitchen and onto the living room carpet. The security deposit didn't cover much of the cost to replace the carpet and get the smell of death out of there. I replaced the carpet with Pergo, then sold the place, because college kids are stupid.
I don't have too many horror stories. Most of the places I owned rented well because of location, and cash flowed, and provided a great tax break come April 15th, and most were new construction, so the repairs were few and far between.
|
|
|
|
|
CU Medallion [54759]
TigerPulse: 100%
Posts: 52803
Joined: 10/1/03
|
##### kind of rental gets tagged with $4500 in taxes?***
Jul 27, 2015, 12:22 PM
|
|
|
|
|
|
|
110%er [8243]
TigerPulse: 100%
Posts: 7408
Joined: 2/20/04
|
A nice one. The taxes last year were $4,645.19.
Jul 27, 2015, 12:27 PM
|
|
Current rent is $1900, and if these guys weren't such good long term tenants, I could have raised it to $2100.
|
|
|
|
|
Oculus Spirit [98177]
TigerPulse: 100%
Posts: 65143
Joined: 7/13/02
|
Property taxes are higher for rental property
Jul 27, 2015, 12:32 PM
|
|
Since you don't have the homestead exemption.
|
|
|
|
|
110%er [9107]
TigerPulse: 100%
Posts: 14107
Joined: 11/5/05
|
I'd be interested in talking about this more....for srs.
Jul 27, 2015, 12:37 PM
[ in reply to I've owned quite a few rentals over the years ] |
|
My wife is a realtor and we're thinking about doing it, but have become somewhat disillusioned.
|
|
|
|
|
Oculus Spirit [98177]
TigerPulse: 100%
Posts: 65143
Joined: 7/13/02
|
Well, I'm sure a profit can be made, but I wouldn't
Jul 27, 2015, 12:46 PM
|
|
"dabble" in it.
|
|
|
|
|
110%er [9107]
TigerPulse: 100%
Posts: 14107
Joined: 11/5/05
|
That's exactly what I don't want to do.
Jul 27, 2015, 1:15 PM
|
|
Wife was thinking about picking up a $50-60K house to "get our feet wet" and I'm imagining the kind of renters we'll get in that rental market...
Yikes, no thanks.
|
|
|
|
|
110%er [8243]
TigerPulse: 100%
Posts: 7408
Joined: 2/20/04
|
I would not do that. I have always dealt with tenants that
Jul 27, 2015, 2:22 PM
|
|
are professionals, but don't want to buy a house for whatever reason. They take care of their ####. Low end rentals take took much time investment for me.
Consider this: If the house you currently live in is not what you consider your forever home, see if your current finances allow you to buy your next home and keep this one. That way you already have a good lending rate on what would be your rental. (Lending on investment properties will usually run 1-2% higher than owner occupied, every penny counts.) That way, your first rental will be a house you are very familiar with (which could come in handy when dealing with repairs) and depending on location/value, might be on the higher end of the rental market. For Greenville, figure $1750/mo and up will get you educated/professional tenants. Just don't get someone that will "Pacific Heights" you.
If you don't like being a landlord after the first couple years, sell the house. IRS rules say if you lived in the home 2 out of the last 5 years, you don't get hit with income tax on the proceeds of the sale (there is a $ limit to that exemption, but I don't remember what it is)
|
|
|
|
|
110%er [9107]
TigerPulse: 100%
Posts: 14107
Joined: 11/5/05
|
We are considering that exact scenario.
Jul 27, 2015, 2:29 PM
|
|
The big issue I have is that because we put 0% down and financed 100% the mortgage is higher than it normally would be and I don't think, based on some back of a napkin math, that any potential rental income would actually cover the mortgage + insurance + taxes + repairs/maintenance.
No matter how I run the numbers, unless I ask an exorbitant amount for rent that I don't think we'll get, I don't see how it will make a profit.
I guess we could simply try and break even for a few years and then sell to make a profit hoping the GVill RE market continues up, but that's a gamble that the market will continue to go up...and although I think it probably will, I'm not sure I want to gamble that much on it.
|
|
|
|
|
110%er [8243]
TigerPulse: 100%
Posts: 7408
Joined: 2/20/04
|
Definitely a gamble.
Jul 27, 2015, 2:40 PM
|
|
If you can break even on P/I, property taxes and insurance, you will make your money when you file your income taxes because of the depriciation(talk to your accountant about details), then again when you sell (if the market continues to grow at 2-3% in Greenvile).
|
|
|
|
|
Oculus Spirit [98177]
TigerPulse: 100%
Posts: 65143
Joined: 7/13/02
|
Interesting that 30 years ago when financing
Jul 27, 2015, 3:44 PM
|
|
was hard as #### to come by and interest rates were way over 10%, breaking even or making at least some money was a given. Today money flows freely from lenders, rates are super low, and breaking even is no longer a given.
Who knew. Good times man.
|
|
|
|
|
110%er [8243]
TigerPulse: 100%
Posts: 7408
Joined: 2/20/04
|
PS. With the wife being a real estate professional,
Jul 27, 2015, 2:30 PM
[ in reply to That's exactly what I don't want to do. ] |
|
you will get even more IRS tax breaks on the passive income from rent that normal people don't get. As long as she can prove ~700 hours a year are spent in the profession. Realtor lobby at work.
|
|
|
|
|
CU Medallion [54759]
TigerPulse: 100%
Posts: 52803
Joined: 10/1/03
|
|
|
|
|
110%er [9107]
TigerPulse: 100%
Posts: 14107
Joined: 11/5/05
|
Worth it to you?
Jul 27, 2015, 1:17 PM
|
|
What kind of place did you get and in what price range?
Would do again or no?
|
|
|
|
|
CU Medallion [54759]
TigerPulse: 100%
Posts: 52803
Joined: 10/1/03
|
It was the house we bought when we went back to clemson
Jul 27, 2015, 1:35 PM
|
|
For grad school. $90k, lived there for <4 years, been renting it since '08....first set of tenants were the only bad ones, they left without a fight but with a big mess after 2 months. House worth $115k now supposedly....since it was our residence, our rate is lower than if we'd bought it as a rental....
Based on the past 7 years, I'd do it again....planning on it soonish
|
|
|
|
|
110%er [9107]
TigerPulse: 100%
Posts: 14107
Joined: 11/5/05
|
I still don't understand why SC doesn't consider
Jul 27, 2015, 12:08 PM
[ in reply to Similar thing happened to my parents here in SC ] |
|
making property taxes a flat 4%, vs 6% for non-resident owners. It would really encourage more investment IMO. I guess it's just about short term revenue, but seems short-sighted. Maybe I'm missing something.
|
|
|
|
|
110%er [8243]
TigerPulse: 100%
Posts: 7408
Joined: 2/20/04
|
We don't have a housing shortage.
Jul 27, 2015, 12:23 PM
|
|
If we did, that would be a possible solution to encouraging investment in rental property, but right now renters/landlords are willing to pay the 6%.
|
|
|
|
|
Heisman Winner [112386]
TigerPulse: 100%
Posts: 74053
Joined: 9/10/03
|
Re: Fleeing Crushing Taxes for a Better Life
Jul 27, 2015, 12:34 PM
|
|
we currently have the lowest tax rates in over 80 years
|
|
|
|
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
Government revenue in the US has steadily
Jul 27, 2015, 12:53 PM
|
|
increased from 7% of GDP in 1902 to 35% of GDP today.
|
|
|
|
|
Heisman Winner [112386]
TigerPulse: 100%
Posts: 74053
Joined: 9/10/03
|
Re: Government revenue in the US has steadily
Jul 27, 2015, 1:04 PM
|
|
subtract 80 from 2015 and see in you get 1902.(a period in our history when there were almost no taxes or middle class)
|
|
|
|
|
Legend [15761]
TigerPulse: 100%
Posts: 17386
Joined: 2/1/99
|
|
|
|
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
Most any public housing project.***
Jul 27, 2015, 1:09 PM
|
|
|
|
|
|
|
Heisman Winner [112386]
TigerPulse: 100%
Posts: 74053
Joined: 9/10/03
|
Re: Some interesting charts on the topic...
Jul 27, 2015, 1:10 PM
[ in reply to Some interesting charts on the topic... ] |
|
got one adjusted for inflation? and that is how 90% of the country lived back then, something you seem to want usher back in.
|
|
|
|
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
Uh... % of GDP is % of GDP***
Jul 27, 2015, 1:11 PM
|
|
|
|
|
|
|
Heisman Winner [112386]
TigerPulse: 100%
Posts: 74053
Joined: 9/10/03
|
Re: Uh... % of GDP is % of GDP***
Jul 27, 2015, 1:13 PM
|
|
gdp is not a reflection of inflation and find me a graph that deals with RATES, not GDP or inflation.
|
|
|
|
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
Inflation has no impact when measuring % of GDP***
Jul 27, 2015, 1:21 PM
|
|
|
|
|
|
|
Heisman Winner [112386]
TigerPulse: 100%
Posts: 74053
Joined: 9/10/03
|
Re: Inflation has no impact when measuring % of GDP***
Jul 27, 2015, 1:24 PM
|
|
nor does it have an influence over rates.
we currently have the lowest tax rates in over 80 years
|
|
|
|
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
And how did those various rates affect Gov'ts take?***
Jul 27, 2015, 1:37 PM
|
|
|
|
|
|
|
Oculus Spirit [98177]
TigerPulse: 100%
Posts: 65143
Joined: 7/13/02
|
|
|
|
|
Legend [15761]
TigerPulse: 100%
Posts: 17386
Joined: 2/1/99
|
|
|
|
|
Heisman Winner [112386]
TigerPulse: 100%
Posts: 74053
Joined: 9/10/03
|
Re: You have to understand what "as a percentage of GDP" means.***
Jul 27, 2015, 1:25 PM
|
|
I am talking rates, and to a couple of brick walls
|
|
|
|
|
Legend [15761]
TigerPulse: 100%
Posts: 17386
Joined: 2/1/99
|
CDef is talking on a macro scale. You can get into any
Jul 27, 2015, 1:27 PM
|
|
particular tax rate you want, but obviously the government is getting it from somewhere. There are approximately one gazillion ways the government takes your money.
|
|
|
|
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
Rates are irrelevant. How big a piece of the pie counts.***
Jul 27, 2015, 1:35 PM
|
|
|
|
|
|
|
All-In [25032]
TigerPulse: 100%
Posts: 43000
Joined: 7/31/10
|
Who's pie...? Joe Middle-Class or Donald Billionaire?***
Jul 27, 2015, 2:34 PM
|
|
|
|
|
|
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
" It's the economy, stupid."***
Jul 27, 2015, 4:03 PM
|
|
|
|
|
|
|
Orange Blooded [3590]
TigerPulse: 89%
Posts: 6987
Joined: 11/30/12
|
|
|
|
Replies: 38
| visibility 507
|
|
|