Abandoning Suburbia

[ApatheticNoMore]

High property taxes are yet another reason renting is becoming increasingly appealing to me (in a small city center or resort town rather than the 'burbs or the country). For what Cathrine pays in Prop taxes alone, I could rent a nice house somewhere - even in Calif if I went back to someplace like in my ski resort town where you can find nice little cabins right in town for under $700/month.

I agree. With property taxes like that $7800/annually (!!!!) what exactly is the appeal of homeownership over renting? Especially if you add in maintenance. Now if you can lock in property taxes and not rents (as in CA) it's a bit different. Rents do increase gradually but I see no reason at all to anticipate massive rent increases at least most places (unless you live in the next big boom town), so if you CAN'T lock in property taxes, they will probably be increasing right along with rents. Sure there's some advantage to being able to do more with the place if you buy, but that is only worth so much economically (what is reasonable with a low property tax rate doesn't look so much so at $7800 annually). Perhaps property tax is federal tax deductable, rents aren't.

Plus, when the Apocalypse comes to suburbia (referencing the OP's article), it'll be easier to move on down the road to a better life.

I think suburbia has more reslience than it is usually give credit for. Still never mind that particular apocalypse, there are benefits to mobility (like moving for jobs etc. - you might rather not, but if you have to, you'll be glad your not selling a house to do so). I think homeownership probably works best for people who are retired.

[SteveinMN]

I agree. With property taxes like that $7800/annually (!!!!) what exactly is the appeal of homeownership over renting? Especially if you add in maintenance.

I mentioned this in another thread some time ago, but I still don't quite see how this works out. California (with its weird property-tax exclusions) and certain other places (like rent-controlled apartments in New York City) aside, whoever owns the place being rented still has to pay property tax. At least as far as I've been able to determine, property taxes for "commercial"/non-resident properties is higher than what homeowners typically pay. There still may be a mortgage (or a second to maintain/improve the property). There still has to be money for maintenance and even capital improvements (roofs don't last forever). And money set aside for the times when the property is not rented out. So I don't understand how renting can be universally cheaper than ownership.

[bae]

I routinely pass on property tax increases directly to my tenants. As well as all other costs. I keep my rents to the point where the property shows a reasonable profit, adjusted for risk.

In a reasonably-normal market, renting doesn't get you out of paying for many costs, you just don't see them broken out as line items.

[Zoebird]

I always assumed that was the case, Bae.

For us, the benefit of renting is that we can afford to rent our place, but we can't afford to buy it. Our rent would buy us a house at half the value of our current place with the minimum down payment (20%).

As such, it's much more advantageous for us to rent if we want to live in this neighborhood.

[Spartana]

I routinely pass on property tax increases directly to my tenants. As well as all other costs. I keep my rents to the point where the property shows a reasonable profit, adjusted for risk.

In a reasonably-normal market, renting doesn't get you out of paying for many costs, you just don't see them broken out as line items.

Well it probably depends on what your overall housing expenses are as a landlord and if the rental market can bear all those costs. If your rental property is paid for or has a fairly low mortgage then adding in the extra cost of prop taxes, insurance, maintenance, etc to the tenents monthly rental is doable. But if you have a high mortgage and taxes like Cathrines $7800 annual tax bill, it would be hard to expect to get all that paid in a monthly rent. For instance, if someone wanted to buy a house in my SoCal 'hood as a rental property they can expect to pay $400K to buy. And even with a 10% down payment and low interest rates, their mortgage would be much higher than the approx. $1800/monthly rental rate that places go for. And then if you need to add in another $500/month or more to have your tenant cover taxes, insurance and maintenance the price would be well beyond what the rental market would year. So the landlord would have to pay a big portion out of pocket. And, as Zoebird pointed out, it would cost a person much more to buy a place here then to rent. Buying may mean $3000 - $4000 a month with every thing included for 30 years - as well as having to come up with the $40K down payment and the closing costs, where as renting the exact same place will cost $1800/month with no up front expenses. Now for someone like me who has a paid for house, being a landlord and including all my house expenses in the rent would be a good thing. And of course I'd also have to consider how much it would cost me to live elsewhere if my place was rented.

[pinkytoe]

This weekend we went to look at some open houses nearby and were shocked to see that on one particular street most of the 1950s bungalows had been torn down and replaced with 3000sf high end houses. That is one huge problem with inner ring suburbs. Investors and developers snatch them up and put these monsters up because it is desirable to live close to the city center since our traffic is so bad. It is kind of sad to me that houses are seen only as investment and status these days rather than shelter and a place to have long-term community. We are paying dearly for our convenient location with property taxes being driven up by these upscale houses. I told dh that $7000 a yr is when we hang out the for sale shingle.

[Spartana]

This weekend we went to look at some open houses nearby and were shocked to see that on one particular street most of the 1950s bungalows had been torn down and replaced with 3000sf high end houses. That is one huge problem with inner ring suburbs. Investors and developers snatch them up and put these monsters up because it is desirable to live close to the city center since our traffic is so bad. It is kind of sad to me that houses are seen only as investment and status these days rather than shelter and a place to have long-term community. We are paying dearly for our convenient location with property taxes being driven up by these upscale houses. I told dh that $7000 a yr is when we hang out the for sale shingle.

This is what's happening in my 1950's tract 'hood of small ranch houses. Giant mcmansion of several thousand sq ft going up everywhere - just drawfing the small houses. Sometimes with a second rental house behind almost as big. Terrible. Doesn't effect current owner prop taxes though as they are fixed in Calif, but for new owners they will be high because the purchase price will be high.

[catherine]

This is what's happening in my 1950's tract 'hood of small ranch houses. Giant mcmansion of several thousand sq ft going up everywhere - just drawfing the small houses. Sometimes with a second rental house behind almost as big. Terrible. Doesn't effect current owner prop taxes though as they are fixed in Calif, but for new owners they will be high because the purchase price will be high.

Same is true in my area of Princeton, NJ. There are lots of really cute little 50s and 60s houses that are becoming "push-downs", with ridiculously large houses rebuilt on small lots. Makes me sad.

[pinkytoe]

I was hopeful that the trend towards large homes was on the decline but that doesn't seem to be the case here. I guess large is a personal thing though as I sometimes find my 1600 sf house too big. The thought of having to keep up with a 3000sf house scares me. I guess they "have people" who do all the housekeeping and landscaping.

[Gregg]

Well it probably depends on what your overall housing expenses are as a landlord and if the rental market can bear all those costs.

Successful landlords are good at determining exactly that. Often times they buy property from landlords who had less of a grasp on those figures.