[quote=EconProf]BG: Not everyone wants to be a landlord.
The decision of heirs to rent out rather than sell an inherited SFR depends upon a whole host of considerations. First, most heirs, especially if they are several, may have differing liquidity needs. They also face the question of managing the property, perhaps from afar, and dealing with all the headaches of landlording. SFRs are the least profitable of real estate categories from a cash flow standpoint. Yes, they may appreciate, but CA has had years-long episodes of depreciation at times, and having a tenant for a few years usually hurts the value.
Property taxes are only one of many expenses involved in making this investment decision, so it alone will not be the deciding factor.
BG, I agree with your opinion about the unfairness of the present laws. They grant an unearned tax break to an underserving population. This “subsidy” must be made up by other taxpayers.
But you have a tendency to jump to broad and unwarranted conclusions based on your own experiences in your particular older neighborhood. What’s needed are in-depth, unbiased, peer-reviewed studies of the total revenue loss due to these two Propositions.[/quote]
EconProf, I myself never want to be a landlord again. I agree with heirs’ differing liquidity needs but one of my questions (if there were siblings) was “Would you attempt to buy them out (in order to get an investment property with an ultra-low assessment)?”
I did not state it here but both properties which were the subject of my two questions were free and clear. This fact, combined with their low assessments, makes turning them into rental investments (for a locally-based heir) a good option, considering the “safe” alternatives today. Frankly, I’ve never seen a house passed down around here which wasn’t free and clear at the time of the owner’s passing, EXCEPT ONE around the corner which had been vacant for nine years prior and in terrible disrepair (where ~$20K is currently owing on it). When their mom finally passed, the 60-something son and daughter finally came in on weekends in a 4-month time period and did major repairs themselves and cleaned the property up.
My “broad and unwarranted conclusions” stem from what I’ve personally seen and witnessed on the ground almost the entire time I’ve lived in SD (~40 years). At all times, I have lived in well-established areas where there were always “heirs” occupying SFRs (some were still caring for infirm parent(s) but were expected to “inherit” the family home one day). In most instances, they were only children. Usually, the only child or sibling who took care of their parent until they died never made good money on their own to begin with so did not really “sacrifice” a career to take care of mom and/or dad. In any case, they usually needed a “free” place to stay at various times in their lives, and their parent’s home was always convenient for that.
One of my biggest “heir” issues is with extremely low-income “heirs” attempting to shelter themselves in their former family home after their last parent’s death. This typical heir either did not receive any cash, received very little cash or had to use what cash they were entitled to from their parent’s estate to buy sibling(s) shares out of the property. The vast majority of them had no savings of their own and likely could not qualify for a mortgage. I actually know of two “heirs” who took over their parent’s home after their deaths who had been living out of their car and 5th-wheel camper for months/years before their last parent passed and did not want to leave SD under any circumstances.
Even if a SFR is 1000 sf or less, it is a SFR, usually more than 40 years old with a >=5000 sf lot and needs constant maintenance which, as we all know, is not cheap, especially pest control and tent fumigation. Nor are gas & elec and water and sewer cheap (low-income ratepayers eligible for 20% discount on SDG&E bill, however). If a very low-income heir takes title by themselves of a home they inherited, the property invariably ends up quickly going to waste with trash and discarded items piling up around the property in 4′ high weeds causing neighbors to report the address to the city, who fines the heir/”homeowner” (for the first time in their lives). You can’t squeeze blood out of a turnip.
It’s a sorry situation for their neighbors and I’ve seen it all over SD, South and East County (I’m sure it happens in North County as well as all over the state).
There IS a such a thing as being “too poor” for homeownership … even if that home is free and clear and has an ultra-low assessment attached to it.
I’ve had this very discussion with one of the top probate attorneys in town, who told me, “I don’t care if they (the heir) had been thrice bankrupt and/or just got released from prison yesterday. If they are named in the trust, they are entitled to their portion. If they are only children and the trust leaves them whatever the remaining parent still had at the time of their deaths, then it is all theirs. What they choose to do with it is their business.” The attorney was right, except a lot of these “heirs” never had an attorney and never received good advice for their personal situations after their parent died. Since some of them have been making poor choices all of their lives, what is to stop them from making poor choices when they are finally “heirs?”
I apologize if the above sounds judgmental to some folks. This is my “brethren” I’m discussing here and I don’t have a college degree myself (but had a good public K-12 education and 2.5 years of college). For the life of me, public schools used to be very good to excellent in SD, South and East County (at the time these people attended them or abt 1955 – 1975). I’ve interviewed dozens of people (mostly age 55-62) in recent years in attempting to help them with their seemingly intractable problems and I often had a difficult time understanding how they allowed themselves to end up in the situations they were in. I came to the conclusion that they apparently just never took charge of their own lives.
