Don’t worry we are doing GREAT!

[UCGal]

I was one of those folks… left in my late 20’s, came back more than a decade later… Boy did I have sticker shock on housing. But we dug in and bought anyway. Now 12 years after coming back to San Diego, we’ve almost paid off the house we bought when we came back.

No bmw’s. I guess my SUV isn’t designer since it cost well under $40k when I bought it 8 years ago.

Once you pay for housing, California isn’t that expensive. Groceries, medical insurance, and some of the other big ticket items are cheaper here than back east. Property taxes, if you stay long enough, are a bargain. (Because of the prop13 cap). Especially if you compare it to upstate NY, or anywhere in New Jersey. Even in suburban PA – I had a much less expensive home -but prop taxes were higher.

[spdrun]

NSR: borrowing against it to just spend the money would be stupid. Borrowing against it to invest in income property or a small business, less so. You could also tap the equity, buy something smaller/cheaper, move, rent the house, and then put it on the market. You’d have continuity without being forced into renting. Equity begets options.

[no_such_reality]

[quote=SK in CV][quote=no_such_reality]
Not major but those little expenses add up and more importantly drive you to realize income which then adds an additional tax expense.[/quote]

Unless I’m missing something in what you’re describing here, borrowing money doesn’t normally create any income or additional income tax expense.[/quote]

The borrowing doesn’t. The paying it back requires income. Unless you’re in the 1% or on a government pension, managing your realized income is a critical component of retirement. Most struggle to have enough income, a small percentage struggle to manage their taxable income and even smaller percentage worry about maximizing their returns, income be damned.

Say you need $10,000 for insurance, you need another $10,000 for food and utilities and $8,000 for travel and another $12K for cars and what not spending.

You can get by on $40K. The health plans will give you a subsidy backing out $8000 of that expense. Your taxes will be $2200 on the Fed form before credits.

Add the loan repayment, and you’ve bumped your costs $15-$20K a year. Your taxes jump another $2500 a year, your tax credit drops another $2500 ($5000 net swing on taxes) Run over $65K in income and you completely lose the insurance credit.

Similarly, the tax burden on $40K realized income in CA is about $290, on $60K it’s $1000, on $80K it’s $2200.

Granted, I think most of us would rather be in the crapping money out of our investment spending $150K a year, but that’s not going to happen for 98% of us.

sp, yes equity has options, but housing is illiquid for a good reason, that’s why a lot of wealth managers don’t count primary. Consuming your primary is the ultimate wealth destruction.

[spdrun]

It’s not any more destructive than consuming the cash equivalent to the primary. If they count cash in the absence of a primary, they should also count the primary 🙂

[no_such_reality]

If you need to use it you don’t really have the money.

If you want to use it, that’s your choice.

That’s why they don’t count it. If you need to count it, you don’t really have enough money for whatever you’re counting it for.

[spdrun]

That’s frankly absurd — you could as well say “if you need to spend the cash, you really don’t have it.” An asset is an asset, and BTW, I look at my primary as an investment — I can go off to another corner of the world and keep it rented at a profit. (Finding decent tenant for anything in a halfway decent area of NYC is child’s play.)

[no_such_reality]

[quote=spdrun]That’s frankly absurd — you could as well say “if you need to spend the cash, you really don’t have it.” An asset is an asset, and BTW, I look at my primary as an investment — I can go off to another corner of the world and keep it rented at a profit. (Finding decent tenant for anything in a halfway decent area of NYC is child’s play.)[/quote]

You then need a new primary.

[spdrun]

Why do I need a new primary — what’s wrong with treating a property as a hybrid of primary and investment?

(I’m actually a lot more comfortable with it being rented if I’m away for a month than sitting vacant, and I’m not really bothered by the idea of an unofficial “time share.”)

[no_such_reality]

You need a place to live. Where you primarily live is your primary.

You’re not really going to sell a million dollar place in NYC and go move into a shack in Vietnam to live on $500 a month are you?

Odds are you’re going to go buy another million dollar place somewhere else.

You could buy something less expensive, but again, that’s back to the major life change.

[spdrun]

Hahaha, it’s not worth even close to that. Frankly, if I sold it, I’d buy a building in the ‘burbs instead and just rent in the city. Prices in the city didn’t go down much from the bubble, whereas prices in NJ are down 25-30% or even more right now and HomePath listings are rockin’.

Feels like SD Co felt like in 2010-2011.

[no_such_reality]

LOL, so you’ll turn your primary into an asset and then create a new expense in one of the most expensive rental markets around…

good example of why they don’t count primary residence.

[spdrun]

My primary is an asset, as is anything I own. Your point?

Secondly, if you know anything about NY itself, it’s actually often cheaper to rent than to buy(*), whereas the opposite is true, dramatically so, in many parts of NJ right now. Even good parts. I’d rather have an income-producing duplex or triplex and live in the mother-in-law flat than have equity and debt tied up in a primary.

As far as a primary, with so many opportunities out there, at this point I’d rather go for either (a) a rental or (b) the cheapest primary possible in an an area that’s reasonably convenient and where I’m not likely to be shot. I don’t see housing as a place to live in, as much as a source of income that helps me work less and makes my tenants (rather than some asshole of a boss who wants to control my fucking life) pay my bills. I value independence much more than flash or even comfort — if I acquired enough rentals in the next few years not to ever HAVE to work outside of the rental business again if I lived frugally, I’d be happy as a pig in shit. I’d still work, but be comforted by the fact that I could tell any boss or client to go fuck off without repercussions.

(*) – and once you’re in a stabilized (not rent-controlled) apt for a while, they can’t raise rent much or evict you easily if at all.

[no_such_reality]

.

[bearishgurl]

[quote=flyer]Per the trend of this thread. A stat that still amazes me, is how few people have a million+ in net worth–especially in CA–where the “appearance of wealth” is so highly prized.

As a native, that’s why, IMO, CA tends to be a somewhat of a revolving door–few can sustain it here (in the lifestyle to which they have become accustomed) through retirement.[/quote]

Well, flyer, that depends on the lifestyle to which one has been “accustomed to.” I see PLENTY of retirees who have been “sustaining themselves” in SD County in retirement for decades.

Prop 13 allowed them to stay in their homes (modest or not) and pay just a few hundred annually in property taxes. Defined benefit plans (often 3 or more per hshld), along with SS and savings, have enabled most of them to travel some and assist children or grandchildren with college expenses and buying homes.

Many of them have more than $1M in net worth or even in cash but they don’t need it and will likely never use it all … yes, these people live in ALL areas of SD County.

You must know that you can’t really judge a person by their house, neighborhood or vehicle they drive, especially a senior citizen 🙂

[bearishgurl]

[quote=The-Shoveler] . . . Most the natives I know who have stayed have long since paid off their homes before retirement and you can’t get them to move. maybe I run with a small crowd however.

That is actually a big complaint in San Jose, Retiree’s don’t want to sell and move!!! LOL

The Natives I am talking about are boomer’s who originally bought their homes in the 80’s and 90’s and did not take all the equity out to buy new BMW’s (yes there are many believe it or not).[/quote]

All true, shoveler, except many boomers are still living in a home which they bought in the late ’60’s or early ’70’s for well under $50K. It’s not just SJ … ALL established areas of CA (except those which are grossly overbuilt) will continue to experience less sales listings into the future due to Props 13, 58 and 193 on the books. A CA homeowner, no matter WHAT their age, who is paying just a few hundred in property tax per year would be a fool to sell that “protected” property unless they were forced to move into a board and care facility and absolutely had no heirs who wanted the property for themselves.

It doesn’t matter WHERE the “protected” property is located. If the owner doesn’t want to live there themselves, they can rent it out and retain their ultra-low assessment for their lifetimes and continue to pass the property on to children and grandchildren.

The continuing shortage of listings in CA’s most established (read: generally most-coveted) areas will only result in higher prices in those areas … or at the very least, firmed-up prices in the event of a recession.

The vast majority of CA property owners who don’t have mortgages and also enjoy a very low tax bill have no incentive whatsoever to ever sell. They can’t safely invest the sales proceeds and earn much in this economic climate. It is more profitable for them to rent the property out and use that income to help with their living expenses, if needed, even if they have to hire a PM company to handle everything. It’s nearly all gravy to them 🙂

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