Public Housing,,, Crazy program

[urbanrealtor]

Per my Aunt (broker of Cassidy Real Estate in Los Altos):

“Pretty easily. Depends on location of course- does it back to highway 85?”

Apparently, backing on to 85 is bad for value.

[bearishgurl]

[quote=urbanrealtor]Per my Aunt (broker of Cassidy Real Estate in Los Altos):

“Pretty easily. Depends on location of course- does it back to highway 85?”

Apparently, backing on to 85 is bad for value.[/quote]

UR, I only saw one listing that was within a block and a half of the 85/Jct I-280. The rest were far enough away not to get the noise and traffic exiting on and off. But right in town (95070), I had a filter on for one-story ranchers, only. Obviously the 85 was always there, albeit probably a two-laner when these homes were built. Of course, the I-280 was not there and IT is the sole reason for all the traffic around there now.

I also saw online 2-3 gems on/off “Pierce Rd” leading to the Mountain Winery. IIRC, they all were situated on 1 AC+ lots and needed work but two of them needed quite a bit of work. I didn’t include them in the above description of listings because they were not one-story ranchers. They were a partial two story or had “walk-out basements.” All early ’70’s, IIRC and listing prices crept up to +/- $2M. The (long) decks that were replaced by Trex were in good shape, as I recall. They had awesome westerly tree-filled views over the foothills with a sliver of the (distant) ocean. Drinking your morning coffee on a deck like that with the fog rolled in almost every morning would be an incredible experience, methinks. This area is 20x better than the dry desert that is the Hollywood Hills (LA) and 10x better than darkly-forested Mill Valley facing Mt Tam and the ocean, IMO.

Saratoga is SUCH a fabulous area for retirement (if you already bought a place back in the day and still own it)! I guess all those old-timers that are deciding to list there now are now either now alone or just physically can’t take care of their property anymore … or both.

[bearishgurl]

[quote=no_such_reality][quote=bearishgurl]I forgot to add that a large portion of the driveways in Saratoga are asphalt and many of them in the listings I saw (even the concrete ones) are full of cracks. A (concrete) driveway of that size costs about $25K to pour today.[/quote]

I’ve being seeing that for three years in my neighborhood. Homes that have been owned for 40 years go up for sale at near market. they eventually come to reality and sell about 10-15% lower to one of the many investor flippers (last one I talked to had five investor offers first day. It then comes off market for 1-3 months and back on the market about 20-25% above their original listing.

I’ve watched home after home after home change hands.[/quote]

Where is this, NSR? Based upon your posts, I thought you lived in a newer area, with MR.

SD areas with “garden variety” 1940-1960’s tract homes don’t seem to turn over much (where the resale value might be $300-$600K). Perhaps this is because their owners have fewer choices in life and need to live there until they die (or until they can no longer take care of themselves).

[no_such_reality]

At that price point, the rental value exceeds the sale value. It’s about at the tipping point though. At that price point (outlined in the other thread), a new buyer can’t really purchase it with anything over 50% financing and make a return on capital after paying the stepped up taxes and costs. The net result, the homes change hands to new owners, not landlords.

As the price goes up, the rental value doesn’t keep up and the houses tend to resell and revamp instead of refurb and rent.

As another pointed out, rental market above certain amounts thin out quickly.

[bearishgurl]

[quote=no_such_reality]At that price point, the rental value exceeds the sale value. It’s about at the tipping point though. At that price point (outlined in the other thread), a new buyer can’t really purchase it with anything over 50% financing and make a return on capital after paying the stepped up taxes and costs. The net result, the homes change hands to new owners, not landlords.

As the price goes up, the rental value doesn’t keep up and the houses tend to resell and revamp instead of refurb and rent.

As another pointed out, rental market above certain amounts thin out quickly.[/quote]

I see your point but I thought most buy and hold investors today purchased their investment properties with all cash. Do you see small investors taking out purchase-money mortgages for a 1-4 unit investment property?

[bearishgurl]

There has been three “heirs” (that I know of) in my immediate area over the last 3 years who spent 2-4 months rehabbing the interior and exterior of their deceased relative’s home and promptly placed tenants in it. In all cases, the taxes were less than $700 year and those low assessments passed to the heirs.

[bearishgurl]

As I stated before here, NSR, yes, I do believe it is a “game changer” for a longtime owner to be able to now fetch $1.2-1.8M+ for a (now dated and rundown?) home they paid $30-$70K for between 1955 and 1970. Of course, it is better to have that cash in hand before you die than fooling around trying to collect rents from marginal tenants (who would be all that would apply to rent it in its current shape). A costly rehab probably even looks daunting to “heirs” (of Saratoga properties and similar around the state) when the cracked and broken concrete alone (front, side and back) could cost $65K+ to replace all by itself. That doesn’t include the cost of replacing the massive wood roof and tearing out 1/2 AC of unkempt landscaping and replacing with drought resistant plants and drip irrigation.

And we haven’t even stepped inside the house yet to see what else it needs :=0

[Happs]

bearishgurl: What % of assessed value do you think is fair? Do you think the % of assessed value should be progressive based upon worth? For example, should a $300,000 house be taxed at 1/2 of 1% of $300,000 and should a $3,000,000 house be taxed at 1.5% of 3,000,000?

[XBoxBoy]

[quote=Happs]What % of assessed value do you think is fair?[/quote]

Fair is such a subjective thing. (Even though we like to think there is some universal “fairness”) Are any taxes fair? What makes one tax fair but another not?

[quote=Happs] Do you think the % of assessed value should be progressive based upon worth? [/quote]

Are property taxes progressive anywhere? I’ve never heard of that. I think it would lead to people coming up with schemes to split their property assessment somehow.

But to put all this in relation to our current california situation, I would think that simply repealing any ability of heirs to inherit property assessments, and for reduced property assessments to only apply to principle residences would be good start.

Personally the thing that really bothers me is I know several of my neighbors are living with very low property taxes and declaring residency in a state with no income tax. Not only do they pay no CA income tax, they pay almost nothing property tax wise. People like me are carrying them and that doesn’t seem fair. (Darn couldn’t avoid that word!)

XBoxBoy

[no_such_reality]

[quote=bearishgurl][quote=no_such_reality]At that price point, the rental value exceeds the sale value. It’s about at the tipping point though. At that price point (outlined in the other thread), a new buyer can’t really purchase it with anything over 50% financing and make a return on capital after paying the stepped up taxes and costs. The net result, the homes change hands to new owners, not landlords.

As the price goes up, the rental value doesn’t keep up and the houses tend to resell and revamp instead of refurb and rent.

As another pointed out, rental market above certain amounts thin out quickly.[/quote]
I see your point but I thought most buy and hold investors today purchased their investment properties with all cash. Do you see small investors taking out purchase-money mortgages for a 1-4 unit investment property?[/quote]

1 Unit is an SFR or single hab condo. Anything else that is 2-4 uits is intended to be landlord owned, whether or not the landlord lives on premise. The math on those are about the same. All cash you can squeak, and I mean squeak a return out on them, but you aren’t rolling dole. Based on the info from my tax preparer, there are 20:1 people buying properties and losing money to those buying properties and making money. Most are buying the propery, owning the property and having a renter subsibize their purchase of it, but many are kicking in money every month to hold it and aren’t going to be getting to break even soon.

You can do the math. That $400,000 home, if it’s sold to a new person at $400,000. At $1750 rent, if it’s straight up rented twelve months, max is $21,000 a year before any expenses, which would be a 5.25% return on cap before taxes. Property taxes are $4000+, insurance another $100. Call it $5200 for taxes and insurance before anything else. You’re down to $15,800. or a return of 3.95%.

Now start adding expenses, do you need a landscaper? Roof reserve? New carpet? AC service? Furnance service? They all chew into it.

Carrying debt? a $200K loan at 3.75% carries $620/month in interest, that’s $7440 a year out the door. The good news is it’ll push your return up to 4.1%, but on half the size of capital.

The $550K property example renting for $2200-$2400, same boat.

They’re using heavy cash or all cash because if you don’t, you have to kick money in every month to cover the principal portion of the loan. Crunch the numbers: 30% down, loan at 3.75%, the interest is $870/month. insurance another $100, property tax another $330. You’re at $1300 and you haven’t had a single variable expense, with $450 left on “the rent” and a principal payment on the loan of $430 due. Sure you can experiment with an ARM or 15 year or 10/1 I/O but that’s gambling the timing moves in your favor.

[no_such_reality]

@xbox I hear you, I too share the beef with all the people living here but pretending to reside elsewhere for their car title, income etc.

[bearishgurl]

[quote=Happs]bearishgurl: What % of assessed value do you think is fair? Do you think the % of assessed value should be progressive based upon worth? For example, should a $300,000 house be taxed at 1/2 of 1% of $300,000 and should a $3,000,000 house be taxed at 1.5% of 3,000,000?[/quote]

I’m okay with Prop 13 as written except for the owner’s ability to turn their long-owned property with their ultra-low assessment still intact into rental property and the law’s application to multifamily properties and commercial buildings. When an owner applies to the assessor to have their tax bill mailed to a different address and/or places their HOEX on a different property, then that date should trigger an automatic reassessment on their old principal residence. I’m not sure yet how much of a percentage of the old bill it should be or what formula to use on this. I think the ad valoream portion of a CA property tax bill (the 1% portion of the purchase price + 2% per year) is “fair.”

I’m NOT okay with the transfer-ability of an owner’s old assessment to a new owner (even if that new owner is a child or grandchild of the old owner). All transfers of title should trigger reassessment at an assessor-appraised figure if the transfer was not at arm’s length and its corresponding deed states the property was “sold” for $250 or $50K or some arbitrarily low amount. If the “buyers” don’t think the assessor’s appraisal is accurate, they can go through the assessment appeal process, just like all property owners in CA must do.

I think if the voters were actually educated (via TV/internet/mailers, etc) as to WHO benefits the most from Props 58 and 193 (large scale slumlords, comm’l property owners and old-money families who own multiple `trophy homes,'” etc) and were made aware that owners of 1-4 units are allowed by law to turn their ultra-low assessed properties into rentals and keep their old assessment, those two props alone could get enough attention to get repealed. The vast majority of voters are simply ignorant of these lesser-known “loopholes” in state law.

These measures were both passed in the mid-eighties but it took at least 15 more years for CA state and local governments to begin feeling the ramifications of too many properties still receiving ultra-low assessments and thus their owners paying ultra-low taxes on them.

If Props 58/193 weren’t in place, the first group of ultra-low-assessed owners who originally benefited in 1979 from Prop 13’s rollback to September 1975’s assessment (likely 98% of them born prior to 1955) who still owned these same properties would all eventually die off and thus Prop 13 would become moot. And multifamily/commercial owners would have not been able to transfer title their their property to a Corporation, REIT, or partnership that they were part of and still be able to keep their ultra low assessment. They would have had to keep the title in their own name and operate it solely with their own capital and/or borrowed funds if they wanted to keep their ultra-low assessment.

Rents would NOT be higher in CA (in both residential and commercial properties) if Props 58/193 were not in place. Rent is set by the market and in the absence of rent control, all LL’s attempt to get as much rent as the market will bear (and still retain the best quality tenant they can get). The amount of their assessment has nothing to do with it.

Family farms, other Ag (and wineries, to a lesser extent) should be taxed at .005 to .008 of the assessed value of the property if Prop 13 did not exist. If any state or Federal Ag exemptions exceed that tax savings, these owners are welcome to apply for it. Whether this type of property’s title is transferred or not should have no bearing on the formula used to assess it as long as the property continues to be used solely for Ag purposes. If the current owner decides to sell the property to Big Development, their property should be reassessed effective July 1 of the YEAR PRIOR to the transfer of title out of agricultural use. This will prevent farmers and ranchers from negotiating all year with developers (whether or not they are still farming the land) and then scheduling the closing just before June 30. This will also prevent “middlemen” from transferring title from a farmer/rancher/winemaker to themselves close to June 30 (end of the tax fiscal year) and then having little to no property tax liability for the (brief?) period they owned it.

[no_such_reality]

BG several of your points are valid however you fail economics 101. The tax assessment is an expense. If you increase expenses the number units people are willing to make available for a given price falls. As you see in the other thread, homes the would be rental with low assessment will be sold to owners at higher prices

Less units means more competition for the units and greater increases.

While a renter turn buyer does remove one renter from the pool, the effect on the pool of available rentals will be greater than the affect on the decrease of renters. As less SFRs are available to rent, there rental cost will increase, which will in turn pull the next leg down in size/quality up.

We’ve seen repeatedly how quickly rents rise with any constraint in supply in SoCal.

[CA renter]

[quote=no_such_reality]@xbox I hear you, I too share the beef with all the people living here but pretending to reside elsewhere for their car title, income etc.[/quote]

X3

This really ticks me off, as well.

[CA renter]

[quote=no_such_reality]BG several of your points are valid however you fail economics 101. The tax assessment is an expense. If you increase expenses the number units people are willing to make available for a given price falls. As you see in the other thread, homes the would be rental with low assessment will be sold to owners at higher prices

Less units means more competition for the units and greater increases.

While a renter turn buyer does remove one renter from the pool, the effect on the pool of available rentals will be greater than the affect on the decrease of renters. As less SFRs are available to rent, there rental cost will increase, which will in turn pull the next leg down in size/quality up.

We’ve seen repeatedly how quickly rents rise with any constraint in supply in SoCal.[/quote]

Why wouldn’t turning renters into buyers be neutral? Assuming everything else remains equal, people would be able to buy their own homes, as opposed to renting them. For every (SFH) rental you take off the market, you take a renter out of the rental market. Why do you think that’s a bad thing?

[Author]

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