[joeypants05]

[quote=joec]Yeah, prop tax is much much higher in Texas and also, with so much land, I don’t think Texas is as good of an investment in terms of housing, also without prop 13 that we have here. I don’t think prop 13 would ever go away completely for primary home buyers even though they may try to change it, but with businesses and the wealthy controlling all the laws, it’s unlikely anything will ever change IMO).

My parents have places in TX and they said that they’d lose money if they were to sell the place they bought and are renting.

CA with Prop 13 is a very unique state (are we the only 1 in the country?) so if people move to Texas or Nevada, or wherever, I don’t think they would ever move back to CA due to the much much much higher housing cost.

Not to mention prop tax would be higher if they bought a new place compared to the one that was sold.

Overall, I think if your income is super high, then no state income tax can make a big difference. We know dual income doctors making mil+ in a tax free state and I can see why you’d want to do that, but if that wasn’t you, then I don’t think the numbers are that great assuming you buy something not super great in CA.

A high mortgage is also a greater tax deduction if you are high income in CA so that 3k mortgage compared to TX may actually end up being 2k/month where in TX, you may be claiming the standard deduction.[/quote]

This depends on why you are buying the house. If you are buying the house as an investment then California is probably a better choice since your expected future appreciation is higher. If you are looking to buy a house to live in I’d argue that Texas is a better choice because you get more house for your money. The higher property taxes are more then offset by the income tax & SDI you don’t pay unless you are low income but if that is the case you aren’t in the market to buy a house in California.

I think you are overstating the effect of the mortgage deduction but I also would argue that paying less in interest is a better choice then taking a larger deduction. The deduction only adjusts your AGI down so if your marginal total tax rate is 40% you are still paying 60 cents in interest to get a 40 deduction. I’d rather pay 6k in interest a year and only get a 1k deduction then to pay 20k in interest a year and get a 8k deduction.

There is another key factor that I believe is overlooked which is risk. The risk of having a large mortgage is that if you fall on hard times, lose your job, get very sick etc then it is much harder to sustain a 3k mortgage payment or find a replacement income that can support it. A 250k mortgage in Texas will run you about $1100 a month which would be easier to maintain in case of disaster.

Like I said in my original post to the person that started the thread, we like San Diego but simply don’t want to afford a 3-4k mortgage to live in a not great place/area when basically everywhere else in the country (excluding a few key metro areas) we could live on much less in a much nicer house and area.

We could easily be wrong and if we get there and don’t like it we can always move back or choose the next place to try out.

[joeypants05]

Thanks for the input on things to consider. We did look at the tax implications of moving there since property taxes are quite notorious in some areas. The house we have under contract will have about $6000 a year in property tax (for a house @292k) which isn’t a ton higher in actual costs then the ~$4500 I pay in property taxes currently (house here is about 450k) although it is a much higher percentage. There is no state tax so I’ll be saving about $6k a year between state income tax and SDI.

Utilities are higher but most home also have two ACs so you can zone it out. The current owners sent their utility bills for the last year and they average out to about $200 a month between electric and gas which is also about on par with what I’m currently paying here. I’d speculate that utilities there are higher on average because the average house there is larger.

We don’t eat out much and most people we know here eat out everyday for lunch and a lot of days for dinner but that doesn’t sway our choices.

Prices there have seen some fairly large increases since the bottom of the housing downturn but they are developing a lot of areas which should mitigate any housing shortages in the area. Even if there was a large correction in the housing prices there we could absorb it much better then if the same were to happen here because the actual prices there are so much lower. Of course the inverse of that will be that the home we buy there won’t appreciate nearly as much as a house here but we are perfectly fine with that since we aren’t too keen on the idea of using our primary residence as a nest egg/investment.

[joeypants05]

[quote=FlyerInHi][quote=joeypants05]It doesn’t sound like you’re too fond of any of the options available. Have you thought of looking at other complete alternatives such as moving out of the area/state?

I’m also in my late 20s, have more capital than the average person at our age and have a job that pays well. My wife and I started looking at moving out of Escondido six or so months ago and found that there were simply no good options. The math we were looking at was basically along the lines of selling our current house and adding 150k-300k onto the mortgage to move to an area with better schools/ closer to my work. The thought of doing this was just something we couldn’t stomach so we started looking at other options and ultimately decided to move out of state. I’m fairly lucky in that I can telework most of the time and travel when necessary. My wife and I both like living in Southern California but the sacrifices you have to make to live here outweigh the benefits in our minds. I know this option isn’t one that everyone can take as it does require some upfront capital and some people have family/friends here that they’d never leave or a job/skills that don’t transfer easily but if you aren’t highly tied here I’d recommend looking at other states/areas where you could see yourself. Your 250k will buy a mansion in most of the country or a nice house along with a couple of rentals.[/quote]

I’m curious where you’re moving. I hope you’re choosing a major city that has a future for you and your kids.

This is an interesting discussion of housing and the shift to cities. I listened to in the car.
http://www.wbur.org/onpoint/2016/06/02/american-real-estate-market%5B/quote%5D

We are moving to the Dallas area. Housing there is much more reasonable in my opinion (we have a house under contract for under 300k that is 3500sq ft). It’s in a very nice area by a lake, has good schools and there seem to be quite a few jobs in my field (telecom engineer). The cost of living decrease will allow my wife to go back to school and we’d eventually like to have kids without worrying about her going back to work immediately. Like I said in my original reply we both like the San Diego area but it’s just not spectacular enough that we are willing to struggle and worry about our economic future (i.e. retirement, putting kids through college, etc).

[joeypants05]

It doesn’t sound like you’re too fond of any of the options available. Have you thought of looking at other complete alternatives such as moving out of the area/state?

I’m also in my late 20s, have more capital than the average person at our age and have a job that pays well. My wife and I started looking at moving out of Escondido six or so months ago and found that there were simply no good options. The math we were looking at was basically along the lines of selling our current house and adding 150k-300k onto the mortgage to move to an area with better schools/ closer to my work. The thought of doing this was just something we couldn’t stomach so we started looking at other options and ultimately decided to move out of state. I’m fairly lucky in that I can telework most of the time and travel when necessary. My wife and I both like living in Southern California but the sacrifices you have to make to live here outweigh the benefits in our minds. I know this option isn’t one that everyone can take as it does require some upfront capital and some people have family/friends here that they’d never leave or a job/skills that don’t transfer easily but if you aren’t highly tied here I’d recommend looking at other states/areas where you could see yourself. Your 250k will buy a mansion in most of the country or a nice house along with a couple of rentals.

[joeypants05]

I don’t think its realistic to think we could have a perfect system at tracking aircraft as anything you put on the aircraft could be defeated and a worldwide radar system on the ground is just not feasible as the oceans are massive and politics would probably prohibit it from getting very far

I do think it will be become easier to actively track aircraft as technology is adopted. Aircraft that have high speed internet connectivity through a satellite system typically have a inertial reference and GPS signal so that the antenna can properly point and track a geosynchronous satellite while moving. This data could easily be transmitted over the same communications system and be used for tracking and recovery operations.

[joeypants05]

Do many people actually put a whole lot of stock in what the zestimate says? I’m looking at buying a house and I certainly don’t pay much attention to what the estimates on zillow and/or other sites says a property is worth because to me they don’t mean much as the estimate doesn’t represent what a seller is willing to sell for or what a buyer is willing to pay. I simply look at the asking price of a house and what other comparable houses have sold at because those are actual numbers. Do the zestimate and other estimates just fulfill the curiosity of what your house is worth today (much like checking the price of stock that you have no intent of selling) or is there more to it then that?

[joeypants05]

So I’d like to take a swing at helping answer your question as I’ve been doing quite a bit of research on this since I’m looking at moving to southern California and there is very little information to be found on the subject. Skip to the end if you want to see the conclusions I’ve drawn for myself. Below is what I’ve found with references wherever possible.

1. Most properties initially listed are redeemed before the sale. See (http://www.sdtreastax.com/prior-year-sale-results.html) for actual sales numbers but in the last few years about 1/3 of all properties initially approved actually went to auction and fewer yet sold. In my simple logic I assume most homes are redeemed if the person is actually still residing there because scraping together 3-5 years of taxes and penalties is much more palatable then losing all of your equity in the home. Owners also have the option of declaring bankruptcy to delay or stop the tax sale.

2. Most properties that you actually want will not go for the minimum bid (unless you want some land in the middle of nowhere or something else out of the ordinary). I ran down a few of the prior year sales list (refer to the link in 1 for the prior year sales lists) and found that properties that seemed to have a house in an alright area went for well above the minimum bid. To give a few empirical points of reference a house in Carlsbad went for about 360,000 whereas the opening bid was 200,000, another property sold for 315,000 with an opening bid of 181,400 and another sold for 222,000 with an opening of 50,000. You have to assume there are investors there that will drive the prices up, by all likelihood it will still be below perceived market value but there is a level of risk involved and the sales are cash which keeps many out of the process as a whole. I’d speculate and say most banks won’t give you a loan for these properties and if you win a bid and fail to pay you forfeit the deposit. See (http://www.sdtreastax.com/deferred-payment-agreement.html) for deposit and when full payment would be due (it seems either immediately or within 30 days). To correlate properties to actual addresses easily I found that you can take the Assessor’s Parcel Number, go to (sdgis.sandag.org) put the number in and see where it is on a map along with other information.

3. From everything I’ve read the property sold at these auctions are free of most liens that you’d usually think would convey. There are some exceptions here including IRS liens (and/or I assume any lien that could be considered superior then the state tax), liens from local governments, mello-roos, lis pendens and others. See (http://www.sdtreastax.com/docs/important-information-for-bidders.pdf) and (http://www.sdtreastax.com/terms-and-conditions.html) for what can convey with the sale.

4. There is no redemption period as you might traditionally think about it. Technically redemption for the owner of the property ends at 5:00pm the day before the auction. The only other reference I found to redemption was if there is an IRS lien against the property the U.S. government can redeem it but they will pay you the full purchase price. See (http://www.sdtreastax.com/right-of-redemption.html).

5. All properties are sold as is and there seems to be absolutely no guarantees. It seems they will sell you anything at these sales and it is your responsibility to do the research. If the property is not up to code, has a bad foundation, is not developable etc it is on you to know that before buying it. See (http://www.sdtreastax.com/docs/important-information-for-bidders.pdf) especially the “CONTAMINATED PARCELS” section as a reference to what they mean by as is. In short if you buy the property with toxic waste on it then it becomes your toxic waste to clean up.

6. If I were going to buy a house at a tax auction I’d treat it like a foreclosure auction and do as much due diligence as possible. I would pick properties in an area I want and keep an eye on them until the auction approached. I’d gather as much information as I could about them (anything in city/county records) and I would try to get title insurance to ensure there are no IRS/other liens pending. If possible I’d try and find someone who has done this before and probe them for as much information as possible (buyers are listed on previous year sales so that would be a good place to start to track one down). I’d then set a price I’m willing to pay for the property with the appropriate amount of risk factored in. Then show up to the auction, see if any of the properties you want are actually there and if they are then sign up to bid. If the property goes over what you want to pay wait for the next one and if all of them do wait until the next one.

In conclusion I’ve decided this isn’t the best course of action for me as there is a very high level of risk involved, I’m unlikely to find a property in the area I want and while you can get a deal it won’t be that spectacular after you spend money researching the property and fixing it. If you are not looking for a specific area, have the money on hand, know a lot about real-estate, can do some of the handy work yourself and are willing to take a very high risk then it might be worth pursuing.

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