6/17 When I first came to California many years ago my advisor invited
me to his house and gave me an advice that I never really thought
about until recently. It was dead simple, and had nothing to do
with what I was studying-- if you ever buy houses in California,
DON'T SELL THEM. Keep them around, because in time, property tax
will be so low that it'll take an act of stupidity to sell them. As
long as population is booming and as long as people like me flock
to California, property values will only go up, and in time, I will
be a wealthy landlord just like my advisor. That's it! His second
advice was a counter advice of the first one-- don't buy a house in
California unless you're rich enough to hold on to it forever. Why?
Because of Prop 13 which acts like Social Security in many ways.
As long as you're the first recipient, you have a lot to gain from
because newcomers pay more taxes to cover the old timers who are
paying less. In addition, because (he thought) both SS and
Prop 13 ecosystems are not sustainable in the long term, newcomers
will receive much less services when they get old themselves, while
new comers are hit with shit like property tax reset which are
always proportionally much higher than pre Prop 13 taxes, as well
as Mello-Roos, an additional 1% on taxes to pay for services that pre
Prop 13 taxes used to cover. In another word, people who gained the
most were those who joined the game early on while those who are
new to the game (me) will simply pay exorbitant amounts of money
with proportional gains that will only decrease in time. Hmmmmm.
So basically-- my advisor's advice to me was pretty much: newcomers
are pretty much screwed because they're late in the game, but if
they ever get sucked into the game, don't leave. Thanks for coming
to California Joe!
\_ California is full, go home.
\_ No please stay. The longer you stay, the higher value my
home is. -home owner
\_ Your advisor's advice to you was: buy as early as possible and
don't sell. Sounds likes good advice.
\_ Holding onto a property that is not making enough rent is
stupid as hell. Sell the house and invest in something that's
actually making you money. Property tax is not a reason to
hold onto a losing investment.
\_ In California, even if you put down 20% on normal homes
(decent location, decent crime rate, etc), you're mostly
likely still not going to make enough rent for the first
decade or so.
\_ Only if you're an idiot who buys without considering
cash flow. If you only buy SFR in areas where rents
are low compared to prices then sure. Don't do that.
\_ *BUYING* a property that is not making enough rent is
stupid. No one said to be stupid about buying.
\_ There's all sorts of reasons you can end up with
property that's a bad rental. Maybe it was a previous
home. Maybe you inherited it. I'm just saying that
buy early and never sell is not a given.
\_ It wouldn't be buying if you inherited it.
\- it's unclear what you advisor's "objective function" was,
and i am guessing he is not an economist, but what an economist
\_ right he's not an economist. He's one of those jolly
old guys who love drinking and talking shit and always
says things like "LIVE SIMPLE & BE HAPPY!" and "BUY
LOTS OF PROPERTIES IN CA AND NEVER SELL, TRUST ME!"
\_ This advice makes sense if you were a Baby Boomer,
which this guy probably is. Our lives are more
complicated.
\_ I think the moral of the story is you should have
bought properties when you were 5 years old.
\_ I'm 27, is it more complicated than a 35 year
old, and even more complicated than a 45 year?
\_ no. life is no more complicated now than then.
oh wait, we have the intartubes now and ipods so
gosh i guess life is really hard now not like
the people who fought in ww2, got schooled on the
gi bill and bought houses in the 60s. those
guys had it easy.
\_ You are confusing Boommers with the WWII
generation. People who were born after WWII
would not have had a chance to fight in it.
would not have had the chance to fight in it.
\_ I'm not confusing it at all. Few of those
wwii vets came out and bought a house. They
went to school, they saved up, then bought
later. So someone buying in the 60s was
likely a wwii vet. Someone born in 1945
would have been 20 in 1965 and not buying
a house. None of which has anything to do
with anything on this thread.
\_ I think most people born in the late
40's bought their first house right out
of college. I know my parents, who were
born in 42 & 45, bought their first house
in 1968. It was easier to buy a home in
California those days.
\_ My advisor said when he first got his
BS in the 70s his salary was about
$10K/yr and homes were $20K/yr, and
it wasn't a big deal getting a house
1-2 years after you graduated. A
lot has changed since then.
\_ A lot of veterans bought houses when
returning from the war. That's when
cheap tract housing became popular. In
CA there were a lot of houses built
in the 1920s, but very little in the
1930s (Depression) and then a big
boom in 1945-1950s or so when returning
vets came back, took factory jobs (or
similar) and bought homes. Even now
in much of the country two people
with union manufacturing jobs or even
something less well paid like call
center operators can buy a nice home in a
safe neighborhood.
would tell you is "people move too little" and would make more
money if they were more open to moving because of jobs. but
of course that in turn doesnt factor in quality of life issues
[like how much of a premium would you have to be paid to move
to the fresno branch of your office for a year? $50k? $100k?].
but once you start including more than NPV in the calculus,
you have to start considering that in terms of house purchase
too. if having three kids is important to you, that may affect
you housing decisions. also, when you no longer need the
services of a local good scholl district, it might not make
sense to keep paying for it. imagine how much more expensive
SF real estate would be if the schools were palo alto level.
\_ Not that much more. Reason: Most people who can afford SF
can afford private school and would likely put their kids
in private school even if they lived in Palo Alto.
\_ I'm not sure that most means what you think it does.
Here's a hint, there's a hell of a lot of kids in
SF public schools.
\_ Sure, but how many are there by choice?
\_ There are some very good public schools in SF, as good
as the schools in PA. The trick is getting your kid into
them.
\- look at percentage of WHITE CHILDREN in SF public
schools as you go from low grades to high school.
it's amazing how non-white SF public high schools are.
\_ So, what is your point? That only white children
can be good students?
\_ White kids don't go to SF public schools.
Either there are none living in SF (possible) or
they are going to private schools anyway.
\_ This is mostly true. About 10% of the kids in
school are white, while 30% of the population
is (non-hispanic) white. 20% of the students
are in private school, so I think you can
figure out where they went. |
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