Property taxes in California are fixed at the purchase price with a minor increase allowed for inflation. My home has quadrupled in value since I bought it twenty years ago, but my property taxes have only gone up 60%.
"Property taxes in California are fixed at the purchase price with a minor increase allowed for inflation. My home has quadrupled in value since I bought it twenty years ago, but my property taxes have only gone up 60%."
-I love your observation. I moved to the San Francisco Bay Area to take a senior job in Finance. I have been here a couple of months and have been looking at real estate.
Last weekend, I looked at a house in Berkeley, CA. The homeowner said the house hadn't been on the market for 40 years. So the homeowner was probably paying $1,200-$1,500 a year in taxes. Let's say they bought the house in 1965 for $20,000. Now, they have it on the market for $799,000. The real estate agent says they will "accept bids" on May 25th (today), and that it will probably go for $950,000.00. At 1.5% tax rate, which Berkeley is, the tax burden alone will be nearly $14,250/yr.
You gotta understand, this place is the classic grandma's craftsman. It hasn't been worked on in years. The yard is small and overgrown, the floors sag and the walls are not plumb. It has a sweeping view of the San Francisco Bay but dozens of steps up from the street and a mass of tangled electrical wires block the view. It ain't the western white house.
So, here I am, making high $200's to low $300's in a finance job, looking at this overpriced piece of junk that has structural issues and needs 40 years of updating and thinking, "Sure, if I take this on, I will be paying $1,200 for taxes a month, $5,000 for mortgage and additional for utilities, remodeling and upkeep."
Meanwhile, the State of California is taking 10% of my pay in taxes each payday before I even see the money. Please tell me...am I supposed to look at the guy who posted the quote above and with a smile take this junk house off his hands so he can make his mint, laugh all the way to the bank and pay the taxes he hasn't paid over the past 40 years?
I can't suspend belief enough to participate in that ponzi scheme. So, the solution? My friends and I who are working in California, are taking the money out of state and buying beautiful homes back in the real world. Smart people are finding other solutions. Renting in the same area with a better view in an updated apartment currently costs the equivalent of the monthly tax payment alone. Assets are leaving the state as smart people look elsewhere for a reasonable tax shelter.
...just one guy's story.
Max = 2%/yr.