Rent or Buy?

First, decide whether the economy is about to go into a recession. Rent if it is.

Second, decide how desperate the seller is. If he is desperate, consider making an offer.

Third, see how long houses in the ZIP code have been on the market. The longer, the better if you are a buyer.

Fourth, go the school bus site in the morning, just before the bus comes. These kids will be your neighbors.

Fifth, read two John Schaub books.

Sixth, use this calculator. http://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx

On Foreclosures, consider this:  

If your state allows foreclosures without going to court, housing prices have probably bottomed. This means deeds of trust. If it's a judicial state -- mortgages -- it may not have bottomed.

The theory is simple. The more expensive it is for a lender to foreclose, the less likely he is to foreclose. He lets "squatters" -- owners who cease paying -- continue to squat. So, the shadow inventory is high. This keeps the market from clearing. For a chart on this discrepancy, go here: http://www.businessinsider.com/michelle-meyer-foreclosure-process-home-prices-2012-12.

For speed of transfer, Texas is best. Georgia is second. See this table: http://www.realtytrac.com/foreclosure-laws/foreclosure-laws-comparison.asp.

2014 Oregon Real Estate Boom continues . . . .  

At least back in 2009, Texas was the place for jobs.  Is it still?  For more on this topic, see this. 

Rents have started to drop in San Francisco?  Really?  Prove it.  

Your wish is my command.  

One facet of real estate investing that doesn't get mentioned often enough is appreciation and its driving relationship to property tax and insurance costs. Blub Bierflart may think he's doing great when the neighbor's house sells for nearly twice what the neighbor paid for it, but along with that rapid rise in appreciation come higher insurance premiums and property tax bills. They in turn eat into Blub's cashflow and erode his bottom line unless he sells during the peak and moves to or re-invests in a low-cost location.  

And this . . .  

This is why I'm a fan of the bread and butter SFH. The ones that are bought in the $80,000 to $130,000 range and rent in the $1000 to $1500 range. The swings in prices are nominal. They are always in demand.

Trapped in California

Gary NorthAugust 31, 2016

That saying was common in my day. Perhaps it still is. It means that decisions have consequences. If you do something that has unpleasant consequences, you will pay the price."You've made your bed. Lie in it."

But what about people who do dumb things, start paying the price, and do the same thing over and over again?

What about people with high incomes who live in states with high taxes, who refuse to move? They cry out for tax relief. It is available within a few months. But they never move.

They cry out. Do they think the tax collectors care? Do they think that voters by the millions who pay no income taxes care a whit about the suckers who sit tight, hoping for tax mercy?

It never ceases to amaze me that people who can move refuse to move.

I moved out of California to a state with no state income tax--Washington--in December 1975. I never looked back. I have lived in states with income taxes, but nothing like the top tax bracket of California: 13.3%. This is reality:

For single and married filing separately taxpayers:

1% on the first $7,850 of taxable income.

2% on taxable income between $7,851 and $18,610.

4% on taxable income between $18,611 and $29,372.

6% on taxable income between $29,373 and $40,773.

8% on taxable income between $40,774 and $51,530.

9.3% on taxable income between $51,531 and $263,222.

10.3% on taxable income between $263,223 and 315,866.

11.3% on taxable income between $315,867 and $526,443.

12.3% on taxable income of $526,444 and above.

A 1% surcharge, the mental health services tax, is collected on taxable incomes of $1 million or more, making California's highest marginal rate 13.3%.

Then there is a sales tax. It varies from 7.5% to 10%.

When high-income people get skinned, year after year, yet in response merely grouse a little, they should expect no mercy from voters.

A family could move to Nevada and escape the state income tax. The Nevada sales tax varies from 4.6% to 8.5%.

Nevada's home prices are maybe a third of California's. Look at housing costs nationwide. The disaster is California.

But they buy their overpriced homes, massively indebting themselves for 30 years. A recession will come. They will suffer enormous losses: upside-down mortgages. They don't think this can happen. Yes, it happened in 2009. "But this time, it's different."

States with no income tax are Washington, Alaska, Nevada, Wyoming, South Dakota, Texas, Florida, and New Hampshire (on salaries--no sales tax, either). There is no income tax on salaries in Tennessee.

Do people move out of California? Some do, but not the people with high incomes. Maybe when they retire. But their kids stay behind, buried in mortgage debt.

By comparison, New York state is a tax haven.

State income tax: 4% - 8.82%

NYC income tax: 2.907% - 3.876% (in addition to state tax)

Sales tax: 7% - 8.875%

Property tax: 1.5% average effective rate

They stay in New York City. Yet the city's real estate is astronomically expensive.

Smart people with high incomes make this money because of their specialized knowledge and their access to the Web. This means that they could live in tax havens. They stay.

When sheep stand still, they are sheared--year after year. 

They bleat. The shearers laugh.

What is my conclusion? People make lifestyle decisions on the basis of things other than after-tax income. They grouse about taxes, but they don't move. They could escape, but they don't.

So, my advice is to find a region with low income taxes and low housing costs, and move there when you're young. Put down roots where it does not take massive debt to buy a home. Put down roots where your kids can stay close by when they marry.

Then start buying investment homes.

Florida, Ol' Miss, or Tyler?

Definitely not Tyler, Texas. 

Locations to consider . . . 

The area around Oxford, Mississippi is a haven for retirees. The area doesn't get much snow, is milder than being on the coast, is home to University of Mississippi (Old Miss) and has a quite impressive literary history. My company supplies several large CSA farmers, who also sell at the local farmer's markets year round. State property and income taxes are relatively low, especially when compared to CA.

One guy pointed out the downsides of Florida . . .

It's hot. All the time. People die from the heat and humidity, and the 

older you get the less ability you have to adjust.
It's terribly overpriced.
There are floods.
There are hurricanes.
There is lots of crime, drugs, and a significant push for 
a Spanish-dominant culture (I mean legally) in many areas.

IMO, unless you absolutely MUST be in Florida for some other reason 

(family, other ties) I would look into other southern and southwestern 

states with much cheaper cost of living, similar better climates, and 

better opportunities.

Seattle seems like a disaster politically.   

North has recommended Tyler, Texas but that does seem a bit 
remote to me.  What is in Tyler? There is the University of Texas.  
It looks nice.  This page cited 2 complaints about Tyler: traffic and length 
of time it takes to sell a home.  As to livability, it looks like your 
standard quaint, conservative Christian town.  I need a big city.  
I love a big city.

Tyler has a state park, a rose garden, a skyline, mall, zoo, and water park.  
How quaint.  I hate quaint.