Why is real estate property part of net worth? [Why should I downsize?]

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lazaro53
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Why is real estate property part of net worth? [Why should I downsize?]

Post by lazaro53 »

Hello wise people (english not my first language)

I have always have this doubt. I bought my house for 400.000, 7 years ago. (normal house, but I live in Miami)

I pay property taxes of 400 000 (I know that they will increase every year)

Suppose that in 20 years I want to retire and I can sell my home for 1 million (or whatever) and downsize to a house that costs 800 000.

I will have to pay property taxes of the house that cost 800 000

Can you help me to see the good thing here? What is the point of selling and downsizing?

Or the idea is selling and then renting in retirement?

And also the question in the subject

Thank You!!!!
runner3081
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Re: Why is real state property part of net worth?

Post by runner3081 »

Net Worth is the value of your assets, less debt.

If you own a house that could sell for $500,000 and only own $250,000 on the mortgage, the "worth/value" in that house is $250,000, less transaction costs.

Property taxes don't come into play, just as income tax on savings accounts or fees on ETFs/Mutual funds don't come into play.

You can also, if needed, likely pull HELOC money out or do a reverse mortgage in the future. Or, sell and buy something smaller.
LittleMaggieMae
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Re: Why is real state property part of net worth?

Post by LittleMaggieMae »

I'm not sure what you are asking... property taxes are a part of home ownership in most places in America.

The thing that varies is WHERE the house is located. In my High cost of living area I might be paying 10,000 a year in property taxes on a 3bed/2bath 2 car garage 400,000.00 valued house. While someone else in a lower cost of living area might be paying 3,000 per year in property taxes on bigger 5bed/4bath 3 car garage 400,000 valued house

When people talk about downsizing in retirement - it's generally involves lowering their monthly costs for having a place to live. IF property taxes were the only variable - someone might "downsize" from a 400K HCOLA House with 10K in property taxes to a bigger nicer 400K LCOLA house and pay 3K in property taxes - and maybe have 7K per year to do something else with. You CANNOT just compare property taxes though. There are lots of other ways that houses cost money - even in LCOLA's. I just used that as an example.

Sometimes people will actually downsize the SIZE of their house so they have less house to take care of (saving time and money). I might down size from my 1200 square foot house to a 800 square foot condominium which might be more expensive in PRICE than my house. The condo would give me more freedom (I would no longer have to mow a lawn and I would have less space so I might buy less stuff to fill the space, and I would have less to clean.) A Condo might also give me a swimming pool (I don't have to take care of) an indoor work out room (I don't have to take care of) and maybe some other nice things (maybe an nice outdoor area with a pond and walking paths). So, I might downsize my living area but not the cost of it (but I might have more things that add quality to my life - the pool, gym, and outdoor area).

Generally Downsizing is about having a smaller house AND/OR having lower expenses to live in a house.

Owning (or mortgaging) a house/property is part of your net worth because it's an asset and an expense (even once you no longer have a mortgage).
Topic Author
lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

LittleMaggieMae wrote: Sat Oct 17, 2020 6:31 pm I'm not sure what you are asking... property taxes are a part of home ownership in most places in America.

The thing that varies is WHERE the house is located. In my High cost of living area I might be paying 10,000 a year in property taxes on a 3bed/2bath 2 car garage 400,000.00 valued house. While someone else in a lower cost of living area might be paying 3,000 per year in property taxes on bigger 5bed/4bath 3 car garage 400,000 valued house

When people talk about downsizing in retirement - it's generally involves lowering their monthly costs for having a place to live. IF property taxes were the only variable - someone might "downsize" from a 400K HCOLA House with 10K in property taxes to a bigger nicer 400K LCOLA house and pay 3K in property taxes - and maybe have 7K per year to do something else with. You CANNOT just compare property taxes though. There are lots of other ways that houses cost money - even in LCOLA's. I just used that as an example.

Sometimes people will actually downsize the SIZE of their house so they have less house to take care of (saving time and money). I might down size from my 1200 square foot house to a 800 square foot condominium which might be more expensive in PRICE than my house. The condo would give me more freedom (I would no longer have to mow a lawn and I would have less space so I might buy less stuff to fill the space, and I would have less to clean.) A Condo might also give me a swimming pool (I don't have to take care of) an indoor work out room (I don't have to take care of) and maybe some other nice things (maybe an nice outdoor area with a pond and walking paths). So, I might downsize my living area but not the cost of it (but I might have more things that add quality to my life - the pool, gym, and outdoor area).

Generally Downsizing is about having a smaller house AND/OR having lower expenses to live in a house.

Owning (or mortgaging) a house/property is part of your net worth because it's an asset and an expense (even once you no longer have a mortgage).
thanks, I understand that, but I was thinking just about the property tax situation, buying a cheaper house but at the same time paying more taxes (future taxes)
Jags4186
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Re: Why is real state property part of net worth?

Post by Jags4186 »

lazaro53 wrote: Sat Oct 17, 2020 6:49 pm
LittleMaggieMae wrote: Sat Oct 17, 2020 6:31 pm I'm not sure what you are asking... property taxes are a part of home ownership in most places in America.

The thing that varies is WHERE the house is located. In my High cost of living area I might be paying 10,000 a year in property taxes on a 3bed/2bath 2 car garage 400,000.00 valued house. While someone else in a lower cost of living area might be paying 3,000 per year in property taxes on bigger 5bed/4bath 3 car garage 400,000 valued house

When people talk about downsizing in retirement - it's generally involves lowering their monthly costs for having a place to live. IF property taxes were the only variable - someone might "downsize" from a 400K HCOLA House with 10K in property taxes to a bigger nicer 400K LCOLA house and pay 3K in property taxes - and maybe have 7K per year to do something else with. You CANNOT just compare property taxes though. There are lots of other ways that houses cost money - even in LCOLA's. I just used that as an example.

Sometimes people will actually downsize the SIZE of their house so they have less house to take care of (saving time and money). I might down size from my 1200 square foot house to a 800 square foot condominium which might be more expensive in PRICE than my house. The condo would give me more freedom (I would no longer have to mow a lawn and I would have less space so I might buy less stuff to fill the space, and I would have less to clean.) A Condo might also give me a swimming pool (I don't have to take care of) an indoor work out room (I don't have to take care of) and maybe some other nice things (maybe an nice outdoor area with a pond and walking paths). So, I might downsize my living area but not the cost of it (but I might have more things that add quality to my life - the pool, gym, and outdoor area).

Generally Downsizing is about having a smaller house AND/OR having lower expenses to live in a house.

Owning (or mortgaging) a house/property is part of your net worth because it's an asset and an expense (even once you no longer have a mortgage).
thanks, I understand that, but I was thinking just about the property tax situation, buying a cheaper house but at the same time paying more taxes (future taxes)
I don’t know what Florida law is, but your property taxes are generally based on your assessed value multiplied by a local tax rate.

In 20 years, the house worth $1,000,000 that you’re selling will likely have higher property taxes than the $800,000 house you plan on downsizing to - assuming you live in the same state/municipality.

Of course, some folks can upsize by moving to a lower tax burden state. A $400,000 house in New Jersey could have $11,000 property taxes. You could move to North Carolina and get a $400,000 house that is twice the size of your New Jersey home with a quarter of the property taxes.
Topic Author
lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

Jags4186 wrote: Sat Oct 17, 2020 6:54 pm
lazaro53 wrote: Sat Oct 17, 2020 6:49 pm
LittleMaggieMae wrote: Sat Oct 17, 2020 6:31 pm I'm not sure what you are asking... property taxes are a part of home ownership in most places in America.

The thing that varies is WHERE the house is located. In my High cost of living area I might be paying 10,000 a year in property taxes on a 3bed/2bath 2 car garage 400,000.00 valued house. While someone else in a lower cost of living area might be paying 3,000 per year in property taxes on bigger 5bed/4bath 3 car garage 400,000 valued house

When people talk about downsizing in retirement - it's generally involves lowering their monthly costs for having a place to live. IF property taxes were the only variable - someone might "downsize" from a 400K HCOLA House with 10K in property taxes to a bigger nicer 400K LCOLA house and pay 3K in property taxes - and maybe have 7K per year to do something else with. You CANNOT just compare property taxes though. There are lots of other ways that houses cost money - even in LCOLA's. I just used that as an example.

Sometimes people will actually downsize the SIZE of their house so they have less house to take care of (saving time and money). I might down size from my 1200 square foot house to a 800 square foot condominium which might be more expensive in PRICE than my house. The condo would give me more freedom (I would no longer have to mow a lawn and I would have less space so I might buy less stuff to fill the space, and I would have less to clean.) A Condo might also give me a swimming pool (I don't have to take care of) an indoor work out room (I don't have to take care of) and maybe some other nice things (maybe an nice outdoor area with a pond and walking paths). So, I might downsize my living area but not the cost of it (but I might have more things that add quality to my life - the pool, gym, and outdoor area).

Generally Downsizing is about having a smaller house AND/OR having lower expenses to live in a house.

Owning (or mortgaging) a house/property is part of your net worth because it's an asset and an expense (even once you no longer have a mortgage).
thanks, I understand that, but I was thinking just about the property tax situation, buying a cheaper house but at the same time paying more taxes (future taxes)
I don’t know what Florida law is, but your property taxes are generally based on your assessed value multiplied by a local tax rate.

In 20 years, the house worth $1,000,000 that you’re selling will likely have higher property taxes than the $800,000 house you plan on downsizing to - assuming you live in the same state/municipality.
OK, I got it, thanks
Independent George
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Re: Why is real state property part of net worth?

Post by Independent George »

lazaro53 wrote: Sat Oct 17, 2020 6:49 pm thanks, I understand that, but I was thinking just about the property tax situation, buying a cheaper house but at the same time paying more taxes (future taxes)
Are you in CA? As I understand it, property taxes there are limited based on their purchase price, but in most other places it will go up and down based on assessed value. In your original example, you'd be paying property taxes in the original property based on the $1M valuation, and not the purchase price. I'm currently 50% more in property tax on a condo that went down 30% in value from when I bought it in 2007.
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lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

Independent George wrote: Sat Oct 17, 2020 7:00 pm
lazaro53 wrote: Sat Oct 17, 2020 6:49 pm thanks, I understand that, but I was thinking just about the property tax situation, buying a cheaper house but at the same time paying more taxes (future taxes)
Are you in CA? As I understand it, property taxes there are limited based on their purchase price, but in most other places it will go up and down based on assessed value. In your original example, you'd be paying property taxes in the original property based on the $1M valuation, and not the purchase price. I'm currently 50% more in property tax on a condo that went down 30% in value from when I bought it in 2007.
Thanks, Miami

For example, my next door neighbor bought his house many years ago for 220 and is now worth 700, I bought mine 8 years ago for 400 and now is worth 600. His property taxes are much less than mine. Because they are based in the original price. (I know how much he pays) If he sells his house and buy mine, he will have a 100 000 gain, but will pay more property taxes for the rest of his retirement (he is 72). That is my doubt about the value in selling any house to buy another one (cheaper) in the future (make money in equity but pay more in taxes every year)
dukeblue219
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Re: Why is real state property part of net worth?

Post by dukeblue219 »

lazaro53 wrote: Sat Oct 17, 2020 7:15 pm
For example, my next door neighbor bought his house many years ago for 220 and is now worth 700, I bought mine 8 years ago for 400 and now is worth 600. His property taxes are much less than mine. Because they are based in the original price.
In this case it may not make sense to downsize purely to save money. However, you still have to consider that in downsizing you’d save on utilities, have less to clean and maintain, and hopefully pocket some cash from your equity.

State laws can vary dramatically. In my state everyone pays property tax based on the current value. Those appraisals can be wrong, but two similar houses next door will have very close property taxes regardless of how much the owners paid or how long ago.
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lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

dukeblue219 wrote: Sat Oct 17, 2020 7:21 pm
lazaro53 wrote: Sat Oct 17, 2020 7:15 pm
For example, my next door neighbor bought his house many years ago for 220 and is now worth 700, I bought mine 8 years ago for 400 and now is worth 600. His property taxes are much less than mine. Because they are based in the original price.
In this case it may not make sense to downsize purely to save money. However, you still have to consider that in downsizing you’d save on utilities, have less to clean and maintain, and hopefully pocket some cash from your equity.

State laws can vary dramatically. In my state everyone pays property tax based on the current value. Those appraisals can be wrong, but two similar houses next door will have very close property taxes regardless of how much the owners paid or how long ago.
ok, I got it, I thought they would increase based in the purchase price only. Thanks
Independent George
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Re: Why is real state property part of net worth?

Post by Independent George »

lazaro53 wrote: Sat Oct 17, 2020 7:15 pm Thanks, Miami

For example, my next door neighbor bought his house many years ago for 220 and is now worth 700, I bought mine 8 years ago for 400 and now is worth 600. His property taxes are much less than mine. Because they are based in the original price. (I know how much he pays) If he sells his house and buy mine, he will have a 100 000 gain, but will pay more property taxes for the rest of his retirement (he is 72). That is my doubt about the value in selling any house to buy another one (cheaper) in the future (make money in equity but pay more in taxes every year)
Can you appeal your tax assessment? If you can demonstrate the comps, you might be able to get your taxes lowered. I've done it successfully a couple times, and my parents had done it consistently in NY until the neighbors' assessments started to go up. Of course, that might result in his tax bill going up instead of yours going down (which would likely not endear you to him if he found out, so you should probably be discreet in the meantime...).
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lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

Independent George wrote: Sat Oct 17, 2020 7:43 pm
lazaro53 wrote: Sat Oct 17, 2020 7:15 pm Thanks, Miami

For example, my next door neighbor bought his house many years ago for 220 and is now worth 700, I bought mine 8 years ago for 400 and now is worth 600. His property taxes are much less than mine. Because they are based in the original price. (I know how much he pays) If he sells his house and buy mine, he will have a 100 000 gain, but will pay more property taxes for the rest of his retirement (he is 72). That is my doubt about the value in selling any house to buy another one (cheaper) in the future (make money in equity but pay more in taxes every year)
Can you appeal your tax assessment? If you can demonstrate the comps, you might be able to get your taxes lowered. I've done it successfully a couple times, and my parents had done it consistently in NY until the neighbors' assessments started to go up. Of course, that might result in his tax bill going up instead of yours going down (which would likely not endear you to him if he found out, so you should probably be discreet in the meantime...).
I will think about it, interesting, thanks a lot
retire2022
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Re: Why is real state property part of net worth?

Post by retire2022 »

lazaro53 wrote: Sat Oct 17, 2020 6:04 pm Hello wise people (english not my first language)

I have always have this doubt. I bought my house for 400.000, 7 years ago. (normal house, but I live in Miami)

I pay property taxes of 400 000 (I know that they will increase every year)

Suppose that in 20 years I want to retire and I can sell my home for 1 million (or whatever) and downsize to a house that costs 800 000.

I will have to pay property taxes of the house that cost 800 000

Can you help me to see the good thing here? What is the point of selling and downsizing?

Or the idea is selling and then renting in retirement?

And also the question in the subject

Thank You!!!!
Hi btw it is Real Estate not state.

It is because as a community this is part of the social contract to be part of the rights of local, city, state and Federal Governmnet

https://en.wikipedia.org/wiki/Social_contract

One gives up one's individual freedom to be part of collective society

Critical theories
Consent of the governed

An early critic of social contract theory was Rousseau's friend, the philosopher David Hume, who in 1742 published an essay "Of Civil Liberty". The second part of this essay, entitled "Of the Original Contract",[21] stresses that the concept of a "social contract" is a convenient fiction:

As no party, in the present age can well support itself without a philosophical or speculative system of principles annexed to its political or practical one; we accordingly find that each of the factions into which this nation is divided has reared up a fabric of the former kind, in order to protect and cover that scheme of actions which it pursues. ... The one party [defenders of the absolute and divine right of kings, or Tories], by tracing up government to the DEITY, endeavor to render it so sacred and inviolate that it must be little less than sacrilege, however tyrannical it may become, to touch or invade it in the smallest article. The other party [the Whigs, or believers in constitutional monarchy], by founding government altogether on the consent of the PEOPLE suppose that there is a kind of original contract by which the subjects have tacitly reserved the power of resisting their sovereign, whenever they find themselves aggrieved by that authority with which they have for certain purposes voluntarily entrusted him.
— David Hume, "On Civil Liberty" [II.XII.1][21]

Hume argued that consent of the governed was the ideal foundation on which a government should rest, but that it had not actually occurred this way in general.

My intention here is not to exclude the consent of the people from being one just foundation of government where it has place. It is surely the best and most sacred of any. I only contend that it has very seldom had place in any degree and never almost in its full extent. And that therefore some other foundation of government must also be admitted.
— Ibid II.XII.20
LittleMaggieMae
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Re: Why is real state property part of net worth?

Post by LittleMaggieMae »

For the OP, many places have special property tax rules for senior citizens. My local HCOLA gives seniors 65 an older a special exemption that can lower the amount of taxes they pay - any senior can apply for this on their primary home and get it. Then there's the really big help to seniors. They can also apply for a property tax "freeze" thing - based on their income - their property taxes may be "frozen" at a lower level no matter how much their house might currently be worth or how much taxes may raise.

It's not surprising to see a house with a decade (or more) of 3K per year property taxes suddenly jump to 6K when it's sold. The decade (or more) of 3K per year taxes was when the house was owned by a senior citizen who applied for and qualified for the property tax freeze.

I wouldn't focus solely on property taxes when thinking about the cost of owning a house (even in retirement). There are a lot of tangible things and intangible things involved with the "cost" of one's retirement living arrangements.
LittleMaggieMae
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Re: Why is real state property part of net worth?

Post by LittleMaggieMae »

To the OP, you should check out your Assessor's Office website. (or what ever governing body handles your local property taxes). You should be able to find all the information about what your property taxes pay for, how your property is taxed, and how to review the info about your property (to fix any errors) and how to appeal the assessment, and how to go about figuring out if appealing it is in your best interest.

Knowledge is power. Choosing to take or not take action on the knowledge is using that power.
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lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

LittleMaggieMae wrote: Sat Oct 17, 2020 9:41 pm For the OP, many places have special property tax rules for senior citizens. My local HCOLA gives seniors 65 an older a special exemption that can lower the amount of taxes they pay - any senior can apply for this on their primary home and get it. Then there's the really big help to seniors. They can also apply for a property tax "freeze" thing - based on their income - their property taxes may be "frozen" at a lower level no matter how much their house might currently be worth or how much taxes may raise.

It's not surprising to see a house with a decade (or more) of 3K per year property taxes suddenly jump to 6K when it's sold. The decade (or more) of 3K per year taxes was when the house was owned by a senior citizen who applied for and qualified for the property tax freeze.

I wouldn't focus solely on property taxes when thinking about the cost of owning a house (even in retirement). There are a lot of tangible things and intangible things involved with the "cost" of one's retirement living arrangements.
thanks!!!!
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lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

LittleMaggieMae wrote: Sat Oct 17, 2020 9:54 pm To the OP, you should check out your Assessor's Office website. (or what ever governing body handles your local property taxes). You should be able to find all the information about what your property taxes pay for, how your property is taxed, and how to review the info about your property (to fix any errors) and how to appeal the assessment, and how to go about figuring out if appealing it is in your best interest.

Knowledge is power. Choosing to take or not take action on the knowledge is using that power.
Thanks!!!
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lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

runner3081 wrote: Sat Oct 17, 2020 6:24 pm Net Worth is the value of your assets, less debt.

If you own a house that could sell for $500,000 and only own $250,000 on the mortgage, the "worth/value" in that house is $250,000, less transaction costs.

Property taxes don't come into play, just as income tax on savings accounts or fees on ETFs/Mutual funds don't come into play.

You can also, if needed, likely pull HELOC money out or do a reverse mortgage in the future. Or, sell and buy something smaller.
Thank You
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cchrissyy
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Re: Why is real state property part of net worth?

Post by cchrissyy »

Suppose that in 20 years I want to retire and I can sell my home for 1 million (or whatever) and downsize to a house that costs 800 000.

I will have to pay property taxes of the house that cost 800 000

Can you help me to see the good thing here? What is the point of selling and downsizing?
one good thing you left out is the 200 000 price difference is money into your pocket
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Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (selling a home).

Hello lazaro53. I have clarified your thread title. I have also fixed a spelling error "real state" to "real estate".
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Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by Nate79 »

I doubt most people consider downsizing as going from a $1m house to a $800k house. That's barely worth it if you consider all the costs to sell and move.
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Re: Why is real state property part of net worth?

Post by tibbitts »

Independent George wrote: Sat Oct 17, 2020 7:43 pm
lazaro53 wrote: Sat Oct 17, 2020 7:15 pm Thanks, Miami

For example, my next door neighbor bought his house many years ago for 220 and is now worth 700, I bought mine 8 years ago for 400 and now is worth 600. His property taxes are much less than mine. Because they are based in the original price. (I know how much he pays) If he sells his house and buy mine, he will have a 100 000 gain, but will pay more property taxes for the rest of his retirement (he is 72). That is my doubt about the value in selling any house to buy another one (cheaper) in the future (make money in equity but pay more in taxes every year)
Can you appeal your tax assessment? If you can demonstrate the comps, you might be able to get your taxes lowered. I've done it successfully a couple times, and my parents had done it consistently in NY until the neighbors' assessments started to go up. Of course, that might result in his tax bill going up instead of yours going down (which would likely not endear you to him if he found out, so you should probably be discreet in the meantime...).
But the question is how the taxes are calculated, not so much the value. I own a small condo in FL where all the units are essentially identical, and the assessor agrees on that. Most of the neighbors pay well under $1000 for their 130k-ish condo. I pay nearly $3,000. It's just a function of me and my characteristics (when I purchased, my age, etc.), not the condo. You would have to find not just a property like yours, but a person just like you, to do comps.
Notsobad
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Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by Notsobad »

In Florida there is a cap on how much they can raise your assessment to calculate taxes. Therefore after several years new owners will pay more than you for the same value house. However when you move within florida you can take that discount with you.

So If you downsize from a 1M house that you bought for 400k that they assess at 700k and move to a 500k you will get a discount on the assessed value and get a break on taxes. I can’t remember how it is calculated.
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Re: Why is real state property part of net worth?

Post by Independent George »

tibbitts wrote: Sun Oct 18, 2020 9:39 am But the question is how the taxes are calculated, not so much the value. I own a small condo in FL where all the units are essentially identical, and the assessor agrees on that. Most of the neighbors pay well under $1000 for their 130k-ish condo. I pay nearly $3,000. It's just a function of me and my characteristics (when I purchased, my age, etc.), not the condo. You would have to find not just a property like yours, but a person just like you, to do comps.
I had no idea those things were factored into the equation in Florda - which just goes to show much local methods will vary. In IL, it's based entirely on assessed value (which has its own completely obscure method for calculation). Where my parents live, it's much more transparent - assessed value is based on comps, and there is an online tool to find comparable properties and appeal your assessment. I was geninely shocked at how simple it and logical it was - taxes were still crazy high, but at least it made sense.
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Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by adamthesmythe »

lazaro53 wrote: Sat Oct 17, 2020 6:04 pm What is the point of selling and downsizing?
To take untaxed capital gains and pay less in taxes.

If that doesn't happen, don't do it.
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lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

retire2022 wrote: Sat Oct 17, 2020 8:02 pm
lazaro53 wrote: Sat Oct 17, 2020 6:04 pm Hello wise people (english not my first language)

I have always have this doubt. I bought my house for 400.000, 7 years ago. (normal house, but I live in Miami)

I pay property taxes of 400 000 (I know that they will increase every year)

Suppose that in 20 years I want to retire and I can sell my home for 1 million (or whatever) and downsize to a house that costs 800 000.

I will have to pay property taxes of the house that cost 800 000

Can you help me to see the good thing here? What is the point of selling and downsizing?

Or the idea is selling and then renting in retirement?

And also the question in the subject

Thank You!!!!
Hi btw it is Real Estate not state.

It is because as a community this is part of the social contract to be part of the rights of local, city, state and Federal Governmnet

https://en.wikipedia.org/wiki/Social_contract

One gives up one's individual freedom to be part of collective society

Critical theories
Consent of the governed

An early critic of social contract theory was Rousseau's friend, the philosopher David Hume, who in 1742 published an essay "Of Civil Liberty". The second part of this essay, entitled "Of the Original Contract",[21] stresses that the concept of a "social contract" is a convenient fiction:

As no party, in the present age can well support itself without a philosophical or speculative system of principles annexed to its political or practical one; we accordingly find that each of the factions into which this nation is divided has reared up a fabric of the former kind, in order to protect and cover that scheme of actions which it pursues. ... The one party [defenders of the absolute and divine right of kings, or Tories], by tracing up government to the DEITY, endeavor to render it so sacred and inviolate that it must be little less than sacrilege, however tyrannical it may become, to touch or invade it in the smallest article. The other party [the Whigs, or believers in constitutional monarchy], by founding government altogether on the consent of the PEOPLE suppose that there is a kind of original contract by which the subjects have tacitly reserved the power of resisting their sovereign, whenever they find themselves aggrieved by that authority with which they have for certain purposes voluntarily entrusted him.
— David Hume, "On Civil Liberty" [II.XII.1][21]

Hume argued that consent of the governed was the ideal foundation on which a government should rest, but that it had not actually occurred this way in general.

My intention here is not to exclude the consent of the people from being one just foundation of government where it has place. It is surely the best and most sacred of any. I only contend that it has very seldom had place in any degree and never almost in its full extent. And that therefore some other foundation of government must also be admitted.
— Ibid II.XII.20
thanks a lot, spanish is my first language
Topic Author
lazaro53
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Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by lazaro53 »

Nate79 wrote: Sun Oct 18, 2020 9:36 am I doubt most people consider downsizing as going from a $1m house to a $800k house. That's barely worth it if you consider all the costs to sell and move.
it was just an example, and real "estate" in Miami is expensive
thanks
Topic Author
lazaro53
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Re: Why is real state property part of net worth?

Post by lazaro53 »

tibbitts wrote: Sun Oct 18, 2020 9:39 am
Independent George wrote: Sat Oct 17, 2020 7:43 pm
lazaro53 wrote: Sat Oct 17, 2020 7:15 pm Thanks, Miami

For example, my next door neighbor bought his house many years ago for 220 and is now worth 700, I bought mine 8 years ago for 400 and now is worth 600. His property taxes are much less than mine. Because they are based in the original price. (I know how much he pays) If he sells his house and buy mine, he will have a 100 000 gain, but will pay more property taxes for the rest of his retirement (he is 72). That is my doubt about the value in selling any house to buy another one (cheaper) in the future (make money in equity but pay more in taxes every year)
Can you appeal your tax assessment? If you can demonstrate the comps, you might be able to get your taxes lowered. I've done it successfully a couple times, and my parents had done it consistently in NY until the neighbors' assessments started to go up. Of course, that might result in his tax bill going up instead of yours going down (which would likely not endear you to him if he found out, so you should probably be discreet in the meantime...).
But the question is how the taxes are calculated, not so much the value. I own a small condo in FL where all the units are essentially identical, and the assessor agrees on that. Most of the neighbors pay well under $1000 for their 130k-ish condo. I pay nearly $3,000. It's just a function of me and my characteristics (when I purchased, my age, etc.), not the condo. You would have to find not just a property like yours, but a person just like you, to do comps.
thanks
Topic Author
lazaro53
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Joined: Fri May 22, 2020 2:12 pm

Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by lazaro53 »

Notsobad wrote: Sun Oct 18, 2020 9:47 am In Florida there is a cap on how much they can raise your assessment to calculate taxes. Therefore after several years new owners will pay more than you for the same value house. However when you move within florida you can take that discount with you.

So If you downsize from a 1M house that you bought for 400k that they assess at 700k and move to a 500k you will get a discount on the assessed value and get a break on taxes. I can’t remember how it is calculated.
thanks
Topic Author
lazaro53
Posts: 66
Joined: Fri May 22, 2020 2:12 pm

Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by lazaro53 »

adamthesmythe wrote: Sun Oct 18, 2020 11:52 am
lazaro53 wrote: Sat Oct 17, 2020 6:04 pm What is the point of selling and downsizing?
To take untaxed capital gains and pay less in taxes.

If that doesn't happen, don't do it.
thanks
musicmom
Posts: 120
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Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by musicmom »

We downsized at retirement from a 2000 sq ft home at $420,000 with annual RE tax of $11,000 to a 900sq ft home at $316,000 with a $6000 tax bill.

Smaller to maintain, less expensive (no more mortgage) and almost half yearly taxes.
Win win in our book.
Topic Author
lazaro53
Posts: 66
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Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by lazaro53 »

musicmom wrote: Sun Oct 18, 2020 3:28 pm We downsized at retirement from a 2000 sq ft home at $420,000 with annual RE tax of $11,000 to a 900sq ft home at $316,000 with a $6000 tax bill.

Smaller to maintain, less expensive (no more mortgage) and almost half yearly taxes.
Win win in our book.
thanks, i hope it is like that in Miami in the future
vested1
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Re: Why is real state property part of net worth?

Post by vested1 »

LittleMaggieMae wrote: Sat Oct 17, 2020 9:41 pm For the OP, many places have special property tax rules for senior citizens. My local HCOLA gives seniors 65 an older a special exemption that can lower the amount of taxes they pay - any senior can apply for this on their primary home and get it. Then there's the really big help to seniors. They can also apply for a property tax "freeze" thing - based on their income - their property taxes may be "frozen" at a lower level no matter how much their house might currently be worth or how much taxes may raise.

It's not surprising to see a house with a decade (or more) of 3K per year property taxes suddenly jump to 6K when it's sold. The decade (or more) of 3K per year taxes was when the house was owned by a senior citizen who applied for and qualified for the property tax freeze.

I wouldn't focus solely on property taxes when thinking about the cost of owning a house (even in retirement). There are a lot of tangible things and intangible things involved with the "cost" of one's retirement living arrangements.
Since we're identifying other locations, and since California was mentioned, there is an additional property tax relief factor in California other than Prop 13, which is the one most talked about on this forum.

CA proposition 60/90 allows homeowners over the age of 55 to retain the property tax base if they sell a home and purchase another home within 2 years in the same county, or in other cooperating counties. My MIL took advantage of this law and transferred her $500 a year property tax to her new home that would have been about $4,000 without that proposition in place.

A senior in CA can also sell their home and move into a relative's house to live with them and transfer their base to that house as well, lowering the property tax bill of the relative's house. That provision is in a different law.

I only bring this up because earlier posts mention that it's always best to do some research as to the County's property tax provisions in order to be able to benefit from things you may not be aware of. Most often that information won't be volunteered, but is considered the responsibility of the homeowner to discover. A good real estate agent will bring these possible benefits to the buyer's attention.
fuj
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Re: Why is real state property part of net worth?

Post by fuj »

vested1 wrote: Mon Oct 19, 2020 4:13 am A senior in CA can also sell their home and move into a relative's house to live with them and transfer their base to that house as well, lowering the property tax bill of the relative's house. That provision is in a different law.
Would you happen to know the law where this provision resides?
Broken Man 1999
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Location: West coast of Florida, inland on high ground!

Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by Broken Man 1999 »

Florida has a max-cap on property taxes. I pay about 25% of the taxes my neighbor pays.

We have enjoyed the property tax cap since it was enacted, as we have lived in our home since 1989.

I think you can transfer your cap if you buy another home, but I have no knowledge of exactly how and how much the cap is applied.

OP, you could contact the property tax appraiser's office to see how the transfer cap works.

As I said, I think a transfer is possible, but the office could give you a better idea.

Certainly worth a call.

Broken Man 1999

.
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain
Topic Author
lazaro53
Posts: 66
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Re: Why is real estate property part of net worth? [Why should I downsize?]

Post by lazaro53 »

Broken Man 1999 wrote: Mon Oct 19, 2020 3:33 pm Florida has a max-cap on property taxes. I pay about 25% of the taxes my neighbor pays.

We have enjoyed the property tax cap since it was enacted, as we have lived in our home since 1989.

I think you can transfer your cap if you buy another home, but I have no knowledge of exactly how and how much the cap is applied.

OP, you could contact the property tax appraiser's office to see how the transfer cap works.

As I said, I think a transfer is possible, but the office could give you a better idea.

Certainly worth a call.

Broken Man 1999

.
Thanks, I will do that, I hope the transfer is possible.
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