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When Assets (Such as Real Estate) Become Liabilities

Discussion in 'Real Estate & Other Investments' started by Scorpio, Dec 30, 2016.



  1. Scorpio

    Scorpio Скорпион Founding Member Board Elder Site Mgr Site Supporter ++

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    When Assets (Such as Real Estate) Become Liabilities
    December 27, 2016

    It will be the middle class that accepted the notion that "real estate is the foundation of family wealth" that will be stripmined by higher taxes on immobile assets such as real estate.

    Correspondent Joel M. submitted an article that struck me as a harbinger of the future: In Greece, Property Is Debt:

    "At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. Not necessarily because some feckless uncle left them with a pile of debt at the end of his revels; they are turning their backs on what used to be a pillar of Greece’s economy and society: real estate.

    Growing personal debt, declining incomes and ever higher taxes as Greece’s depression grinds on have turned property and the dream of easy money into dread of a catastrophic burden.

    After many years in which only very valuable properties were taxed, many Greeks went from paying almost no taxes on real estate to not having enough money to pay.

    In 2010, property taxes accounted for 0.26 percent of gross domestic product, while this year they are around 2 percent, according to state budget figures. 'Suddenly, the state treated the Greeks as if they were rich, at the precise moment that they ceased to be rich.'

    Among the many disruptions of the past few years, this one shows how traditional conceptions — and a sense of security — can be shattered. With a history full of wars, bankruptcies and rampant inflation, Greeks had always seen land as a haven.

    But it is private debt — at 222 billion euros last year — that may prove an even greater danger. This shows in government revenues. With the unified tax, ownership of every kind of property is now subject to taxation.

    It will be very difficult for the Greeks to get out from under this mountain of debt. Delinquent loans, which at the end of June made up 31.7 percent of all housing loans, were a mere 5.3 percent of the total in 2008."

    The self-reinforcing dynamics in this narrative profoundly reverse time-honored concepts of value: assets that once held or gained value now carry high costs of ownership and lose value.

    1. Governments desperate for tax revenues raise property taxes, which add costs that eventually depress sales and future price appreciation.

    2. High debt levels and high property taxes trigger foreclosures and forced sales that further depress the market with high inventories of unsold/unrented homes.

    3. As sales decline, appreciation can no longer be counted on to enrich owners. Instead, owners fear declines in value and higher taxes. This further depresses sales.

    4. High debt levels become even more burdensome as property values fall.

    5. Rather than offer a means of building and protecting wealth, real estate becomes a liability that destroys wealth via payment of taxes and declines in value.

    While it can be argued that Greece is a unique situation--a cumbersome, costly bureaucracy of land transfer coupled with soaring taxes--perhaps Greece is simply early to the party.

    [​IMG]

    Governments everywhere are facing fast-rising pension and healthcare costs, and the need for more tax revenues will skyrocket once the global recession trims income, payroll, business and sales taxes.

    Additional taxes on assets that can't flee the country--i.e. real estate--become extremely attractive.

    Once an asset class shifts from being a means of wealth preservation and appreciation to a financial risk and burden, a self-reinforcing feedback loop reduces demand and increases supply, pushing prices lower--a decline that then causes more people to sell before prices drop further.

    The nightmare scenario for recent buyers is a sharp tax increase that crushes the market value of their home, putting them underwater, i.e. their mortgage is greater than the value of their home. Faced with ever-increasing property taxes and further erosion of value, what's the advantage of holding onto the property?

    Anecdotally, stories of owners destroying buildings to lower their property tax appraisal emerged in America's Great Depression, as owners desperate to lower their property taxes destroyed their assets (buildings on the land) as the only available means of keeping their property.

    Which asset class attracts new taxes will be different from nation to nation, but we can anticipate that governments will go after assets that are currently considered safe and that can't flee to low-tax havens.

    Mobile capital can flee to safer, lower tax climes, and the super-wealthy can buy legislative tax breaks on their wealth. It will be the middle class that accepted the notion that "real estate is the foundation of family wealth" that will be stripmined by higher taxes on immobile assets such as real estate.

    This essay was drawn from Musings Report 45. The Musings Reports are sent exclusively to major patrons and contributors ($5/month or $50 annually) every weekend.


    Join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.

    Check out both of my new books, Inequality and the Collapse of Privilege ($3.95 Kindle, $8.95 print) and Why Our Status Quo Failed and Is Beyond Reform ($3.95 Kindle, $8.95 print). For more, please visit the OTM essentials website.

    http://www.oftwominds.com/blogdec16/assets-liabilities2-16.html
     
  2. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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    Property tax is ongoing robbery and you the owner is a sitting duck.
    It is the #1 way the elite keep you the dirty peasant in your place.

    Trying to improve your lot in life is fine, owning a lake house or cabin in the woods is great.
    Just be prepared to be kicked in the balls repeatedly by useless scum communist party members for the rest of your life.

    .
     
  3. GOLDZILLA

    GOLDZILLA Harvurd Koleej Jeenyus Midas Member

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    I tore down a building on my property just to cut my taxes in half.
     
  4. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    I doubt if this goes anywhere.

    Drive to kill school property tax in Pennsylvania headed back to Legislature


    By Marc Levy, The Associated Press

    Posted: 01/03/17, 2:28 PM EST | Updated: 11 hrs ago

    HARRISBURG >> Debate over school property taxes in Pennsylvania is expected to return to the Legislature in 2017.

    Senate supporters say the Nov. 8 election provided the necessary votes to eliminate school property taxes entirely and replace them with other revenue streams.

    That would mean shifting about $14 billion in taxes from property owners, including businesses, to Pennsylvania consumers and workers through sales and personal income taxes.

    An Associated Press analysis of state data found that more than 70 percent of school property taxes were collected by the wealthiest half of school districts in 2014-15.

    Sen. David Argall, R-Schuylkill, will introduce the leading proposal, which would increase the income tax rate by 60 percent and hike the state sales tax rate by 17 percent while applying it to a wider range of goods and services, such as groceries, clothing, basic TV, and funeral services.

    In late 2015, the Senate defeated Argall’s legislation by a 25-24 vote with Lt. Gov. Mike Stack casting the tie-breaker. The vote split both parties and the Pennsylvania School Boards Association opposed it.

    But proponents say a pair of incoming Harrisburg-area senators elected in November are replacing two opponents.

    “We believe that gets us to the magic number of 26,” Argall said.

    WHAT’S NEXT?


    Argall said he will reintroduce the bill in the two-year session that began Tuesday. It would allow the collection of school property taxes only to retire current debt, would give districts an inflationary aid increase annually and would require voter approval for school boards seeking a local income tax increase.

    Argall said he has discussed eliminating school property taxes with Democratic Gov. Tom Wolf’s administration, but “the devil is always going to be in the details.”

    Wolf campaigned in 2014 as a proponent of reducing property taxes, in part to narrow the wide disparity between wealthy and poor school districts. The following year, he proposed a $3.2 billion property tax cut designed to provide the most help to higher-poverty, higher-tax school districts, such as Erie, Harrisburg, Johnstown, Reading and Scranton. The plan never got a vote.

    The governor hasn’t endorsed a plan to eliminate property taxes. His office said that while Wolf “could support taking steps towards elimination, the details of such a plan are very important, especially how and whether local communities would contribute directly to school funding.”

    It is unclear whether Argall’s legislation can pass the House.

    A Republican plan the House approved in 2015 was designed to reduce property taxes by about $4 billion. But Democrats said the bill would have helped wealthier, not poorer, districts, and it died in the Senate.

    WHAT’S THE PLAN?


    School property tax collections this fiscal year likely will amount to $13 billion to $14 billion.

    Argall’s legislation would increase the state’s income tax rate to 4.95 percent, from 3.07 percent. That increase would provide an estimated $5 billion, while someone earning $50,000 a year in taxable income would see their state income taxes go from $1,535 to $2,475.

    The remainder needed to make up the difference would come from increasing the state sales tax rate to 7 percent from 6 percent and eliminating exemptions on many transactions, including groceries, clothing, and shoes; legal, accounting and financial services; dry cleaning; funeral services; salon services; basic television services; trash pickup; liquor and beer by the drink; non-prescription drugs; and tickets to sporting events, concerts and other events.

    WHERE WOULD THE MONEY GO?


    An Associated Press analysis of state data found that more than 70 percent of school property taxes were collected by the wealthiest half of school districts in 2014-15, the latest data available.

    Of the $12.3 billion collected, nearly $9 billion of that was collected by the 250 school districts that are in the top half of average household income, according to AP’s analysis.

    Districts in the bottom half of household income collected an average of less than $4,500 in property taxes per student. School districts in the top half collected nearly $9,000 per student, or twice as much.

    The disparity is greater at further ends of the income spectrum. School districts in the bottom 10 percent of household income collected about $3,100 in property taxes per student, while school districts in the top 10 percent collected nearly $13,000 per student, or more than four times as much.

    Follow Marc Levy on Twitter at www.twitter.com/timelywriter. His work can be found at http://bigstory.ap.org/author/marc-levy.

    http://www.thereporteronline.com/article/RO/20170103/NEWS/170109953


    PENNSYLVANIA TAXPAYERS CYBER COALITION
    http://ptcc.us/
     
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  5. Usury

    Usury Gold Chaser Platinum Bling

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    I subscribe to the "Rich Dad" philosophy of assets/liabilities. Unless it's generating positive cash-flow for me, it's a liability. PERIOD.

    So the same is true of your car, boat, lawnmower and all your other "stuff" as well....that even includes your PM's.

    Now at the same time, all of the above can be a store of wealth that can be sold to re-coup it if/when needed (and granted some are better at this than others). I do also realize that is therefore the generally accepted definition of an asset. However if we could change everyone's thinking to the idea in my first sentence, we'd all be a lot better off, mostly just buying what we need and investing the rest. It'd sure eliminate a lot of the useless retail glut.
     
  6. andial

    andial Sir Midas Member Site Supporter ++

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    Ya know, i was having a pretty good day before i read that post brother.
     
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  7. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    The 'nightmare house' for sale that comes with a live-in 70-year-old artist who can't be kicked out and doesn't pay any rent
    • A South Carolina home was advertised with an 'upstairs apartment cannot be shown under any circumstances' and mystery tenant who doesn't pay rent
    • Zillow post quickly went viral as the bizarre post sparked a flurry of conspiracy theories, from it being haunted, a 'murder house' or even a prank listing
    • 'I HAVE SERIOUS QUESTIONS ABOUT THIS NIGHTMARE HOUSE,' one Twitter user, Bekka Sup, posted after seeing the ad
    • The upstairs tenant is Randall McKissick, a 70-year-old retired artist, who has lived in the house for decades
    • He moved in as a struggling artist after his friend, then the homeowner, offered him the apartment which he has never paid rent on
    • Despite the quirky nature of the property, the $130,000 listing boasted it was a 'diamond in the rough'
    • The ad has since been changed and the home is currently 'off-market'


    Read more: http://www.dailymail.co.uk/news/article-4516356/Nightmare-home-sale-tenant-never-paid-rent.html#ixzz4hNshNSjx
    Follow us: @MailOnline on Twitter | DailyMail on Facebook
     
  8. GOLDZILLA

    GOLDZILLA Harvurd Koleej Jeenyus Midas Member

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    Pretty much every asset is being turned into a liability these days. Many are learning now that the only real asset is to have the biggest victim card at the table.
     
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  9. hammerhead

    hammerhead Not just a screen name Gold Chaser

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    I don't consider my residence an asset. I do have equity but the house is nothing but a money eater. Been trying to get it up to snuff just to put it up for sale. Still have a ways to go. If I can hang on long enough to sell it. I want to get a shit box fixer upper. Need to get wife on board for that.
     
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  10. Treasure Searcher

    Treasure Searcher Gold Chaser Platinum Bling

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    Where I live, houses have not been worth anything for many years. Bought an $8,000 house and fix it up as funds allow. Invested my "would be house payment" cash into farmland. My farmland pays me. Of course, I have to use some of the farmland rent towards the house (upkeep, etc.) but I have to live somewhere.
     
  11. gringott

    gringott Killed then Resurrected Midas Member Site Supporter

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    You can't get there from here.
    The Greeks are being strip mined. Soon they will be homeless in their own country and they will be flooding Germany too. The slave class of Roman times is being recreated, updated of course. They learned from the black slave experience it is cheaper to rent or lease a slave, example the Scot-Irish immigrants, you could work them harder, if they got sick or can't work, you just get rid of them. They had to "take care" of the black slaves because they were a capital investment.

    Real Estate? As we all know, a sitting target for the government mafia. The school system isn't just an indoctrination camp, it serves up reliable voters to continue the theft. What teacher or administrator [more office staff than teachers in today's schools] is going to vote against property tax increases to fund the school scam? None. Ever notice they love hiring school superintendents from out of town or better out of state? They don't want them to have any skin in the game as to shearing the sheep.

    Get rid of government schools, now. They account for more than half of my property taxes, and almost every bill I get monthly has an additional school tax. Yet the parking lot for teachers is full of new cars. Teachers pension fund here is bankrupt but they keep taking more money. Things have gotten way out of line.
     
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  12. gringott

    gringott Killed then Resurrected Midas Member Site Supporter

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    I have an inclination to like the Penn. plan. Everybody will pay if they buy something or have income. More will participate in directly funding the school scam, pissing them off. Seniors with no real income nor doing much buying will get off light. Conspicuous consumers will pay pay pay. High earners will pay pay pay. Sounds good.

    Just think about this. I bought a low cost house that barely met our needs at the time. I was a low income earner. Yet I bought what I could afford and paid it off in 7 years on a 15 year loan. The whole time until today we scrimped and saved to keep the house in repair and slowly do upgrades to enhance our living here. Yet I am punished by increased property taxes [forever] for making improvements! If I blew the money every month on hookers and blow instead of taking care of myself and my property, I wouldn't have to pay. How does that make sense? Another example, I am taxed for having homeowners insurance. A person without homeowners insurance is not taxed. Yet if a tornado plows through and destroys both our homes, I have insurance to cover me and keep me from becoming a community liability. The guy who didn't have insurance is first in line for the government benefits [he didn't pay for] as he "lost everything".
     
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  13. gringott

    gringott Killed then Resurrected Midas Member Site Supporter

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    I agree with Ursury. A home IMHO is a liability. It is simple math. Sit down and add up all you pay to own the home over time. Property taxes, upkeep, mortgage and interest payments. Add all of it up. Then look up how much homes in your area that are the same sell for. Subtract that amount from the amount you have paid out so far. That is how much your RENT on the home you OWN really is. Adjusted for inflation I doubt there are many who show a real profit after sale. Exceptions of course are those homes in crazy markets like San Fran etc. I personally saw in the San Jose area in the early 1990s where a new house on one side of the street had a $500K mortgage and a just built house on the other side was selling for $250K. You can't make sense of a roller coaster market like that. Luck of the dice.

    The only saving grace is you don't pay tax on a certain amount after sale. Why? Because if you did it would collapse the real estate market big time.
     
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  14. solarion

    solarion Gold Member Gold Chaser

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    I think that's right. The parasite class in Greece is currently doing the equivalent of eating their seed grain, a situation which obviously cannot last.

    One look at major cities in decline in Amerika(Detroit & Chicago), will show a similar trend. The parasite class can never steal enough resources, can never stop growing and strangling its host.
     
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  15. searcher

    searcher Mother Lode Found Site Supporter ++ Mother Lode

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    I don't believe teachers, teacher unions & school boards deal in reality. They seem to believe that they can keep picking from the property owner vine without the fruit running out. Here's a good example of how they think..............

    Bucks, Montgomery school leaders say House bill could cost districts millions in tax revenue


    School officials are irate over a proposal in the state House to restrict the right of districts to challenge property assessments.

    If passed, House Bill 1213 could potentially cost the 500 districts in Pennsylvania $677.4 million a year, according to an analysis of revenue for the 2015-16 school year by the Pennsylvania School Boards Association.

    "It's just one more thing being recommended in the House to undermine public education in Pennsylvania," said William Harner, superintendent of the Quakertown Community School District, who listed escalating pension and charter school costs as state-mandated budget items forcing school boards to raise property taxes. "We've just gone through a budget cycle that was tough for students, parents, teachers and the rest of the community, all brought on by the leadership crisis in Harrisburg. The ability to pull a rabbit out of the hat is gone for most school districts."

    "It's like being punched in the head continually," Central Bucks Superintendent John Kopicki said of measures in the General Assembly. "I don't understand the logic behind the bill."

    The bill is sponsored by state Rep. Warren Kampf, R-157, who represents parts of Chester and Montgomery counties. It has 11 GOP co-sponsors, including state Rep. Robert Godshall, R-53, of Hatfield.

    In his February memorandum seeking support for the legislation, Kampf states the Uniformity Clause in the Pennsylvania Constitution does not allow a county to single out a property for a reassessment, the Pennsylvania courts have allowed school districts to pick properties they deem undervalued for taxing purposes and seek more money through what's called a "spot appeal" of the county's assessment.

    "A significant number of school districts now routinely appeal the county assessments of individual properties to increase the revenue they use to balance their budgets," Kampf's memo states. "These spot appeals are of properties where no improvement has occurred, or any change by the county assessor has happened."

    In describing the real estate assessment process, the Pennsylvania General Assembly's Local Government Commission said that while a county assessment office may not revalue a property following its sale, such a sale "may alert a taxing district, such as a school district, to appeal the (county) assessment based on the sales price."

    Such a practice by school districts, according to Kampf's memo, "literally has the effect in some cases of hammering a property owner with a huge tax increase after he has decided to buy the property and participate in our state economy. It strikes me as one of the most anti-competitive government practices in existence today.

    Godshall, who said he served on the Souderton Area school board for 17 years, said he's going to take another look at his co-sponsorship after receiving phone calls from area superintendents.

    "It's a matter of fairness," Godshall said about his co-sponsorship of the bill. "That was my rationale."

    In a 2014 report, the Pennsylvania Apartment Association said school districts have used the spot appeal process to get more tax money out of apartment complexes the district deems undervalued.

    "Current law provides no restrictions and school districts answer to no one regarding their reasons for picking one property owner over another for appeal," the association said in its report, which at the time was prepared in support of a House bill that had the same goals as the one now before the General Assembly.

    State Rep. Tom Murt, R-152, of Hatboro, was the lone Republican on the Commerce Committee to vote against the current bill, which is expected to go before the full House following a 19-8 committee vote earlier this month.

    "I was not convinced that that bill was a fair approach to the problems of assessment," Murt said. "If we started down that road, many of the districts I represent were going to be adversely impacted.

    "I have not seen, nor have I been shown evidence, that the school districts I represent in eastern Montgomery County have misused or abused their legal right to request a reassessment of a property."


    Edward Tate, president of the Council Rock school board, said, "Any action in Harrisburg that limits the ability of a local school board to govern its business is a mistake. Property owners have a right to appeal assessments, and often do. School districts and school boards should have the right, similarly, to contest those appeals."

    PSBA's analysis shows that other than Philadelphia and Pittsburgh, the legislation would hurt North Penn the most. It would cost the district $11.5 million a year.

    "This would cripple our ability to fund our schools," North Penn Superintendent Curtis Dietrich said. "It's an extremely one-sided piece of legislation. It's written to benefit big-box stores and apartment owners. It would hurt homeowners and school districts."

    According to the PSBA analysis of the bill, other districts that would be hit hard include Bensalem ($9.1 million), Central Bucks ($6.5 million), Neshaminy ($6.4 million), Pennsbury ($5.6 million) and Hatboro-Horsham ($4.95 million).

    "You tell me how I make up $6.5 million without raising taxes," Central Bucks' Kopicki said.

    In a letter to members of the state House, John M. Callahan, PSBA's assistant executive director, stated that "this restriction in the ability to generate future local revenues will harm schools that are already grappling with overall declining state aid and unfairly shift the property tax burden to homeowners. ... All other property owners in a school district have to bear the tax burden of under-assessed properties."

    Quakertown's Harner said having this legislation lumped together with pension costs and charter school expansion "puts the school district and other taxpayers at risk of having a school system lose significant revenue and, in turn, programs. When you cut student programs, you cut property values. The indirect cost to other taxpayers is property values going down."

    In a phone conversation, Kopicki could barely contain his outrage. "How in good conscience can they do this knowing it takes $677 million of property tax money away from our ability to educate children. They need to understand that by doing this they're hurting children. It's borderline obscene."

    Enjoying our content? Become a Bucks County Courier Times subscriber to support stories like these. Get full access to our signature journalism for just 44 cents a day.

    Gary Weckselblatt: 215-345-3169; email: gweckselblatt@calkins.com; Twitter: @gweckselblatt

    http://www.buckscountycouriertimes....44-ada3-6a42b17281e5.html?hp=mid-threestories


    Here's What some people are trying to do about property tax insanity in PA:

    http://www.ptcc.us/solution.htm
     
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  16. solarion

    solarion Gold Member Gold Chaser

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    ...and that's the attitude these disgusting parasites always take. "All your base are belong to us!" "...then we'll decide how much of YOUR stuff we'll graciously allow you to keep..."
     
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  17. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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    I have 2 houses. First one is paid off and the second one is a plan we started 25 years ago by buying a 90 year old shack on 1 acre in the national forest and then piece by piece over time buying up the land around it and paying that off as we went. Usually getting control of 3 or 6 or 11 acres at a time on land contract and then paying it off within a year or less.

    Once we had the land we had all the parcels combined into 1 large parcel and borrowed/mortgaged to build a nice house on it using the land as collateral. That one is almost paid off too, 5 or so years to go.

    Property taxes on our "second home" are fucking astronomical. When we saw our special property tax rate for having the fecking gall of trying to invest in property in our home state and better our lot in life we both said "well, fuck this."

    We both quit trying to earn big money. We both just work part time now, I never even tried to get back into tool and die after being laid off.
    We just make enough to get by and said feck the rest.

    Because we kept hard on the zero debt rule throughout life we live great and are doing what we want. We are far from rich you won't see any vacations to europeistan or shiny 28 foot pleasure boats around here but we live well. We eat a lot of chicken though!
    Once we no longer have to work in the city we'll sell house #1 and move into the house we built and love full time.

    Moral of my rant? Every step up the ladder gets you 3 or more leeches hanging off your back. When your load of leeches gets too heavy don't be afraid to put some salt on them until a few let go.

    Have a goal and work to get it, then don't be afraid to back off and enjoy life.
     
    Last edited: May 22, 2017 at 10:00 AM
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  18. the_shootist

    the_shootist I self identify as a black '69 Camaro Midas Member Site Supporter ++

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    Real estate will always have the property tax anchor around its ankle. The only real estate I own is where I live. I can maintain it and afford the high property taxes. When I no longer can I'll make adjustments and get rid of it for something less costly. One can never completely own real estate in the country. You will always owe on it....ALWAYS! That's become the American dream
     
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  19. Irons

    Irons Deep Sixed Site Supporter Mother Lode

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    It's expensive, it's a lot of work, it's a worry at times and we took some risks along the way but having a nice cabin up north on your own land is also flat out fucking awesome! The benefit outweighs the hassles over all.

    .:2 thumbs up:
     
    gringott and the_shootist like this.
  20. Ensoniq

    Ensoniq Midas Member Midas Member Site Supporter ++

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    I'd rather not pay real estate taxes but 1/2% isn't that bad when it comes with streets, city water and the like. I recently move 10 miles away from a place that was 1.2%

    If I didn't want such things I'd feel differently

    Not everybody wants a huge expensive house but some do
     

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