Author Topic: Low Home Price and High Taxes versus High Home Price and Low Taxes  (Read 1822 times)

FireZoneBlitz

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I live on the border of New York and Connecticut.  As many of you know, New York taxes are a lot higher than Connecticut. My plan is to buy a single family home and live in it forever.

Is it a better financial decision to buy a lower priced home (that way I can pay off the mortgage quicker) but with higher taxes forever, or to buy the higher priced home and have significantly lower taxes forever?

The home price difference is around 30% (cheaper in New York).  However, the taxes in NY are about 3 times as much.

My feeling is that the lower tax option is better.

ShoulderThingThatGoesUp

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Re: Low Home Price and High Taxes versus High Home Price and Low Taxes
« Reply #1 on: May 17, 2016, 05:20:20 PM »
Taxes go up every year. Mortgage payments don't.

paddedhat

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Re: Low Home Price and High Taxes versus High Home Price and Low Taxes
« Reply #2 on: May 18, 2016, 06:18:57 AM »
I live one county north of shoulder, in an area that has long been over-run with NYC refugees. Due to the way the cost of  schools and government services are (not) paid for, by the state of Pennsylvania, my area has some of the highest R.E taxes in the nation, when viewed on a percentage of value basis. Consequently, home values are flat, and have been so since they hit bottom, in the great recession.  As the years go by, and the locals head for retirement, they are ending up seeing little to no reduction in expenses as they pay their homes off.  Thirty years ago they had a new mortgage and a total PITI  payment of, lets say $800 a month. Thirty years later, the mortgage is paid off, the taxes are more per month than the mortgage was, and their expenses on a paid off home are climbing.

Oddly enough, the local economy still does fairly well, in part because of the fact that living here, and commuting back to the NYC metro area, is still a lot cheaper than living in the metro area or more rural NJ. I have read some interesting stuff about how CT. long ago, took the path of being a lot more conservative about keeping their local and regional governments from getting out of control, and as you state, the difference in home values and taxation are pretty stark. Personally, there is no way in hell that I would ever buy property in   metro NYC, including NJ. Every government agency, from the state level on down to the countless local commissions, authorities, and boards have become exploding fountains of waste complete with massive, unfunded pension obligations. It isn't going to end well, and the property owners, as usual, are the ones who are going to get screwed.

ender

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Re: Low Home Price and High Taxes versus High Home Price and Low Taxes
« Reply #3 on: May 18, 2016, 06:31:58 AM »
Taxes go up every year. Mortgage payments don't.

Depends on what state you live in.

Villanelle

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Re: Low Home Price and High Taxes versus High Home Price and Low Taxes
« Reply #4 on: May 18, 2016, 01:07:56 PM »
Taxes go up every year. Mortgage payments don't.

Depends on what state you live in.

Really?  There are states where property taxes are 100% fixed forever?  And I thought us California owners had it good with Prop 13 limits!

money_bunny

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Re: Low Home Price and High Taxes versus High Home Price and Low Taxes
« Reply #5 on: May 19, 2016, 04:59:23 AM »
Paddlehat:
     I'm in Hunterdon County NJ and I echo that. It's the reason I am still renting. The numbers do not work and their are no multi's that cash flow to buy. Are you nearby? Would love to talk about this stuff locally with some people.
    Can you elaborate on PA? That's been my first choice when I FIRE since it's still close enough to my friends in Philadelphia, NYC, and Upstate NY.

To the OP:
      Are you going to use the services that a high tax high service state provides? This is something to think about. If you have kids what school system and how well funded will it be or can you afford private? Taxes in NYS will keep going up. Same in NJ.

ShoulderThingThatGoesUp

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Re: Low Home Price and High Taxes versus High Home Price and Low Taxes
« Reply #6 on: May 19, 2016, 05:34:52 AM »
Paddlehat:
     I'm in Hunterdon County NJ and I echo that. It's the reason I am still renting. The numbers do not work and their are no multi's that cash flow to buy. Are you nearby? Would love to talk about this stuff locally with some people.
    Can you elaborate on PA? That's been my first choice when I FIRE since it's still close enough to my friends in Philadelphia, NYC, and Upstate NY.

Not paddedhat but as he mentioned, we live fairly close to each other. There seems to be a lot of local variation in tax rates, made harder to compare by the way some counties don't adjust "assessed values" for decades - Montgomery County assessed values are based on 1978 dollars. Protesting my assessment when I lived there was very confusing.

I think a lot of the problem here is that municipal boundaries have been fixed for a very long time. It's really easy to move from a high-tax borough or city into a low-tax township that doesn't have any debt service to pay, that doesn't pay a police department because it's newly populated with rich people so they rely on the State Police (which is free), and doesn't have to replace any infrastructure because all of its sewer lines are newly built by developers. Eventually they'll have to pay the piper, but not yet. Meanwhile the older area loses its high-income residents and has to raise taxes further to pay its debts. As paddedhat points out, this means that you have pretty high "payments" even with a paid-off house. And the state government is so thoroughly dysfunctional that no balancing will be coming from there anytime soon.

I think this will eventually all have to be reorganized, somewhere around the time Lower Macungie Township - the third-most-populous municipality in the Lehigh Valley, with a negligible municipal tax - runs out of empty land. In the meantime I found a community I like that doesn't have totally crushing debt and pension problems.

Don't buy Pennsylvania municipal bonds.

FireZoneBlitz

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Re: Low Home Price and High Taxes versus High Home Price and Low Taxes
« Reply #7 on: May 19, 2016, 11:58:17 AM »
.

To the OP:
      Are you going to use the services that a high tax high service state provides? This is something to think about. If you have kids what school system and how well funded will it be or can you afford private? Taxes in NYS will keep going up. Same in NJ.

The school tax is probably the driving force in the higher taxes although I haven't looked into the breakdown. I do have two kids that would be starting grade school soon. Both areas have good public schools but the NY one is better. I would prefer to send my children to public schools.