“ Also, needy families are unlikely to be long term residents of California, because rents are rising faster than incomes. It only makes sense that California would take money away from transient renters who will eventually have to move to more affordable states like Nevada or Arizona, and give it to wealthier homeowners that will be able to stay in California for the long haul.”
Is that paragraph a joke? California property values are so high that renters could never afford a down payment to buy. Therefore perpetuating generational wealth through wealth transfers in homes.
"A 1.2% property tax applied to a home purchased at a typical 6% cap rate (that is, a home that each year is returning 6% of purchase price in income or saved rent) is effectively the same as applying an income tax of 20%."
I am trying to make sure that I understand this. I get the math as a % of net income but then you are also taxed on net rent at ordinary income level right? But then you also are allowed to deduct mortgage interest and depreciation expense that wouldn't show up in the cap rate equation and even carryforward losses? That could mean that a landlord could be deducting/deferring tax at effective tax rate for the year near 0%, no?
The whole post is so good, but how does one actually move the needle on correcting this ridiculous setup?
“ Also, needy families are unlikely to be long term residents of California, because rents are rising faster than incomes. It only makes sense that California would take money away from transient renters who will eventually have to move to more affordable states like Nevada or Arizona, and give it to wealthier homeowners that will be able to stay in California for the long haul.”
Is that paragraph a joke? California property values are so high that renters could never afford a down payment to buy. Therefore perpetuating generational wealth through wealth transfers in homes.
"A 1.2% property tax applied to a home purchased at a typical 6% cap rate (that is, a home that each year is returning 6% of purchase price in income or saved rent) is effectively the same as applying an income tax of 20%."
I am trying to make sure that I understand this. I get the math as a % of net income but then you are also taxed on net rent at ordinary income level right? But then you also are allowed to deduct mortgage interest and depreciation expense that wouldn't show up in the cap rate equation and even carryforward losses? That could mean that a landlord could be deducting/deferring tax at effective tax rate for the year near 0%, no?
incredible post 🔥