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Comment by linguae | Hacker News Reader

And even renting at times feels hopeless. I just received my rent increase notice yesterday; my rent has been going up every year since COVID started. I’d love to be able to have a fixed-rate mortgage so I don’t have to deal with rent inflation, except I can’t afford to buy anything near Silicon Valley (where I work), so I’d have to contemplate a move to the Central Valley or even further away (like working remotely from Las Vegas or Phoenix) if I want to purchase anything.

Hey, it could be worse; I’m in a privileged position compared to many other people where they can’t afford the rent. But this inflationary environment feels demoralizing where everything goes up faster than what you can earn in raises.

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One thing to keep in mind is even with a fixed-rate mortgage you're still facing increasing costs throughout the loan in the form of property taxes, insurance, and maintenance costs. Based on the housing market appreciation, I believe my future property taxes will be about the same as my initial mortgage payment by the time I finish paying off the loan. Then factor in the increased costs to fix and update things? I think I was better at saving money back in the apartment days.

I mean yeah, renting is cheaper from a cashflow perspective. But you don’t end up with a multi-million dollar asset in 30 years.

If you keep investing in something like multi-family realestate you should easily have well over a million in assets after 30 years.

These assets would be generating cash flow, but you could sell them for a lump sum if you are OK with all the taxes.

Selling and buying another property allows you to do it without incurring such taxes.

Prop 13 in CA caps the taxes: they grow at 1% as long as you own

I think you mixed up the numbers. It's capped at growing property value evaluations to 2% a year and counties may only set a property tax at 1% of assessed value. Of course that's only for the ad velorem portion of property tax. My city has fairly high fixed tax components (one of which scales by property square footage) which puts me currently 1.4%, and I expect that to increase over time as the fixed components to my property tax don't seem to have any restrictions. For homes of lesser value I'm sure the fixed costs dwarf their ad velorem components.

You could also rent further away and save more for a house, get roommates, or beg your parents for a downpayment.

Not really an option near; or in Silicon Valley.

You pay the savings in sanity points when you get roommates or family. No amount of savings is worth it.

Downpayments for houses in that area with a 740+ credit score is at least 200k and only goes up from there, don't know many parents that could help that much given the high amount taxable event, that's also not taking into account most homes have significant maintenance the first year, you never know what you'll find.

I've seen some places where they found out they had to fix the foundation after opening up to do some safety fixes, ended up costing around 120k. Involved a hillside sliding too so geotechnical engineer had to come in, no clue how much that cost after all was said and done. Wasn't found during the normal pre-sale inspection.

What is a “high amount taxable event” in this context?

Presumably a misunderstanding or misinterpretation of the gift exclusion rules. It’s a common misunderstanding that gifts over the annual exclusion limit ($17K per donor-recipient pair, so a couple could give a person $34K or a couple could give a couple $68K in a year) incur tax. They do, but only after exhausting the lifetime gift exclusion amount (currently a little over $12M per donor). There is also a process for designating that you’re gifting 5 years’ worth of gifts all at once (so 5x the amounts above before even touching the lifetime exclusion amount).

It would be exceedingly rare for a $200K gift to actually incur a gift tax payment (though it would require a Form 709 gift tax disclosure filing).

My understanding of the comment is the way the parents would get the money is to liquidate something which would incur taxes, which will be a lot in taxes on $200k even with long term capital gains treatment.

Yes, this was the general sentiment.

There may be loopholes and financial engineering that can be done, but its generally not available to the average joe.

I looked into this as a possibility not too long ago, and the professionals we spoke with basically said you'd either need them to take care of the taxes or be co-signer.

Co-signer rights effectively negate the point of getting 'your' house, and can lead to a lot of drama.

Best bet is probably to have them own the house and step up in basis when they move on, if you're really worried about taxes.

If its on a hill, get soil tests before purchasing.

Some people unfortunately have no choice regarding living alone versus taking on roommates or moving back in with family (and this isn’t an option for everyone). Thankfully in my situation I can shoulder my upcoming rent increase without needing to contemplate roommates or moving back with my parents.

For me the big problem is the purchase prices. I’m not going to get a six-figure windfall; my parents are low-income and can’t provide down payment assistance, and I don’t work for FAANG and thus I have no RSUs, instead relying on salary and annual bonuses. It will take me over a decade to save even $100k, which isn’t enough for a down payment. Then there are the actual mortgage payments.

I see the writing on the wall. I will need to leave Silicon Valley eventually, barring either a major drop in housing prices or a major rise in my compensation. I have no idea where I’d move to; I’m a lifelong Californian who was raised in Sacramento and whose only significant periods of time out of state were in Tokyo (eight months) and Seattle (one summer). But a move is looking inevitable.

As a Silicon Valley resident since 1997 I would advise young people starting their careers to not move here in the first place, unless perhaps they get an exceptionally good job offer that requires being physically present. I am kind of stuck here due to personal circumstances but if I had fewer attachments I would would have left years ago. The combination of broader macroeconomic and technological circumstances plus the negative effects of authoritarian leftist state and local governments has really driven the place downhill. There are many better places now to launch a career and build a life.

For example?? Without practical answers this reads like an old fart complaining about good old times. Texas might be the only reasonable alternative for home ownership, even then salaries are lower and we all know about their current situation especially in smaller localities.

Texas is hardly the only reasonable alternative. Several other states make it much easier to own your own home. Look around and find somewhere you like.

https://ipropertymanagement.com/research/homeownership-rate-...

I agree, its a tradeoff wherever you go and takes careful planning.

You can either have high overall income taxes, or you have high property taxes (and low overall cost of living).

Ironically, for those who won't retire before 2030, we'll probably never see social security benefits despite paying into it for most of our life (15% tax).

You will see some Social Security benefits. There will likely be some benefit cuts and perhaps a further increase in retirement age, but there is no political appetite to eliminate the program entirely. As long as you survive to retirement age you will receive something but it might be less than what you paid in.

While it is true there is no political appetite to eliminate it, that has little to do with whether you'll get a reasonable amount of benefit from it.

Currently, mandatory spending which includes Medicare and Social Security go over a cliff where the interest exceeds projected GDP ~2032 (before factoring in inflation; it gets worse with inflation).

There was a congressman trying to bring attention to the issue for newly elected politicians who did a C-SPAN presentation on it.

Link: https://www.youtube.com/watch?v=6ut1yQg2qA4&ab_channel=Forbe...

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