Property Tax

What's the one-sentence takeaway all the listeners can start with this week?

Oh! You're talking about their anchor, right?

Duh.

We're going to call that Their Lighthouse.

Ok, my question still stands. What. Is. Their. Takeaway?

Good Q. Let me read the answer directly as put out by Los Angeles County.

This should be good!

The annual Secured Property Tax bill, which includes the General Tax Levy, Voted Indebtedness, and Direct Assessments, that the Department of Treasurer and Tax Collector mails each fiscal tax year to all Los Angeles County real property owners by November 1, due in two installments.

Zzzzzzzzzzz

Are you snoring, DT?

This might be an important source of unclaimed money for you, dude! You like a good real estate transaction!

(Singing): All about property taxes, all about property taxes, all about property taxes, all about property taxes.

Don't quit your day job, okay?

Trying to tell me something, DT?

I was going to say something about your singing, but I think it's the lyrics.

The property tax thing doesn't make a good song?

Correct. The property tax thing doesn't make a good song. And I'm painting, not snoring since you asked.

Also, don't try to say too much or it'll be your usual saying nothing. And don't forget the through-line, the insight, the ONE thing. Have something worth saying.

No doubt! So, DT! Where does any good come from when we talk about real estate property taxes?

Trying to put me on the explaining side of this one?

No, just setting up a new idea in a new way. Got to keep this interesting after all. Talking about county budgets can be a problem sometimes, even boring!

(Sings) When you purchase a home, you'll need to factor in real estate taxes as an ongoing cost. After all, you can rely on receiving a tax bill for as long as you own this very personal property. The cost of property taxes is an expense that doesn't go away...

Sing with me!

It's an expense that doesn't go away...

Aagh! That's awful!

Not as bad as having to pay the current year property taxes!

Okay, but please, please, just talk about this. No mas encantas!

Thought you'd never ask!

As I was saying, or singing...

It's an expense that doesn't go away over time and generally increases over the years as the current market changes and your home appreciates in value.

But WHAT is it?

Thank you for slowing me down. I do get excited about stuff sometimes.

Property taxes are what you pay every year, usually based on the size of your property or your house, maybe AND your house. It's a kind of public service.

Who gets the money?

Typically, it goes to the county where your property address, your house is. Some counties charge once a year, and others let you pay more often.

Why do they get it?

Because they've agreed to provide a certain level of schools, and road maintenance, fire and police, and other stuff. All of that stuff has an administrative charge.

You means it costs money.

Yes, costs money.

Can your taxes ever go up?

Yes, maybe. Property tax rates can definitely go up.

How often?

It can go up on an annual basis - every year. Anytime there's a ballot issue to raise taxes for anything, it usually means official records and property tax. Tax office stuff.

Like?

Like a new school.

Really that would be a bond that pays for the school, but that's a later pod.

Interesting. We'll be back with more...

And hopefully better...

And better tax roll questions, right after the break.

So as we were saying, we get big group things like fire and police for this, right?

Yep. Big group things. What you said plus roads, schools, stuff like that.

Stuff that renters don't pay for.

Different podcast, DT.

Okay, are they the same everywhere?

No....that'd be too easy.

In some places, a property tax bill, which you get maybe once a year, might be less than a single month's mortgage payment. In other places, it's maybe three to four times your mortgage cost.

For example, I owned a house in Redmond, Washington, and had to pay annual property tax on it.

And I also owned two rental houses near Denver - Denver, Colorado at the same time.

Was this during the infamous Super Bowl between those two cities?

It was, actually. Good call.

The property tax in Colorado, on each house, was $600.00 US per year.

The property tax in Washington was more than $7,000.00 US per year.

A bigger house, probably.

Sure it was a bigger house, but not THAT much bigger.

To be fair, they had other taxes. Washington, for example, didn't have an income tax. Different states make it up in different ways.

This is what I look like when I yawn.

OK, here's the bottom line and why it's important.

It's an expense that will never, ever, ever go away.

As long as you own any property anywhere.

Can't you ask realtors? Won't they know?

They should. You can ask one or head over to www.realtor.com/taxes. But since they're not sponsoring this we'll stop there for now.

You can ask lenders, financial advisors, and others. I highly recommend asking more than one person on nearly everything anyway.

You were saying something about a bottom line?

Yes, and here it is: Don't let it keep you out of the game.

Understand it, and work it into the picture.

Okay, cue John with the investing examples.

Not yet. Just regular examples.

But every example is an investing example, isn't it?

You've even said that!

Point taken. Let's say we owned a business, and there was a particular cost involved with our owning that business.

Like what kind of cost?

Like insurance, or inventory, or rent or like something else.

We would have two choices:

1. We could bitch about it.

Or, 2. We could accept the cost - or not – and deal with it and move on.

Sounds too calm and happy.

That's because it is. But yet, there's one thing that's even better. And that is the investment gain that we could make if we're so inclined. And we'll talk about that right after the break.

Okay, so finally the investing part we've been waiting for.

The closing segment? Why would we be waiting for that?

To tie this whole thing, this whole property tax thing, into investing.

Just like you want me to do.

Oh, this should be good. Like I can make money off of someone else's property tax.

Sheesh.

You can. You can. You can. You can.

No singing, remember?

Oh, right. So every year, you get a tax bill for your property.

And for whatever reason, this year you don't pay it.

You're in arrears, is what they say.

Lawyers.

And you lose your property immediately.

What? Really?

No, not really. But every business day you dig a hole you really don't want to dig.

So you lose your property immediately?

No, but you do open a back taxes account with them and get on a payment schedule.

Why?

Because they're still doing the school districts thing, and the police and fire thing, and other county services.

Oh, you're just not paying your share.

Right, so let's fast forward a bit.

You don't pay next year either, or the year after.

Your file is stamped "Late Property Tax Payment" and you might not even be eligible for online payments.

Meanwhile, I've figured this out about you, and I made the payment of property taxes for you.

Big deal.

Yeah, it can be, because I now have a lien on your house for that real estate tax.

So? The Internal Revenue Service will smack that one down.

Maybe they'd like to, but they can't. County taxes come first, so you, investing, get what's called "standing".

And the investing comes how?

So glad you asked.

As an investor, you would buy what are usually called "tax liens".

This is where the state, the state in which the county is, sells the debt and the right to collect it along with any penalty charges, so that they can go on with doing the fire and school thing.

Sort of like debt collection...

A lot like that, except that you and I get to play the game without being, what did you call them?

Lawyers.

Right. Who are hopefully property taxpayers themselves.

Could you end up owning their house?

Yes, it is possible, but it's not super likely.

If that's your strategy, there are things you can look for to increase that possibility, but most of the time, they pay you off.

They don't plan to let you have a million-dollar place for 5 grand in taxes.

It happens, but usually you're right. Either way, we find every source of revenue by looking for it.

We find what we look for!

Right, and you're going to tell us what we must remember.

Remember, all you need to do is practice afterward which you'll be good.