Real Estate Archives

To Cash-Out Refinance And Make It Rain…. Or Not

Updated: 07/08/2021 by Financial Samurai 29 Comments

Are you thinking about doing a cash-out refinance on your property? First of all, make sure you understand what is involved and how it differs from a HELOC and cash-in refinance for that matter.

What Is A Cash-Out Refinance?

A cash-out refinance lets a property owner to use their home mortgage to get additional cash. This mortgage refinancing option replaces an existing mortgage with a new, larger mortgage. The difference between the old and new mortgage amount is paid to the borrower as cash.

What’s the catch? A cash-in refinance typically comes with a higher interest rate or more points. Getting a standard “rate-and-term” refinance for the same amount usually has better terms.

The amount you can receive from a cash-out refinance is determined by several factors. The most common determinants are your credit score, the property’s LTV ratio (loan-to-value), and your bank’s lending standards.

Lots of cash buys you lots of alcohol, access, and action – Triple AAA if you will. What more does anybody want?

The Temptation Of Cheap Money Is Strong

Triple AAA is tempting me right now. I’m considering doing a cash-out refinance for one of my rental properties at 3.375% from 4% (thank you Ben Bernanke). If you’re in a oppressively high federal income tax bracket, you might consider doing a cash-out refinance. It may lower your income tax bill.

I’m pretty sure I’ll be in a lower income tax bracket during retirement (as will you most likely). Thus, I figure why not extract cash out of a rental property. This can increase my interest expense to shield my rental income. With 5-year rental property money at only 3.375%, it would be foolish not to at least consider the option.

The rental market is hotter than the 49ers. So, I was able to increase my asking rent price by 12% last month from a year ago. My realtor friends implored me to raise the rent by another couple hundred bucks. But, I didn’t have the heart. I had already put the price out there on Craigslist, and I found a potentially ideal tenant.

By refinancing, the cash flow for the rental property increased by another 23% for a total increase of 35%. Yet, despite this increased cash-flow, I thought long and hard whether increasing my debt to then negate my cash flow increase was the right financial decision in this low interest rate environment. Doing a cash-out refinance is definitely something to consider if you have a hefty amount of equity in your property.

HOW TO DECIDE WHETHER TO CASH-OUT REFINANCE

* What are you going to do with the money? If you have no good plans for the money that will return at least the cost of your mortgage, then you probably shouldn’t cash-out. CD and savings rates are still much lower than your mortgage rates, so you will be losing money every month you don’t put it to good use. Nothing is a guaranteed return, so think long and hard before plopping that cash down on something that sounds so good.

* What’s your outlook on the property market? If you think the markets are going to tank 90%, then by all means cash out! You don’t want to see your equity disappear. If you can legally cash out and have free cash in your bank account, then please do so before it disappears. In the event of a market crash, it is then up to you to decide whether you should pay your mortgage or not. You should if you live in a recourse state, and maybe not if you live in a non-recourse state. Just don’t brag about it and try and profiteer if you do welch on your debt!

* How disciplined are you? Some people go crazy irresponsible when they have a sudden influx of cash. If you are making say $100,000 a year with $50,000 in savings, could you handle an extra $200,000 in the bank after a cash-out refinance? Would you not be tempted to go on some fancy vacation or buy a car you’ve always wanted? If so, then you shouldn’t do a cash-out refi since you wouldn’t have spent that money if you didn’t get the injection. I have a weakness for nice vacations and cars, even though I haven’t bought one in 4 years and drive a beater.

* How much money are you making? If you already have a high amount of cash-flow or have a a healthy year-end bonus every year and don’t plan to get fired, then perhaps you really shouldn’t do a cash-out refinance. For example, let’s say you want to cash-out $100,000, but you can save $100,000 every year. If this is the case, why bother?

* Understand the rate differential. My banker said I could do a cash-out refinance if I wanted to, but then said my mortgage would have to be re-underwritten, and the rate would go up. Funny how they didn’t tell me this before my appraisal. I was thinking to myself if I borrow more money, I could get a lower rate! Silly me. It’s quite the opposite. This higher rate was the straw that broke the camels back as he tried a little bait and switch. I’m a rate seeker.

* How desperate are you for cash? Interest rates are incredibly low, making living off dividend or CD interest income incredible hard for retirees. Your house is likely your largest asset, which isn’t doing you much good except for providing you a hopefully rent-free place to live. If you are at the point where you have to sell precious belongings, priceless memorabilia, and liquidating your grandchildren’s education funds, then doing a cash-out refinance is a much better option.

A CASH-OUT IS FINE IF YOU ARE DISCIPLINED

Cash-out refinancing is just accounting. You either have cash in the bank or equity in the house. I would actually much rather have cash in hand to do what I want (invest, spend, remodel, travel) than have it stuck in a house which might burn down.

Housing will continue to get better over the next 5-10 years. Just make sure that if you do a cash-out refinance that you spend it wisely, preferably on living a better life and investing for more security.

Recommendations

Explore real estate crowdsourcing opportunities: If you don’t have the downpayment to buy a property, don’t want to deal with the hassle of managing real estate, or don’t want to tie up your liquidity in physical real estate, take a look at Fundrise, one of the largest real estate crowdsourcing companies today.

Real estate is a key component of a diversified portfolio. Real estate crowdsourcing allows you to be more flexible in your real estate investments by investing beyond just where you live for the best returns possible.

For example, cap rates are around 3% in San Francisco and New York City, but over 10% in the Midwest if you’re looking for strictly investing income returns. Sign up and take a look at all the residential and commercial investment opportunities around the country Fundrise has to offer. It’s free to look.

Fundrise Due Diligence Funnel — Less than 5% of the real estate deals shown gets through the Fundrise funnel

Shop around for a mortgage: Check out Credible, one of the largest mortgage lending marketplaces where lenders compete for your business. You’ll get real quotes from pre-vetted, qualified lenders in under three minutes. Credible is the easiest way to compare rates and lenders all in one place. Take advantage of lower rates by refinancing today.

Cash-Out Mortgage Refinancing As A Way To Lower Your Tax Bill

Updated: 12/15/2020 by Financial Samurai 53 Comments

Conducting a cash-out mortgage refinancing is a way to lower your tax bill. And we all want to lower our taxes!

You should defer or shield as much income as comfortably possible until retirement to minimize your present tax bill. The odds of your retirement income equaling your working income is slim-to-none. Therefore, your retirement tax rate will be much lower.

Read More…

During Market Panics Debtors And Investors Win While Savers Lose

Updated: 12/15/2020 by Financial Samurai 29 Comments

During market panics, debtors and investors win, while savors lose. Let me explain.

I’m feeling a little sadistic right now. A large part of me is hoping the equity markets take a big dump again before the end of summer. Bring on the pain baby!

I thought I was absolutely done with refinancing my primary residential mortgage in 2010 when I got 3.625% for 5 years. But, I just called my banker on 2/3/2015 and he says I can now get 2.25% jumbo and no points or fees for the same duration! Because I would simply refinance with the same bank, the process would be streamlined since they have all my documentation.

What is this world coming to? Who does that, putting more money in the pockets of consumers who never asked for it? Why save me thousands of dollars a year in interest expense when there’s a guy who’s been out of work for over two years and needs it more?

If I do the refi, living in my house will be cheaper than living in a 2 bedroom rental. Something is wrong with how government policies are working. The more the Fed and the Treasury meddle, the more unintended consequences result.

Those with debt are the bad guys right? We’re living in houses we can’t afford to pay in cash, and we refuse to live in crappy rentals whose landlords never do any updating. Debtors are living it up because they can, and know there’s only one life to live.

There’s no point making money if you aren’t spending your money. Meanwhile, savers are getting squeezed as their rates head to 0% and their equity investments go down the tubes. Debtors are being rewarded again for living beyond their means and that’s just fine by America and our politicians.

Market Panics And Cheap Money

I had 2.25% to lock down during the most violent of +/- 400+ point swings, but I got greedy and wanted another 1/4 credit from the bank i.e. they pay me 0.25% X value of my mortgage. The loan officer’s manager wasn’t in, and I decided to wait for her to return so we could get down to business.

If the equity markets rally, and the bond markets sell off, rates rise, putting me at risk for even getting my 3.25% locked, let alone getting a 1/4 credit. However, with the amount of volatility in the markets, I figure I’m hedged. If the equity markets go up, great, that’s good for the equity portfolio and the economy. And if not, “Hello juicy refi!”

At “no cost” (costs are just embedded in the rate), I would be saving hundreds of dollars a month for the remaining 5 years of my loans. A 5/1 ARM is the duration I like to borrow on the yield curve, and a time-frame where I can comfortable pay off my loan if necessary.

It’s generally a good idea to match fixed duration with the length of time you plan to live in your home. What we all should have been doing over the past 10 years, however, is borrowing at the shortest end possible since rates have done nothing but go down.

With the Fed telegraphing they won’t raise their Fed Funds rates until mid 2013, all of us literally have a green light to borrow at the short end of the curve. For example, those who qualify can get a 1 month floating rate mortgage for only ~1.5%!

That is some serious savings, even compared to my 5 year fixed rate of 2.25%. For those who know they plan on selling or paying off their homes at the end of two years, go for it. I plan on owning my house for another 5-10 years, and don’t particularly like the process of refinancing so the 1 month floating loan isn’t for me.

S&P 500 2016 Performance Chart — The S&P 500 is at a record high

Borrowing Costs And Asset Values

Remember, at today’s 10-year risk free rate of ~1.8% as of 2/3/2015 (<1% in 2021), every $200 decrease in interest expense (or increase in cash flow) is like having an extra $100,000 in the bank.

In other words, if you had $100,000 in risk-free US 10-year government bonds, you would generate $2,400 in interest income a year or $200 a month. Or put it another way, if I am a home buyer and it now costs $200/month less to own the same home, I can now afford to finance a house that costs $100,000 more.

Interest rates are a critical element to housing, consumption, and the overall economy. This is a very important concept to understand. The Fed has never before given such clarity in their interest rate policy. I believe it is a good move because when people know what their future borrowing costs are, they tend to spend.

It’s the same thing with taxes. A temporary tax decrease does nothing because most people would save for the impending tax increase. No wonder why senior corporate leaders and small business leaders have no desire of hiring people, despite tremendous balance sheets.

Here’s hoping to a 1 hour market meltdown, a locked in refinance during that time frame, and then a recovery! I’m ready! Are you?

Important point: The last time the 10-year yield was at 2.25% was in 2009 when the Dow was under 7,000. The world was ending then. It is amazing to see yields at such levels with the markets 50% higher! In other words, we are much wealthier now and yet, get to borrow money at Armageddon levels.

After each of the previous 10-year yield dips, you saw the Dow rally a full year afterward. With the S&P500 yielding 2.4%, I have been buying the markets aggressively close to S&P 1,100 / Dow 10,800-11,000 levels.

Blue line: Dow Jones. Green Line: 10-year Treasury Yield.

Recommendation To Counteract Market Panics

Manage Your Finances In One Place. One of the best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize your money.

Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances on an Excel spreadsheet. Now, I can just log into Personal Capital to see how all my accounts are doing, including my net worth. I can also see how much I’m spending and saving every month through their cash flow tool.

The best feature is their Portfolio Fee Analyzer, which runs your investment portfolio(s) through its software in a click of a button to see what you are paying. I found out I was paying $1,700 a year in portfolio fees I had no idea I was hemorrhaging! There is no better financial tool online that has helped me more to achieve financial freedom. It only takes a minute to sign up.

Planning for retirement when paying for private grade school — Are you on the right retirement path? Click to find out for free

How To Make $50,000 A Year For Free From The Government

Updated: 08/19/2021 by Financial Samurai 27 Comments

Someone once said “there’s no such thing as a free lunch”. They lied. With $50,000 a year, you can buy yourself 5,000 free lunches thanks to the generosity of the government! What are you talking about, I can hear you thinking.

It’s pretty simple really. In addition to giving struggling homeowners a free $50,000 over a course of 5 years, and 99 weeks of unemployment benefits (which we might as well extend to 5 years in my Shock & Awe Yeah! program), the Obama administration has now announced they will require mortgage companies that collect loans backed by the Federal Housing Administration to offer 12 months of forbearance for qualified unemployed owners!

In other words, if you qualify, you don’t have to pay your mortgage for a whole year! Is that not sweet sugar or what?!

Think about this scenario. You unfortunately lose your job in 2010 due to a cut in your entire department. You own a home but don’t have much savings to hold you over even though you should have been saving and investing for the past 20 years. The 10% you put down for your home basically wiped out your cash reservers, but you didn’t care because your three kids and spouse deserve the best.

You can literally get 99 weeks of unemployment benefits, a free $50,000 from the government, $3,000 a year in child tax credit and not have to pay your mortgage for a whole year if you qualify! The maximum unemployment benefit is around $1,400/month. Let’s say your mortgage is around $1,800 a month.

That’s $38,400 in income you get to receive from the government a year. Add on the $10,000 a year free gift from the government for 5 years, plus the $3,000 a year child tax credit, and that’s equivalent to earning a fantastic $50,000+ a year!

I don’t know about you, but I sure as heck wouldn’t mind receiving $50,000 a year in free assistance from the government. With the median US household income of roughly $50,000 a year, the temptation would be incredible not to work and just spend time traveling or hanging out with family. In essence, “making the most of unemployment” might have some different meanings for different people!

To put $50,000 further into context, you can basically change the figure to equal whatever you are making since $50,000 equals the median US household income. Hence, if you live in Manhattan or San Francisco, where incomes frequently breach $200,000 a year, can you imagine getting a free $200,000+ from the government?

Oh man, no wonder why despite all the doom and gloom from the media about unemployment, the malls and restaurants are packed, traffic is horrendous, and real inflation is much higher than expected due to so much demand and spending!

WHEN WILL THE GOOD TIMES END?

We all know that 2012 is a key election year, and the most important thing a politician wants is to get re-elected and maintain power. Therefore, it is perfectly rational that the Obama administration is trying to buy votes with your taxpayer’s money.

Remember, as Milton Friedman said, it’s easiest and most fun to spend other people’s money on yourself! I can understand this, and so does everyone else. The question is, when will the madness really end? When will we start helping the unemployed find jobs, instead of just giving them money?

The solution is compelling small businesses, which account for 70%+ of new and existing jobs to start hiring again. If you are a small business, you are currently shell-shocked by all the new taxes being imposed by the state and federal government. Not only that, you’d rather make due with what you have and work a little hard because you fully expect taxes to go up in 2012 once Obama gets re-elected.

Let’s lower taxes for new businesses instead. The SF city government did a smart thing by freezing the 1.5% payroll tax of total employee compensation for companies with over $250,000/year in payroll because if they didn’t, Twitter and its entire staff would simply move. Taxes are suffocating because States have mismanaged their budgets!

The REALLY good times will end when Obama gets re-elected in 2012. Thanks to the eradication of Osama Bin Laden and all the bailouts that will be offered up to election night, another 4 years is almost a certainty. Once elected, there will likely be more programs and taxation aimed at redistributing wealth.

We need to embrace this fact that our fiscal responsibility and hard work will be siphoned away to those who have been more reckless or simply unlucky. It’s just the way it is. We should help our brothers and sisters out.

Moral hazard is here to stay so long as we keep offering people incentives to take asymmetric risks. Hopefully many of us can take advantage of the government’s generosity with other people’s money. At the same time, it behooves you to try and pay as little taxes as possible because you know the government is fiscally irresponsible.

If the government was a normal citizen, they’d be thrown in jail long ago because they stolen from Paul to pay Peter for way too long. Stealing is wrong, at least according to the Bible, Tanakh, Koran, the Dhamapada and thr Hat In The Cat.

In the mean time, let’s safeguard our finances and keep chanting, “USA! USA! USA!!”

Update 2021: During the height of the recession, eligible unemployed workers in all states could also file for a federal extension of up to an additional 73 weeks after their state’s benefits ran out. However, due to the decline in unemployment rates and improvements in the economy, the Federal Emergency Unemployment Compensation (EUC) program expired at the end of 2013. Nowadays, the standard unemployment benefits are around 26 weeks depending on your state and qualifications.

The value of a severance package has gone way up due to enhanced unemployment benefits. Please take advantage!

We are likely going back into a recession in 2020 thanks to the coronavirus. Stay liquid with lots of cash and stay prepared. Thankfully, we’re out and things are all dandy now. Let’s go her immunity!

Refinance your mortgage:

Check out Credible, my favorite mortgage marketplace where prequalified lenders compete for your business. You can get competitive, real quotes in under three minutes for free. Mortgage rates are down to all-time lows! When banks compete, you win.

Manage Your Finances In One Place:

One of the best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize your money.

Finally, they recently launched their amazing Retirement Planning Calculator that pulls in your real data and runs a Monte Carlo simulation to give you deep insights into your financial future. Personal Capital is free, and less than one minute to sign up. Ever since I started using the tools in 2012, I’ve been able to maximize my own net worth and see it grow tremendously.

Personal Capital Retirement Planner Tool

Is your retirement on track? Check with PC’s Retirement Planner

Updated for 2022 and beyond. Now is more important than ever to track your net worth because the easy money has already been made after a 12+ year bull market.

Free $50,000 Bailout Gift From Government To Homeowners!

Updated: 12/15/2020 by Financial Samurai 36 Comments

Do you want a bailout gift from the government? Well, it’s happening all the time with the CARES Act, enhanced unemployment benefits, stimulus checks, and more. The fact of the matter is, we paid for the bailout gifts through taxes.

The Emergency Homeowner Loan Program, or EHLP, aka Government Big Daddy Bailout Fund will provide zero-interest loans of up to $50,000 to pay your mortgage, property tax and insurance bills for up to two years. That is pretty damn good, considering those who need such help probably make under $100,000 a year and have homes valued right around the median price of $170,000-$200,000.

Supposedly, the program allows you to limit your mortgage payment as a percentage of your income to 31% or $150, whichever is greater. The EHLP will pay the balance. Homeowners can receive this help for up to 24 months, or until they run through the maximum EHLP loan amount of $50,000.

If you keep up with your payments over a five year term, each year that passes, you don’t have to pay back 20% of the loan! That’s a free $10,000 a month you get to keep a month up to a total of $50,000! Let’s say my house is worth $2 million bucks, which is not unreasonable for a 2,800 square foot house in a good area of San Francisco.

Given the loan is probably around 25-30% of the total value of the typical homeowner’s house, that’s like a San Franciscan homeowner getting a nice $500,000-$600,000 loan for free baby!

Bailout Gift From The Government

Read More…

Renters Should Pay More Taxes To Fight For Equality

Updated: 05/14/2021 by Financial Samurai 327 Comments

If we want to boost government revenue, then renters should pay more taxes. With more renters paying more taxes, we can better fight for equality and help all people. The more people who can pitch into pay taxes, the stronger our economy.

Every winter and spring, millions of homeowners across America pay their property taxes. In California, homeowners have to fork over roughly 1.24% of the assessed value every year to the local government. Put it another way, in 83 years, a homeowner will have paid 100% the value of his or her home in taxes! How sick is that?

It is the American way for all citizens to pay their taxes, except for the many who don’t. We know by now that the often cited “47%” are the elderly or those who make under $20,000 so that’s fine. If you are one of them, just don’t vote to raise taxes on the 53% who already pay 100% of all federal income taxes please! Let’s all pitch in or starve the beast instead.

So why is it that homeowners, many of whom initially struggle to pay their mortgages and come up with the down payment, have to pay extra taxes while renters don’t? Let’s explore and discuss, shall we?

Why Renters Should Pay More Taxes: We Are All Equal

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Where Americans Pay The Most To Live And Why

Updated: 07/08/2021 by Financial Samurai 71 Comments

As one can guess, higher paying jobs leads to higher costs of living. In fact, more than half of the 20 cities surveyed by the US Census Bureau are based in California. Let’s look at where Americans pay the most to live and why.

How is it that California is so dominant in the expensive costs of living category? The mass of settlers first arrived on Plymouth Rock 300 years ago. And 3,300 miles is a long way to travel, especially on horse and foot!

Besides the gold rush, the main reason for the unfettered move out west is warmth and sunshine!

There is a reason why the 2nd most number of billionaires live in San Francisco (48). California and Hawaii are two of the best states for retirement.

High Costs Of Living And More Sun

Every time I vacation in Hawaii, I always ask myself, why the heck ain’t I here for good. Let’s face it, more sunshine equals happier people. Sunshine is the classic zeitgeber to help us wake up and get us motoring in the morning. No sunshine leads to no photosynthesis, which means no plant life, and therefore no ecosystem.

After 10 years of living on the east coast, I can still feel the grey skies weigh down my soul every winter. Don’t get me wrong. I love the winter snow during the holidays. But I just love being in a cheerful mood more. Here are America’s most expensive places to live based off median monthly housing costs.

Top Cities Where Americans Pay The Most To Live

1. San Jose, Calif. Median Monthly Housing Costs: $1,828

2. Bridgeport, Conn. Median Monthly Housing Costs: $1,793

3. Oxnard, Calif. Median Monthly Housing Costs: $1,780

4. Washington, D.C. Area Median Monthly Housing Costs: $1,706

5. San Francisco, Calif. Median Monthly Housing Costs: $1,660 (Here!)

8. Honolulu, Hawaii. Median Monthly Housing Costs: $1,532 (There!)

15. Trenton, New Jersey. Median Monthly Housing Costs: $1,401 (So not there!)

19. Seattle, Washington. Median Monthly Housing Costs: $1,368 (On the West Coast, but not as expensive likely due to rain)

Source: Forbes

Go To Paradise And Make More

So there you have it. Did the cities with the highest costs of living surprise you? Would you be willing to pay $131/month more to live in Honolulu, Hawaii than Trenton, New Jersey? You bet your buns of steel I would!

The next time you are feeling a little glum, look outside and see if the weather has anything to do with it. And if so, come back to this post and plan your move out west.

If you’re paying high costs of living might as well be in the sunshine.

300 years ago, it would have taken you months to come out west. Now, all it takes is a two week bus ride at most. Don’t be afraid to pack up your bags and move, even with a family.

Leo from Zenhabits, with his 6 children are moving to San Francisco from Gaum, and Ryan from Planting Dollars left Wisconsin for Hawaii, why can’t you? After experiencing 10 years on each coast, there is no doubt in my mind that living in a warmer, sunnier place is the way to go. See you on the beach this winter!

Recommendation: Invest In Real Estate

If you’re looking to buy property as an investment or reinvest your house sale proceeds, take a look at Fundrise, one of the largest real estate crowdfunding platforms today. They allow everyone to invest in mid-market commercial real estate deals across the country that were once only available to institutions or super high net worth individuals.

They are the pioneers of eREIT funds and they are creating an Opportunity Fund to take advantage of tax-efficient Opportunity Zones. Thanks to technology, it’s now much easier to take advantage of lower valuation, higher net rental yield properties across America.

Book Review & Giveaway: The New Rules For Mortgages

Updated: 07/08/2021 by Financial Samurai 28 Comments

“The New Rules For Mortgages” by Dale Siegel provides a fantastic understanding of everything you need to know about mortgages. For many, a home is the single biggest purchase of their lives, and the mortgage is a necessary instrument for making homeownership dreams a reality.

Qualifying for a mortgage is daunting, but it doesn’t have to be under Dale Siegel’s guidance. After all, who’s better to give instructions than the president of her own mortgage company?

It’s important to highlight that Dale truly tries to provide readers knowledge about mortgages and doesn’t use her book as a sounding board for her company. The book is like a secret weapon for first time home-buyers who dare tip-toe past enemy landmines. The enemy is the industry which has adeptly blown off many appendages via exotic liar loans and oh-too-high fees.

Read More…

How To Lower Your Property Taxes – Adventures In Assessor Land

Updated: 07/08/2021 by Financial Samurai 26 Comments

As a homeowner, your goal is to keep your operating expenses as low as possible. Property taxes is one of those expenses that never goes away, but can be managed. As someone who has successfully fought the property assessors office multiple times before, let me share how you can lower your property taxes as well.

The Government Always Wants Your Money

The goal of local governments is to get every single penny in tax revenue from you! When I got my property tax bill in 2009, I was astonished to see that the City is taxing my primary residence based off an assessed value 7% HIGHER than in Armageddon 2008! In the biggest economic downturn ever, the San Francisco assessors office believes my property actually increased?! What a sham!

Like clock work, assessed values increase 2-3% higher every year, regardless of the economic environment. It’s as if the City is punishing me for succeeding to lower my assessed value last year by 3%.

Too bad for the city, because they are messing with the WRONG person. The tax collectors office counts on citizens to roll over and listen to their every whim, but not me, and certainly not you!

I want to share some tips on how you too can fight against the machine.

How To Reduce Your Property Taxes In 5 Steps

1) Google “<Your City’s Name> assessor’s office.” San Francisco’s site is here. It’s important you proactively find out what the city/county is assessing your property first before you get your bill. You need as much time to prepare for battle.

2) Go to their contact page and call and e-mail them every single day until you get a response. I’m not kidding here. They are sloooooow. Make sure all your v-mails and e-mails are polite, but stern saying you disagree with your assessment with proof.

3) After they respond, you must specifically ask how they came up with their ridiculous assessment value. Ask them to provide comps. Also, ask them what you need to do to make your case. There will undoubtedly be appeal forms to fill out. Fill them out and make copies for yourself (important as they like to tell people they never got it 2 months later, hoping you’ll give up and be too late!)

4) Like any good negotiator, you must highlight the lowest comps and negotiate accordingly. Let’s say your house is worth $1 million bucks. Go in with horrific comparables that look like bomb shelters in terrible locations, such as a house next to a firehouse that may be worth $500,000. Your comparables need to be similar in dimensions and as close to your home as possible. Set your anchor low. The more comps you can provide, the better. The assessor doesn’t usually have time to verify the comps physically, and just uses online comparisons.

5) After sending in the appeal forms and providing comps to your assessor, make sure you courteously follow up every month until you get confirmation of receipt. After reaching out this February, I failed to follow up with more comps until July (big mistake). By then, the assessor had moved to valuing a different district, and another person was recommended to me. Good thing the new person had the forms, and decided to e-mail and call me back. Otherwise, I would have wasted a lot of time. Therefore, don’t forget to back up all your data!

*** This is exactly what real estate lawyers do if you’ve ever got those “lower your property tax” letters in the mail. Don’t be lazy and just do it yourself.

Never Give Up On Fighting To Lower Your Property Taxes

Persistence pays off. These guys don’t have to do anything for you so it’s important you approach them in a polite, but stern manner. The new assessor could have said it’s too late since I got my bill already, but he worked with me given my unwavering commitment to fight.

After several months of going back and forth, they lowered my assessed value back down to last year’s value, thereby saving me $1,504 ($94,000 X 1.16%).

Use any downturn (like a pandemic) to your advantage. Fight like hell to lower your property taxes. If you’re not selling anyways, who cares if you convince the city to believe your property is worth 30 cents on the dollar? You should be rejoicing instead! Don’t roll over and accept what the city bills you. Take action now!

Shop Around For A Mortgage

Check the latest mortgage rates online through Credible. Credible has one of the largest networks of lenders that compete for your business. You can get free, no-obligation quotes in minutes. The more lenders compete for your business, the lower your rate. Mortgage rates continue to be near all-time lows.

Take advantage of the 15-year mortgage in particular. It’s an abnormality that it is average below a 5/1 ARM, which I usually like the best.

Invest In Real Estate Wisely

Immediate Proof Why Net Worth Is Rubbish: Zillow Estimates

Updated: 03/11/2021 by Financial Samurai 15 Comments

Your net worth is rubbish due to poor real estate estimate, your net worth might be very off.

After all these years, Zillow still can’t get its property estimates right. Zillow is also a great reason why you’ve got to be careful calculating your net worth if you have property.

To prove my point regarding “Your Net Worth Is An Illusion” I took a look at Zillow’s latest zestimates of my primary residence and rental property. Apparently, in a span of 3 months, my primary residence gained a whopping $300,000!

I’m popping open a bottle of Crystal, buying a rose gold Patek Philippe Calatrava at Tiffany’s, and ordering the Audi R8 on as we speak. Just kidding, especially since September is frugality month. Besides, Zillow isn’t writing me a check for $300,000!

The dollar sign shows the purchase price after a 4 month escrow that began in late 2004. In other words, the purchase price was $250,000 below what the zestimate measured as fair value in the middle of winter.

You’d think that after 10+ years of existence, Zillow’s price algorithms would be more refined. Perhaps the data is legit, but I’m not buying it. Since net worth calculations don’t include one’s primary residence, let’s strike this example and look at a rental property.

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