To own your own home is an important part of the American Dream. It is a dream of literally billions of people around the world.
But there is a hidden dark side to this dream.
First, you don’t own the home. Sure, it is your name on the deed. But you don’t own it.
You just rent it from the government. Stop paying your property taxes and they take your home from you. End of story. There is no way to avoid it except to move to areas of the country with no property taxes.
I recently spoke at a conference and stayed after my speech to listen to another speaker. I learn a lot at the conferences that I speak at!
The speaker was talking about buying tax liens and properties being sold for the outstanding taxes. Basically, governments in the US put liens on property that is behind on their tax bill. You can buy the tax liens and receive at least 16% return and often more.
I’ve heard the pitch before but I always like to find good investments so I paid close attention to the story. A big part of the presentation was testimonials from people who had invested and were able to acquire properties for insanely low prices.
One story was a gentlemen who had paid the $67.30 back taxes on 15 acres in rural Oklahoma. He assumed that the “owners” of the property would pay the $67.30 back taxes to retain control of the property but they didn’t! So this gentleman was able to take over the 15 acres for just $67.30!
At first, I thought, wow, what a great investment! Good for him!
But then I got appalled. A citizen of the United States of America had just lost their property because they didn’t pay a trivial amount of money. They never really owned the property. The government took extremely punitive actions over a trivial amount. But the government had to do that to show that you can’t fight city hall. They had to show that they were bad ass and had a zero tolerance policy for people who didn’t pay their taxes.
How hard did they try to tell the “owners” that they were going to lose “their” property? Perhaps they were foreigners. But, then, what incentive does the government have to really try to protect the “owner” when a failure by the “owner” to pay their taxes is actually a good thing for the government? The government ends up with more money and power through this process.
Government controls your property in many other ways. So you don’t even have complete control of it even if your pay your taxes.
Many towns and cities have aesthetic boards that have to approve if the looks of your house is acceptable to them. They control the design and even the color of the paint on the house.
Venice California has few restrictions on the design of houses compared to its neighbor Los Angeles which has heavy restrictions. As a result, there is a riot of creativity in design. I get almost giddy looking at all the interesting and often beautiful houses.
Los Angeles, on the other hand, is composed of rows of look alike houses. The classic ticky tacky houses.
I get it. You may not want to live next door to a house painted in puce and fuchsia polka dots. But my point is that YOU don’t get to have that problem or choice. The government has abrogated that power. You don’t control the design of your house, faceless bureaucrats do.
Of course, zoning laws are another way that you lose control of “your” property. Zoning laws restrict the use of your property. The idea is that it is bad to allow people to be able to build factories next to houses and so on.
But zoning goes way beyond that. For example, Starbucks couldn’t open coffee houses in San Francisco neighborhoods only on busy commercial streets. San Francisco has a zoning restrictions against restaurants in residential neighborhoods and Starbucks was considered a restaurant because it served a little food. So San Francisco had no local place to hand out and relax.
Starbucks hired a bus full of lawyers and persuaded the government to create a new zoning classification for coffee houses and now Starbucks are in San Francisco.
Could you or I have been able to do that? No. We are not rich or powerful to do that. We would have just been victims of the stupid zoning regulations.
And let us not forget eminent domain. Eminent domain gives the government the power to seize private property for public use. Traditionally this meant taking property to build a highway.
But this power has been dramatically expanded in the last 20 years. Now, your property can be seized and given to another private individual if the new owner would be paying more taxes that you would have!
Clearly this is a whole new way to abuse the power of government and crush the citizen.
I’m not saying that you shouldn’t consider buying property. There are definitely reasons to do it.
But people understand the limits of their “ownership” of real estate. It is wise to fully understand exactly what you are buying and the limits of that ownership.