Let’s say that it is mid-season in 2006 and you live in a home that is worth $900,000. Now let’s say that your children, grand children and friends have discovered that visiting you is a whole lot of fun so you want to buy a bigger home – say $1,800,000. So here’s what you are looking at (roughly), invest an additional $900,000 in the bigger home and at least double your property tax base which would be more than $11,250 additionally per year. But for some reason you didn’t pull the trigger and now it’s 2010, and you are reconsidering that proposition BUT your house isn’t worth $900,000 anymore and you could never afford that upgrade…
Oh Really?
Now, The “Bubble” has burst and your home has depreciated by 35% – BUT so has the home you wanted to buy. So you sell your home for $585,000 ($900,000 – 35%) and the home you wanted to buy for $1,800,000 has also depreciated 35% and is now worth $1,170,000. So now in 2010, you invest an additional $585,000 instead of $900,000, and buy the new home for $1,170,000. Your children, grand children and friend come to
visit and are really thankful that you bought such a nice comfortable home…
The bottom line is that if you upgrade today using the example above, you will save $315,000 in upgrade cost and you will save $7,875.00 per year in property taxes because you bought your new home for $630,000 less than you would have in 2006.