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Old 11-27-2007, 03:22 AM
 
3 posts, read 14,553 times
Reputation: 10

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Hi Everybody!

My husband and I are doing some long term planning for our retirement in 5-6 years. We've lived outside of the US for 20 of the last 26 years. We're looking for the best place to settle down when we finally return to the US.

Chico seems to be just about perfect - small city, university culture and diversity, good weather, low crime, etc.

My question is about cost of living:

Can we find/build a nice house for less than $350,000?
How is the housing market there now?
What about buying now and renting for the next 5-6 years - good idea?
What areas would you recommend?
How are the property taxes?
Can we get by on a retirement income of $45,000/year okay?

Thanks for any advice you can give us?
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Old 11-27-2007, 05:24 PM
 
Location: Tijuana Exurbs
4,526 posts, read 12,346,501 times
Reputation: 6268
Property taxes throughout California are governed by Proposition 13, and are set at 1% of your purchase price per year, plus a 2% yearly escalator, plus some additional fees to repay bonds, and special purpose fees like vermin and mosquito control. You could safely assume your taxes in most parts of California to be 1.2% of your purchase price unless you were buying new construction. A lot of new developments come with special fees called Mello-Roos to pay for special amenities, and the developer impact fees. Those fees can raise taxes to amounts that might be more like 2% of your purchase price.

The market throughout California is generally soft, and it is expected to be declining throughout 2008. After that some areas may continue to decline, most will probably be flat, and a few might even recover.

Being an absentee landlord is a difficult thing, and given that prices aren't likely to rise in the next year, is definitely something you could postpone at least 2 years. You would need to find a management company to do the work, and you would be cash flow negative for the first several years of being a landlord. If you're in a high tax bracket and could get some benefits from the loss, go for it. If your income and taxes are more modest, the negative cash flow would be a burden on you.

A nice middle class home should be doable in the Chico area. If you've checked out the R/E websites you will know what 350k will get you.

If your house will be paid for, 45k/year can be lived on in reasonable comfort. Most costs in California are at the national average. It's only housing that's unusually high, but then so are housing costs in NYC, DC, and Boston. However, in California, the high housing costs extend further away from the center city.

I can't give you specifics on particular areas in Chico.
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Old 11-28-2007, 01:19 AM
 
3 posts, read 14,553 times
Reputation: 10
Default How to take advantage of the soft housing market while not living there

Thank you very much, Kettlepot, for the concise information. It all sounds good. The property tax seems a bit high, but doable.

- How much do property management companies typically charge?
- Is there be a strong market for home rentals in Chico?
- Any other suggestions how we can take advantage of the soft real estate market in the next year, even though we won't be moving back there for 5-6 years? Maybe we would be better off just purchasing a piece of property to build on when we return and hope the prices for building a home have not escalated significantly in that time.

We're new to the "real estate game" so we'd appreciate any advice.
Thanks
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Old 11-28-2007, 03:31 AM
 
Location: Tijuana Exurbs
4,526 posts, read 12,346,501 times
Reputation: 6268
I've heard management companies charge 6% of the monthly rent, plus you have to pay for all materials and labor associated with repairs. But I've just heard this, I don't know this from experience.

Actually, California's property taxes are considered low by US standards. Most localities have property taxes in the 1.5% - 2.5% of purchase price range. Though, typically the purchase prices are much lower than California's R/E prices. and the 2% yearly escalator means that over time the property tax becomes less and less of an issue.

Chico would have a strong rental market in the area around the college, but student tenants can be a tricky issue, and you probably wouldn't want to retire around the college area.

Last edited by kettlepot; 11-28-2007 at 03:43 AM..
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Old 11-28-2007, 11:59 AM
 
Location: Born + raised SF Bay; Tyler, TX now WNY
8,350 posts, read 4,596,162 times
Reputation: 8231
Damn, I had a nice review up and everything, and somehow it didn't post. I'll re-write it later, I guess.
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Old 11-28-2007, 06:01 PM
 
Location: Born + raised SF Bay; Tyler, TX now WNY
8,350 posts, read 4,596,162 times
Reputation: 8231
Here's what I said in a much more brief nutshell...the Chico market is seen as being pretty well overvalued even for California, but it does have some nice points. It's very much a college town, and downtown is quaint and even a bit artsy. Bidwell Park is one of the largest city parks in the United States and is a great place to spend some time. It's literally so big that you'll always have more to explore. Nearby Lake Oroville has more recreation opportunities, too, if you do run out of sights in Bidwell Park. The business district has most of the brands you're likely to have heard of, and has spawned something of a second downtown. It's also very pretty in the falltime.
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