The Cost of Owning a Home
April 4, 2004 11:07 PM Subscribe
Can anyone give a good break down of the expenses associated with home ownership? [more inside]
I'm beginning to look towards buying a home, and want to plan not only for my ability to pay for the price of the property itself, but for what is probably an inevitable miscellany of little assesments and crap. I have no idea what these expenses are, however. Property tax? Various insurances? Average cost of repairs over the years? Closing and escrow robbery? Other stuff?
I'm beginning to look towards buying a home, and want to plan not only for my ability to pay for the price of the property itself, but for what is probably an inevitable miscellany of little assesments and crap. I have no idea what these expenses are, however. Property tax? Various insurances? Average cost of repairs over the years? Closing and escrow robbery? Other stuff?
i would say to look at the expenses of an apartment and add on the stuff that you didn't have to pay for then. like home repair, lawn maintenance, insurance etc.
maybe you could look into a nice townhouse. their usually pretty nice and furnished. and you have a lawn (somewhat) but you dont have to take care of it.
posted by bob sarabia at 11:29 PM on April 4, 2004
maybe you could look into a nice townhouse. their usually pretty nice and furnished. and you have a lawn (somewhat) but you dont have to take care of it.
posted by bob sarabia at 11:29 PM on April 4, 2004
I won't attempt to answer your question in its entirety, as I am SO not qualified to do so, but I will say this: see what kind of dues and fees your neighborhood association has in store for you. I live in a townhouse, and I sure hadn't figured in the expenses for the neighborhood association AND the residential association. It's well over $600 a year, just for the dubious priveleges of not having to mow my tiny strip of lawn and attending meetings in which the old biddy down the way bitches about her next-door neighbor painting their front door the wrong color. (Before we sell this place, I swear I'm going to paint my front door chartreuse with pink trim, just to piss her off.) We rolled our homeowner's insurance into the mortgage, so I'm not sure exactly how much we pay for that (and I'm not sure I want to know). Property taxes vary wildly -- your realtor can help you with this, along with explaining closing and escrow costs. There really are good realtors out there. Don't be afraid to try several to find one you can rely on. Repair costs will vary with the age of the home and your willingness to do the work yourself. As a plumber, I've saved myself boocoodles over the years by handling all my own drainage and plumbing issues. Another unexpected cost: termite bond (but it's only about $100 per yr). Adding it all up, including property taxes and the little niggling things, it probably comes to around $200 extra per month, in addition to our mortgage payment. And I live in the Deep South, where property taxes are comparatively low. Another thing to consider: do you now or will you soon have kids? If not, moving to an unincorporated area or a place just on the other side of a municipal boundary can save you a bunch, since you don't have to care about the quality of the school system and the taxes you'd pay to school them young'uns. (Something I wish I had thought of THEN.) If you find a house you really like, in the price range you can afford, then spend the money to hire an independent inspector to check the roof, foundation, plumbing, and wiring. It'll buy you some peace of mind and possibly save you a bunch of money down the road. Or, it could be that you're the handy type and you can use the inspector's findings to get thousands of dollars knocked off the sale price, and then do the work yourself at a considerable savings.
posted by BitterOldPunk at 11:37 PM on April 4, 2004
posted by BitterOldPunk at 11:37 PM on April 4, 2004
On a related note: anyone have any experience with mobile homes? Do they hemorrhage value or hold it? Are they rentable? Do they have the same kinds of expenses associated with real home ownership?
(Not even necessarily, you know, personally, but maybe, like, through a friend)
posted by namespan at 11:40 PM on April 4, 2004
(Not even necessarily, you know, personally, but maybe, like, through a friend)
posted by namespan at 11:40 PM on April 4, 2004
On a related note: anyone have any experience with mobile homes? Do they hemorrhage value or hold it? Are they rentable? Do they have the same kinds of expenses associated with real home ownership?
I've lived in a trailer park. I ain't ashamed. Met some good people there. My mother-in-law still lives in a trailer, and it's really kinda nice. Three BR, one bath, big kitchen, plenty of space.
Trailers (I refuse to call them "mobile homes" or "manufactured homes") plummet in value as soon as you buy them. They are generally shoddily built. They are rentable, but require careful screening of tenants. The population of any given trailer park outside of a retirement community is generally going to be... well, maybe a little rough around the edges. And you'll likely get gouged by hook-up fees. All things being equal, I'd rather have an apartment.
On the plus side, a trailer is a great way to start out. They are affordable, allowing you to invest in more land and less house. They are easy to set up, and you don't have to buy expensive fixtures (commodes, sinks, tubs, etc) that you would if you were building a house. Plus, you can move them!
Where I live (in Alabama), it's not uncommon to see young couples buying a few acres of land in the country, putting a trailer on it, and living there while they build or save for a permanent house elsewhere on the property. Then they can get a little of their money back by renting out the trailer.
Or they can turn it into a meth lab.
(I just undermined my whole "trailers aren't just for rednecks" subtext, didn't I?)
posted by BitterOldPunk at 12:43 AM on April 5, 2004
I've lived in a trailer park. I ain't ashamed. Met some good people there. My mother-in-law still lives in a trailer, and it's really kinda nice. Three BR, one bath, big kitchen, plenty of space.
Trailers (I refuse to call them "mobile homes" or "manufactured homes") plummet in value as soon as you buy them. They are generally shoddily built. They are rentable, but require careful screening of tenants. The population of any given trailer park outside of a retirement community is generally going to be... well, maybe a little rough around the edges. And you'll likely get gouged by hook-up fees. All things being equal, I'd rather have an apartment.
On the plus side, a trailer is a great way to start out. They are affordable, allowing you to invest in more land and less house. They are easy to set up, and you don't have to buy expensive fixtures (commodes, sinks, tubs, etc) that you would if you were building a house. Plus, you can move them!
Where I live (in Alabama), it's not uncommon to see young couples buying a few acres of land in the country, putting a trailer on it, and living there while they build or save for a permanent house elsewhere on the property. Then they can get a little of their money back by renting out the trailer.
Or they can turn it into a meth lab.
(I just undermined my whole "trailers aren't just for rednecks" subtext, didn't I?)
posted by BitterOldPunk at 12:43 AM on April 5, 2004
Having just bought our first house last year, I can tell you at least the New Zealand perspective.
With the actual purchase, you'll probably want some sort of building inspection done on a house you're serious about buying, to make sure there's no hidden problems with the house or the property (like drainage, cracked piles, rotten floorboards, lack of insulation). You'll pay a lawyer fee for the property's change of ownership and a fee to your agent (if you have one who finds the property for you -- you don't have to have one). My husband and I did our own househunting, so the only expense -- apart from the house deposit -- was the inspection, and a standard one, which was very comprehensive, was about NZ$350. Make sure you know exactly what the inspection will cover, and get all your questions answered.
You want home insurance, obviously. And contents insurance, unless you have a super-secure house. You'll probably pay property tax, utilities, and whatever local fees they may charge property owners. Here we pay rates to the local council each year, and they provide all utilities (not including phone, gas, or power) with that.
majick had a good summary: maintenance is a big cost. An inspection report will prepare you for those costs before you've even signed on the dotted lines (you can place an offer with the vendors conditional on said report here, at least). If your house is structurally sound, warm and tidy, you should be able to get away with minimal maintenance except the basics like chimney cleaning, property maintenance (which doesn't cost anything except a lawnmower and getting rid of garden waste), and worry about the big things that make the house pretty to outsiders when you're ready to sell -- by which I mean repainting the exterior, or building a new fence, or changing the colour of the ceiling.
We struck it lucky because we found a house that has recently been renovated, so our big costs have been in little things like weather-stripping for the doors and windows, which actually save you money on your heating bills in the long run, and getting the fruit trees pruned so we can get lots of fruit off them next year. Finding ways in which small payouts yield longterm savings is well worth your time and effort.
posted by tracicle at 1:00 AM on April 5, 2004
With the actual purchase, you'll probably want some sort of building inspection done on a house you're serious about buying, to make sure there's no hidden problems with the house or the property (like drainage, cracked piles, rotten floorboards, lack of insulation). You'll pay a lawyer fee for the property's change of ownership and a fee to your agent (if you have one who finds the property for you -- you don't have to have one). My husband and I did our own househunting, so the only expense -- apart from the house deposit -- was the inspection, and a standard one, which was very comprehensive, was about NZ$350. Make sure you know exactly what the inspection will cover, and get all your questions answered.
You want home insurance, obviously. And contents insurance, unless you have a super-secure house. You'll probably pay property tax, utilities, and whatever local fees they may charge property owners. Here we pay rates to the local council each year, and they provide all utilities (not including phone, gas, or power) with that.
majick had a good summary: maintenance is a big cost. An inspection report will prepare you for those costs before you've even signed on the dotted lines (you can place an offer with the vendors conditional on said report here, at least). If your house is structurally sound, warm and tidy, you should be able to get away with minimal maintenance except the basics like chimney cleaning, property maintenance (which doesn't cost anything except a lawnmower and getting rid of garden waste), and worry about the big things that make the house pretty to outsiders when you're ready to sell -- by which I mean repainting the exterior, or building a new fence, or changing the colour of the ceiling.
We struck it lucky because we found a house that has recently been renovated, so our big costs have been in little things like weather-stripping for the doors and windows, which actually save you money on your heating bills in the long run, and getting the fruit trees pruned so we can get lots of fruit off them next year. Finding ways in which small payouts yield longterm savings is well worth your time and effort.
posted by tracicle at 1:00 AM on April 5, 2004
for a few hundred extra dollars I chose not to have an escrow account with my mortgage.
This means that I am on my own to pay my property taxes and homeowner's insurance each year. The two of those average about $250-275 a month, but are only paid once a year. Like others have said little things come up that you need cash for. I can use my tax/insurance fund money for these things and replace it later. With an escrow account I would not have access to that money.
posted by busboy789 at 3:41 AM on April 5, 2004
This means that I am on my own to pay my property taxes and homeowner's insurance each year. The two of those average about $250-275 a month, but are only paid once a year. Like others have said little things come up that you need cash for. I can use my tax/insurance fund money for these things and replace it later. With an escrow account I would not have access to that money.
posted by busboy789 at 3:41 AM on April 5, 2004
It seems to be a rule of thumb that there's at least one big expense within the first year of purchasing the home--in my case, I had to replace the hot water heater. You should also be socking money away in case you need to replace a furnace (up to $3000) or, as I'm currently doing, the roof (about $7000).
Expenses will vary depending on your part of the world. After mortgage, property taxes and PMI (which together are less than what I was going to pay for rent), I usually expect to pay about $125-$150/mo. for various bill-related expenses. You should also set aside a few hundred per year for necessary repairs, like plumbing, gutters, etc. If you buy in an area with heavy winters, you're going to have ice damage as almost a matter of course, so factor that into your plans. Older houses (1930s and earlier), especially if they have wood siding, will take a lot more money for upkeep.
posted by thomas j wise at 5:01 AM on April 5, 2004
Expenses will vary depending on your part of the world. After mortgage, property taxes and PMI (which together are less than what I was going to pay for rent), I usually expect to pay about $125-$150/mo. for various bill-related expenses. You should also set aside a few hundred per year for necessary repairs, like plumbing, gutters, etc. If you buy in an area with heavy winters, you're going to have ice damage as almost a matter of course, so factor that into your plans. Older houses (1930s and earlier), especially if they have wood siding, will take a lot more money for upkeep.
posted by thomas j wise at 5:01 AM on April 5, 2004
To add a bit to what Bitter said about trailers. One of the reasons they hemorrage value so quickly is the policies of most trailer parks. They'll accept a trailer when it's new, but often won't allow you to move an older trailer in - that limits the resale value a lot. Plus, the fact that it's actually quite annoying, and not inexpensive to move these things. Finally, if you put a trailer on a piece of land that you own, in order to sell the land and trailer together as a piece of real estate, you have to have the trailer deregistered, at which point, it can never be moved again.
posted by jacquilynne at 5:29 AM on April 5, 2004
posted by jacquilynne at 5:29 AM on April 5, 2004
The biggest piece of hell about buying a house is all the people who like to chuckle "Heh, the joys of home ownership" when you tell them that your hot water heater broke, or your roof is leaking. I own a home, it's in rural Vermont so YMMV, and here are my expenses:
- house insurance $1200/year
- property taxes $1800/year [I don't have a mortgage, if you have one, these are frequently rolled in]
- electric/phone $800/year
- other incidentals include snowplowing, PO BOX ownership, volunteer fire department donations, yard and garden stuff [this adds up but it SO worth it], winterizing and pest control.
It's really low for me on a month by month basis but, as tjw says, there are always things that need fixing, repairing, replacing or upgrading. I always basically double what my fixed expenses are when I try to estimate money to set aside for these things. Things in my case include: barn roof blowing off in hurricane, leaky roof, barn stabilization, replacing power lines to house, voltage spike in house frying some appliances, water pipes freezing, leaky hot water heater, and then just prettifying like painting and carpentry and buying a lawnmower and deck furniture.
Generally home ownership beats the money-suck that is renting but it's more unpredictable and sometimes you have to come up with big hunks of cash all at once. You also have to make a lot of decisions about whether you want to spend money to fix little things that can turn into bigger more expensive things later on. And, since you own the place, if you don't make repairs, or do them half-assed, it only hurts you in the end if you want to sell the place. I've been a generally happy homeowner, and I think home buying is a generally good thing to do, but there are ways to not take it all on at once.
Up here there is also a pretty large trailer/mobile home community and you can buy used mobile homes cheap if you don't mind doing some work and then putting them on a few acres. Their biggest problem seems to be lack of serious insulation [their pipes freeze a LOT unless you insulate the crap out of their underneaths] but they're a completely legit way to go and a good "starter" home set up. Buying into a nice condo or co-op, though less inexpensive, also gives you a buffer from some of the immediate hassles of individual ownership. I read a lot of "so you're buying your first home" books before I took the plunge and I suggest you do also.
posted by jessamyn at 5:41 AM on April 5, 2004
- house insurance $1200/year
- property taxes $1800/year [I don't have a mortgage, if you have one, these are frequently rolled in]
- electric/phone $800/year
- other incidentals include snowplowing, PO BOX ownership, volunteer fire department donations, yard and garden stuff [this adds up but it SO worth it], winterizing and pest control.
It's really low for me on a month by month basis but, as tjw says, there are always things that need fixing, repairing, replacing or upgrading. I always basically double what my fixed expenses are when I try to estimate money to set aside for these things. Things in my case include: barn roof blowing off in hurricane, leaky roof, barn stabilization, replacing power lines to house, voltage spike in house frying some appliances, water pipes freezing, leaky hot water heater, and then just prettifying like painting and carpentry and buying a lawnmower and deck furniture.
Generally home ownership beats the money-suck that is renting but it's more unpredictable and sometimes you have to come up with big hunks of cash all at once. You also have to make a lot of decisions about whether you want to spend money to fix little things that can turn into bigger more expensive things later on. And, since you own the place, if you don't make repairs, or do them half-assed, it only hurts you in the end if you want to sell the place. I've been a generally happy homeowner, and I think home buying is a generally good thing to do, but there are ways to not take it all on at once.
Up here there is also a pretty large trailer/mobile home community and you can buy used mobile homes cheap if you don't mind doing some work and then putting them on a few acres. Their biggest problem seems to be lack of serious insulation [their pipes freeze a LOT unless you insulate the crap out of their underneaths] but they're a completely legit way to go and a good "starter" home set up. Buying into a nice condo or co-op, though less inexpensive, also gives you a buffer from some of the immediate hassles of individual ownership. I read a lot of "so you're buying your first home" books before I took the plunge and I suggest you do also.
posted by jessamyn at 5:41 AM on April 5, 2004
I can speak as somebody who's decided to rent, at least in the location I live. For $600/month I can get a 1400 square foot townhouse with a garage. That's all I need. People have tried to talk me into buying a house and I've considered it but property taxes are exorbitant here. On a 120,000 dollar house it's near 5K per year. So on top of the extras cost involved with owning a home I get the privilege of almost paying my present rent to the government.
I would recommend doing what I did. Make a balance sheet. Nobody here can tell you about the particulars for your neck of the woods (unless they live there). On one side add up your rent, utilities, renters insurance and so on. On the other side add up mortgage payments, taxes, insurance, repairs and maintenance. Repairs and maintenance are tricky. $10,000 seems excessive for paint in my opinion but my folks always did it themselves (or bought the paint and showed me the ladder). One thing I would recommend is find a friend or friend-of-a-friend who is knowledgeable about housing construction. When I was seriously looking I had a buddy of mine who's built houses and is a wizard with wood look things over. He'd make notes "Furnace is old, will need replacing. Water marks along walls, basement has flooded. Slight staining on wood in attic, roof is leaking - might just be a patch job"
posted by substrate at 5:51 AM on April 5, 2004
I would recommend doing what I did. Make a balance sheet. Nobody here can tell you about the particulars for your neck of the woods (unless they live there). On one side add up your rent, utilities, renters insurance and so on. On the other side add up mortgage payments, taxes, insurance, repairs and maintenance. Repairs and maintenance are tricky. $10,000 seems excessive for paint in my opinion but my folks always did it themselves (or bought the paint and showed me the ladder). One thing I would recommend is find a friend or friend-of-a-friend who is knowledgeable about housing construction. When I was seriously looking I had a buddy of mine who's built houses and is a wizard with wood look things over. He'd make notes "Furnace is old, will need replacing. Water marks along walls, basement has flooded. Slight staining on wood in attic, roof is leaking - might just be a patch job"
posted by substrate at 5:51 AM on April 5, 2004
Beyond the PMI, utilities and inevitable repair, don't forget what you'll need just to do anything around your home. How complete is your tool box? Do you have a ladder, lawn mower, gardening equipment, garden hose, cleaning supplies, paint brushes and drapes? After spending 6 years in an apartment before buying a house, space concerns made me give away most of the above listed items. For the first two months we spent more time at Target, Home Depot and every garage sale within 10 miles than we did at our own home.
Garage sales can be your friend, WBY, but always remember to have all of your measurements written down before leaving the house, and don't buy anything that looks questionable unless you are sure you can repair it when it inevitably blows up. Always know exactly what colors your rooms are - green is not just green anymore.
One final thing - read up on your tax codes so you know which receipts to save and how to correctly file.
Wait, one more final thing - beware of home repair transactions that can be paid for with beer...
posted by TomSophieIvy at 5:53 AM on April 5, 2004
Garage sales can be your friend, WBY, but always remember to have all of your measurements written down before leaving the house, and don't buy anything that looks questionable unless you are sure you can repair it when it inevitably blows up. Always know exactly what colors your rooms are - green is not just green anymore.
One final thing - read up on your tax codes so you know which receipts to save and how to correctly file.
Wait, one more final thing - beware of home repair transactions that can be paid for with beer...
posted by TomSophieIvy at 5:53 AM on April 5, 2004
Wait, one more final thing - beware of home repair transactions that can be paid for with beer...
HAHAHAHAHAHAHAHA !! That is a good one. Made me laugh outloud. I would say a solid piece of advice too.
I bought a new house. Coming up on two years. So far, no disasters. We did add a hotwater tank hooked to the boiler, as the tankless setup on the furnace proved to be quite lacking. $1300 for the tank and the labor to get it hooked up. Actually quite involved as they have to change the behavior of the furnace.
Things to consider: What kind of driveway will you have? Asphalt? Needs to be sealed every few years. Dirty, smelly nasty job. Prepare to throw away a pair of shoes and a day, or pay someone some $$ to have it done. I will be doing it this summer, well, cutting a check to be more honest.
Landscaping. Did it all myself. But it adds up. Fertilizers, grass seed, bushes, trees. They all cost. I did build some very nice raised flowerbeds by rounding up lots of rocks and making walls. Quite pretty.
The biggest thing I had to get used to, was the absence of time to do things I used to do, so I could get things done around the house/yard.
I find myself in the situation now of going through stuff in the garage and basement, tagging stuff to be dragged to the recycling center, or sold at a tag sale. It amasses quickly if you don't watch out.
Ahh the joys of home ownership..... hehehehehe
posted by a3matrix at 6:55 AM on April 5, 2004
HAHAHAHAHAHAHAHA !! That is a good one. Made me laugh outloud. I would say a solid piece of advice too.
I bought a new house. Coming up on two years. So far, no disasters. We did add a hotwater tank hooked to the boiler, as the tankless setup on the furnace proved to be quite lacking. $1300 for the tank and the labor to get it hooked up. Actually quite involved as they have to change the behavior of the furnace.
Things to consider: What kind of driveway will you have? Asphalt? Needs to be sealed every few years. Dirty, smelly nasty job. Prepare to throw away a pair of shoes and a day, or pay someone some $$ to have it done. I will be doing it this summer, well, cutting a check to be more honest.
Landscaping. Did it all myself. But it adds up. Fertilizers, grass seed, bushes, trees. They all cost. I did build some very nice raised flowerbeds by rounding up lots of rocks and making walls. Quite pretty.
The biggest thing I had to get used to, was the absence of time to do things I used to do, so I could get things done around the house/yard.
I find myself in the situation now of going through stuff in the garage and basement, tagging stuff to be dragged to the recycling center, or sold at a tag sale. It amasses quickly if you don't watch out.
Ahh the joys of home ownership..... hehehehehe
posted by a3matrix at 6:55 AM on April 5, 2004
It varies from state to state, and what kind of property you get involved in.
Presuming you're interested in a single family home:
Once you're actually in the house, besides actual utility bills, you've got yard maintenance, trash/recycling disposal, and of course, interior and exterior maintenance (painting, repair, replacement, etc).
You're going to want to ask a lot of questions while looking at the homes: Ask the age of the heating/cooling systems, the roof, the driveway, vinyl siding if applicable. Find out if the water heater is leased. if you can get documentation as to the age of these items, all the better. Information "per owner" isn't necessarily bad, but you'd obviously want the paperwork. It's going to give you an idea of what will need replacing and maybe a timeframe of when. This isn't to say something isn't going to go kerplunk and just die on you either.
In Massachusetts, you're entitled to have a home inspection before you sign an Offer to Purchase and the home inspector is going to (hopefully) go over the house with a fine toothed comb to reveal any potential issues. The guy that inspected my childhood home when my parents sold it was finding things like "this door's hinges are missing one out of the nine screws". It was a hollow bedroom door. Big deal. Annoying to the seller, but as a buyer, you want that kind of scrutiny.
If you are even a little handy or confident you could be a handy, get yourself one of those "Do It Yourself" set of books. That's going to save you a lot of money on the easier, smaller projects you'll encounter around the house.
It's a lot of work, it can be a lot of hassle, but the short answer is it's an investment that will hopefully appreciate for you and to me, it's better than dropping my money to a landlord.
As for the other fees -- escrow, insurance, taxes, closing, etc -- what state are you in?
posted by jerseygirl at 7:29 AM on April 5, 2004
Presuming you're interested in a single family home:
Once you're actually in the house, besides actual utility bills, you've got yard maintenance, trash/recycling disposal, and of course, interior and exterior maintenance (painting, repair, replacement, etc).
You're going to want to ask a lot of questions while looking at the homes: Ask the age of the heating/cooling systems, the roof, the driveway, vinyl siding if applicable. Find out if the water heater is leased. if you can get documentation as to the age of these items, all the better. Information "per owner" isn't necessarily bad, but you'd obviously want the paperwork. It's going to give you an idea of what will need replacing and maybe a timeframe of when. This isn't to say something isn't going to go kerplunk and just die on you either.
In Massachusetts, you're entitled to have a home inspection before you sign an Offer to Purchase and the home inspector is going to (hopefully) go over the house with a fine toothed comb to reveal any potential issues. The guy that inspected my childhood home when my parents sold it was finding things like "this door's hinges are missing one out of the nine screws". It was a hollow bedroom door. Big deal. Annoying to the seller, but as a buyer, you want that kind of scrutiny.
If you are even a little handy or confident you could be a handy, get yourself one of those "Do It Yourself" set of books. That's going to save you a lot of money on the easier, smaller projects you'll encounter around the house.
It's a lot of work, it can be a lot of hassle, but the short answer is it's an investment that will hopefully appreciate for you and to me, it's better than dropping my money to a landlord.
As for the other fees -- escrow, insurance, taxes, closing, etc -- what state are you in?
posted by jerseygirl at 7:29 AM on April 5, 2004
jessamyn said: "Generally home ownership beats the money-suck that is renting..."
This is highly dependant on market. Study the housing market in your area, because in especially dense urban areas the opposite tends to be true. Here in the Bay Area, the price of homes and recurring costs assosciated with buying come to well over 50% more than renting on a monthly basis. A 3-bedroom home or apartment in a fancy neighborhood is generally about $1800 to rent; buying would be close to a million dollars. If you have access to that kind of financing, owning a home is a great investment, but it does reinforce my"if you're worried about the cost..." rule above.
Renters around here typically have both garbage and water included in the rent, close to $175/mo in services, whereas owners cover it themselves.
Taxes on, say, your basic entry-level $300,000 home in a crummy neighborhood come to a little over $4000 a year. Insuring it is about $1500 a year. Earthquake or flood insurance goes for $1000 or so on top of that, if you're in an area prone to such disasters. You get a little of this back on the federal taxes if you're paying lots of interest, but it's not a very good bargain.
So get out there and learn about your local housing market. That information is critical!
posted by majick at 7:56 AM on April 5, 2004
This is highly dependant on market. Study the housing market in your area, because in especially dense urban areas the opposite tends to be true. Here in the Bay Area, the price of homes and recurring costs assosciated with buying come to well over 50% more than renting on a monthly basis. A 3-bedroom home or apartment in a fancy neighborhood is generally about $1800 to rent; buying would be close to a million dollars. If you have access to that kind of financing, owning a home is a great investment, but it does reinforce my"if you're worried about the cost..." rule above.
Renters around here typically have both garbage and water included in the rent, close to $175/mo in services, whereas owners cover it themselves.
Taxes on, say, your basic entry-level $300,000 home in a crummy neighborhood come to a little over $4000 a year. Insuring it is about $1500 a year. Earthquake or flood insurance goes for $1000 or so on top of that, if you're in an area prone to such disasters. You get a little of this back on the federal taxes if you're paying lots of interest, but it's not a very good bargain.
So get out there and learn about your local housing market. That information is critical!
posted by majick at 7:56 AM on April 5, 2004
I just bought a condominium, in part because I felt that the expenses would be much more predictable than they would if I'd bought a house.
I pay a monthly condo fee which some might consider exhorbitant ($200), but I don't have to worry about huge sudden expenses like my roof caving in or my furnace exploding. These things might happen, and I might ultimately have to pay for it with an assessment or increase in condo fees, but I'm much less likely to get a bill for $10,000 for a new roof. Since I share a roof with 11 other owners, I have 11 other people paying to fix the roof.
That monthly fee also covers a master insurance policy (I'm responsible only for insuring my possessions).
Plus, I don't have to shovel a driveway or mow a lawn.
In the market where I live (outside Boston), it turns out to be slightly cheaper than renting.
posted by jpoulos at 8:19 AM on April 5, 2004
I pay a monthly condo fee which some might consider exhorbitant ($200), but I don't have to worry about huge sudden expenses like my roof caving in or my furnace exploding. These things might happen, and I might ultimately have to pay for it with an assessment or increase in condo fees, but I'm much less likely to get a bill for $10,000 for a new roof. Since I share a roof with 11 other owners, I have 11 other people paying to fix the roof.
That monthly fee also covers a master insurance policy (I'm responsible only for insuring my possessions).
Plus, I don't have to shovel a driveway or mow a lawn.
In the market where I live (outside Boston), it turns out to be slightly cheaper than renting.
posted by jpoulos at 8:19 AM on April 5, 2004
Majick, I think that your "if you're worried about the cost..." thing might be a little specific to the Bay Area. Especially the part about the $300,000 entry level home. You're clear that $300,000 buys a hell of a nice house in most of the rest of the country, right?
Anyway, I do really really prefer buying to renting, both economically and psychologically, but there are a ton of extra expenses. In addition to the things already mentioned here, don't forget about the cost of making a new house livable. In my case, the two major expenses other than the mortgage, property tax, etc., were lamps and window coverings. Now, furniture you can live without (says the woman who still doesn't own a dining room table), but you have to be able to see and (maybe more importantly, and definitely more expensively) make sure other people can't see you.
Good luck!
posted by LittleMissCranky at 8:23 AM on April 5, 2004
Anyway, I do really really prefer buying to renting, both economically and psychologically, but there are a ton of extra expenses. In addition to the things already mentioned here, don't forget about the cost of making a new house livable. In my case, the two major expenses other than the mortgage, property tax, etc., were lamps and window coverings. Now, furniture you can live without (says the woman who still doesn't own a dining room table), but you have to be able to see and (maybe more importantly, and definitely more expensively) make sure other people can't see you.
Good luck!
posted by LittleMissCranky at 8:23 AM on April 5, 2004
Another condo owner here. I work 7 days a week, so the time saved by not having to maintain the outside property myself is absolutely golden.
Be sure to figure in things like regular housecleaning, mowing the lawn (if you have one), waiting on the installation/repair/delivery guy, etc.
It can be hard to quantify. But if you have irregular work hours or travel a lot, you might be needing to pay someone else for upkeep services.
posted by Sangre Azul at 9:01 AM on April 5, 2004
Be sure to figure in things like regular housecleaning, mowing the lawn (if you have one), waiting on the installation/repair/delivery guy, etc.
It can be hard to quantify. But if you have irregular work hours or travel a lot, you might be needing to pay someone else for upkeep services.
posted by Sangre Azul at 9:01 AM on April 5, 2004
Here in the Bay Area, the price of homes and recurring costs associated with buying come to well over 50% more than renting on a monthly basis.... If you have access to that kind of financing, owning a home is a great investment
Well and at the end of your mortgage term you own a house. At the end of your rental term you own nothing. Even if the house depreciates, you still own it and can live in it. Buying is good if you know you're going to stay in one place for a while, have some scratch to spend on a down payment, can qualify for a mortage and have a steady income to pay it, are okay with taking some risks, and enjoy the concept of home ownership philosophically, you must also feel comfortable with long-term debt. Renting gives you the option of moving pretty much whenever with low [compared to a mortgage] cash penalties, the ability to live in a nicer place than you could buy in many situations, and someone else who has to deal with most of the really big-ticket repairs and replacements that would have to happen. Buying gives you much more control over a property, sometimes too much control depending on how you feel about it. It also gives you some assurances that, barring disaster, you get to stay there. I never felt like any apartment I lived in was mine.
A good home inspection is well worth the money [$200-500 when I bought my house in '98] and can help you get at least a ballpark idea of what to expect in terms of repairs for the first few years of your house's life. If the house needs big repairs immediately [roof, rot, furnace] it's within your rights to try to make a deal with the current homeowners where they will fix the problem or else lower the asking price of the house. Lastly, many houses do NOT come with all the appliances in them [fridge, washer/dryer, maybe stove] so be sure to figure those into the initial costs of setting up the house.
posted by jessamyn at 9:40 AM on April 5, 2004
Well and at the end of your mortgage term you own a house. At the end of your rental term you own nothing. Even if the house depreciates, you still own it and can live in it. Buying is good if you know you're going to stay in one place for a while, have some scratch to spend on a down payment, can qualify for a mortage and have a steady income to pay it, are okay with taking some risks, and enjoy the concept of home ownership philosophically, you must also feel comfortable with long-term debt. Renting gives you the option of moving pretty much whenever with low [compared to a mortgage] cash penalties, the ability to live in a nicer place than you could buy in many situations, and someone else who has to deal with most of the really big-ticket repairs and replacements that would have to happen. Buying gives you much more control over a property, sometimes too much control depending on how you feel about it. It also gives you some assurances that, barring disaster, you get to stay there. I never felt like any apartment I lived in was mine.
A good home inspection is well worth the money [$200-500 when I bought my house in '98] and can help you get at least a ballpark idea of what to expect in terms of repairs for the first few years of your house's life. If the house needs big repairs immediately [roof, rot, furnace] it's within your rights to try to make a deal with the current homeowners where they will fix the problem or else lower the asking price of the house. Lastly, many houses do NOT come with all the appliances in them [fridge, washer/dryer, maybe stove] so be sure to figure those into the initial costs of setting up the house.
posted by jessamyn at 9:40 AM on April 5, 2004
All excellent EXCELLENT pieces of advice. As a home owner myself (2 years now), i wish I knew alot of this when I started.
Let me add that what a3matrix said is correct, time does vanish. And god forbid if you blow off one weekend and not work on the yard/house, you will guilt yourself to death. At least I do.
Some other thoughts: Get an inspection! Buying without one is the biggest mistake. Also, get an appliance warranty if you can afford it. It's only $300/year (here in Florida) but when something breaks, you get it replaced. We have a 50's style kitchen, which is great but the appliances were from the 50s too. After a year, our stovetop stopped working. The warranty got us a brand new Jenn-Aire...which is killer!
And don't forget to invest in preventative care. Termites are a giant problem in humid areas. To avoid that giant Termite-prevention fee will only cost you more than you can imagine.
Owning a house is expensive and challenging. I get more frustrated that my to-do list gets longer but my time gets shorter than maybe any single other problem. But there is a flip side. It's YOURS! You can paint it however you want (unless you live in those ridiculous neighborhoods). You can do whatever you want. The satisfaction of putting up a new fence, or even just mowing your yard, is the best! And every dime you put into it is an investment. Renting is the equivalent of putting that rent money in a paper bag, lighting it on fire, and throwing it out of a moving vehicle. I'll never go back to that!
posted by Dantien at 10:36 AM on April 5, 2004
Let me add that what a3matrix said is correct, time does vanish. And god forbid if you blow off one weekend and not work on the yard/house, you will guilt yourself to death. At least I do.
Some other thoughts: Get an inspection! Buying without one is the biggest mistake. Also, get an appliance warranty if you can afford it. It's only $300/year (here in Florida) but when something breaks, you get it replaced. We have a 50's style kitchen, which is great but the appliances were from the 50s too. After a year, our stovetop stopped working. The warranty got us a brand new Jenn-Aire...which is killer!
And don't forget to invest in preventative care. Termites are a giant problem in humid areas. To avoid that giant Termite-prevention fee will only cost you more than you can imagine.
Owning a house is expensive and challenging. I get more frustrated that my to-do list gets longer but my time gets shorter than maybe any single other problem. But there is a flip side. It's YOURS! You can paint it however you want (unless you live in those ridiculous neighborhoods). You can do whatever you want. The satisfaction of putting up a new fence, or even just mowing your yard, is the best! And every dime you put into it is an investment. Renting is the equivalent of putting that rent money in a paper bag, lighting it on fire, and throwing it out of a moving vehicle. I'll never go back to that!
posted by Dantien at 10:36 AM on April 5, 2004
It's only $300/year (here in Florida) but when something breaks, you get it replaced.
curious: is that per appliance (stove, fridge, dishwasher, etc) or to blanket warranty all major appliances in the entire kitchen?
posted by jerseygirl at 10:48 AM on April 5, 2004
curious: is that per appliance (stove, fridge, dishwasher, etc) or to blanket warranty all major appliances in the entire kitchen?
posted by jerseygirl at 10:48 AM on April 5, 2004
gravel for driveway, replace garage siding from wind, insect control (wasps, most I leave alone), gas for mowing yard, landscaping (flowers, bushes, trees), $500-$1K to take out big old sick trees (likewise for tree struck by lightning, tuck-pointing brick, chimeny cleaning (furnace and wood burning stove), wood for said wood burning stove, fence repair, paint for any and all wood surfaces, more pest contol for carpenter bees (when you opted not to paint), insurance, property taxes, water (if you have a well and they offer to hook up water do it now- it is cheaper), a new mailbox (bastards keep hitting it with a bat or something, plowing drive, replacing a broken window here and there, miscellaneous things (a ladder, for instance). There are always the incidentals when you do a project- a new tool. Electric, gas, blah, blah, blah. We bought an old house for "character" which it has, true. It also costs $500/month to heat in the winter (we're fools).
The equity is nice, though, unti they build an internodal rail yard in your backyard and mess that up for you. So, try to find out what building plans exist for your neighborhood/area.
All things being equal, if it were up to me and I were a single man again, I'd rent the hell out of something. I'd sell my house and try oh-so-hard to stiffle the maniacal chuckling and keep the palm rubbing to a minimum while the transaction took place.
posted by pissfactory at 11:45 AM on April 5, 2004
The equity is nice, though, unti they build an internodal rail yard in your backyard and mess that up for you. So, try to find out what building plans exist for your neighborhood/area.
All things being equal, if it were up to me and I were a single man again, I'd rent the hell out of something. I'd sell my house and try oh-so-hard to stiffle the maniacal chuckling and keep the palm rubbing to a minimum while the transaction took place.
posted by pissfactory at 11:45 AM on April 5, 2004
Regarding appliance warranties: when negotiating for our current house, I insisted that the seller buy us such a warranty, and as I recall $300 sounds about right. It covered all appliances (and things such as major plumbing repairs, too, I think). This was in California in 1991.
After living in the place for less than a month the water heater died, but the old one hadn't been installed to code. The insurance wouldn't pay for the code upgrade, but gave me a few hundred dollars towards the new heater and I did the work myself. All in all, the insurance was a good purchase, especially since I didn't pay for it myself!
After a year, they sent me a letter asking me to renew, and I declined as I thought I had a pretty good handle on the house's condition. They offered to knock 30% off the renewal price, but I haven't had a warranty since.
posted by Daddio at 1:15 PM on April 5, 2004
After living in the place for less than a month the water heater died, but the old one hadn't been installed to code. The insurance wouldn't pay for the code upgrade, but gave me a few hundred dollars towards the new heater and I did the work myself. All in all, the insurance was a good purchase, especially since I didn't pay for it myself!
After a year, they sent me a letter asking me to renew, and I declined as I thought I had a pretty good handle on the house's condition. They offered to knock 30% off the renewal price, but I haven't had a warranty since.
posted by Daddio at 1:15 PM on April 5, 2004
Daddio, I had our sellers throw in one year's warranty too. Great deal and when you show $300 against what they are gaining, they don't mind.
jerseygirl (oh, I'm from south Jersey so right on!), it includes all major appliances...including water heaters, air unit, plumbing, etc. I don't think it covers electricity, my pool or my hottub, nor my TV, computer, etc. Just your basic stuff which is spelled out in the warranty. And, of course, you can always get a warranty for more items...but that costs.
posted by Dantien at 1:26 PM on April 5, 2004
jerseygirl (oh, I'm from south Jersey so right on!), it includes all major appliances...including water heaters, air unit, plumbing, etc. I don't think it covers electricity, my pool or my hottub, nor my TV, computer, etc. Just your basic stuff which is spelled out in the warranty. And, of course, you can always get a warranty for more items...but that costs.
posted by Dantien at 1:26 PM on April 5, 2004
Another condo owner here -- I was dubious about the idea at first, but I love not having to worry about all the stuff the condo management takes care of. Plus we get free use of the gym!
And don't be impatient when you do the inspection -- make note of every little thing. Once you sign those papers, it's all your problem.
posted by languagehat at 1:57 PM on April 5, 2004
And don't be impatient when you do the inspection -- make note of every little thing. Once you sign those papers, it's all your problem.
posted by languagehat at 1:57 PM on April 5, 2004
We went through this about eighteen months ago and spent almost a year looking around. One of the conclusions we came to was that building a new home was not only cheaper than buying an existing one, but that we could get what we wanted. More importantly, though, was that everything in the house is brand new and, therefore, under warranty. This means that we got a year or so without having to worry about the cost of replacing things that break the day after you move in. Keep in mind, though, that landscaping, turf etc will cost a lot because you will want it done absolutely right (although you can do it gradually). We were lucky to buy at the right time and in the right area, meaning that our home has increased in value by 75% and we now have around $180k equity in the place.
Whether you are building or buying, spend lots of time hanging around the areas you are interested in, ring and ask the price of every home you see advertised and make sure that what you are buying is not overpriced for the area. Take your time - once you buy a house, it will cost you a fortune if you decide to sell it so get it right the first time.
Oh, that's right, you were asking about costs. Apart from the obvious like insurance, rates, utilities etc, think about the cost of maintenance if you are buying an existing house and make sure you get a thorough inspection or you could be buying massive and expensive problems. If you are building, keep in mind that you will have to pay to "finish" the house and there are sometimes costs in establishing utilities. Either way, every time you turn around there will be someone with their hand out.
Something that we did not consider was that, once we had our "own" place after renting for many long years, we are much more inclined to spend money furnishing and decorating because we feel more "rooted" and want to be more comfortable with the way the house feels. This is proving to be an expensive process - when you are renting, I think you are not so worried about whether the couch matches the wall colours perfectly etc.
At the end of the day, owning a house is at least as expensive as renting, but not more so as some claim and the feeling of belonging and permanence you get from having your own home is worth every cent.
posted by dg at 3:29 PM on April 5, 2004
Whether you are building or buying, spend lots of time hanging around the areas you are interested in, ring and ask the price of every home you see advertised and make sure that what you are buying is not overpriced for the area. Take your time - once you buy a house, it will cost you a fortune if you decide to sell it so get it right the first time.
Oh, that's right, you were asking about costs. Apart from the obvious like insurance, rates, utilities etc, think about the cost of maintenance if you are buying an existing house and make sure you get a thorough inspection or you could be buying massive and expensive problems. If you are building, keep in mind that you will have to pay to "finish" the house and there are sometimes costs in establishing utilities. Either way, every time you turn around there will be someone with their hand out.
Something that we did not consider was that, once we had our "own" place after renting for many long years, we are much more inclined to spend money furnishing and decorating because we feel more "rooted" and want to be more comfortable with the way the house feels. This is proving to be an expensive process - when you are renting, I think you are not so worried about whether the couch matches the wall colours perfectly etc.
At the end of the day, owning a house is at least as expensive as renting, but not more so as some claim and the feeling of belonging and permanence you get from having your own home is worth every cent.
posted by dg at 3:29 PM on April 5, 2004
I have one word of warning about owning condos ... or any property with a homeowner's association -- beware of asshats and unaticipated maintenance.
Two examples:
The condo building I rent a unit in needed a new roof, and three or four units had expenses due to water intrusion (One had to be gutted and rebuilt from concrete walls out due to all of the wood being rotten and the walls being filled with mold) ... the homeowners association told the unit owners to go talk to their insurance companies, and the insurance companies turned around and sued the homeowners association for several hundred thousand dollars for negligence. While the lawsuit, which is getting messier and dirtier by the day, is pending, no unit owner can sell their unit because mortgage companies and most buyers won't touch it. Oh, and those costs will be on top of the $5k assessment that each unit owner had to pay to repair the roof and the increase in annual assessments (by several hundred dollars for most owners) to pay for future unexpected contingencies ... like the upcoming gutting and repair of all pipes in several of the units, and the fact that our elevators are ailing and plauged by gremlins and will need to be replaced within 5 years because they can't get parts. And this building's only 35 years old...!
Near where my parents live in LA, there's a beautiful gated community that's centered on an old historical ranchero. The ranchero has a visitor's society that conducts tours and maintains the building. The homeowners association in this community decided it didn't like the amount of visitor traffic that was coming into the ranchero, so they in all their wisdom decided to aim a full battery of high-powered lawyers at the ranchero. Well, the case went to court ... and the ranchero won. Because high-powered lawyers don't come cheap, each homeowner in the community was assessed for something like 20 grand to pay legal fees. Some homeowners ended up defaulting on their mortgages ... and ladies and germs, these houses were priced close to the million mark. Very few people now want to live in this community and the housing values are dropping... so now some people are in over their head.
Moral of the story: You may think that a condo or property with a homeowner's association may protect you from some unexpected costs or some maintenance, and you're right ... they will to a certain point. When it passes over that point, they pass it on to you directly -- and it'll hit harder because of that.
posted by SpecialK at 4:33 PM on April 5, 2004
Two examples:
The condo building I rent a unit in needed a new roof, and three or four units had expenses due to water intrusion (One had to be gutted and rebuilt from concrete walls out due to all of the wood being rotten and the walls being filled with mold) ... the homeowners association told the unit owners to go talk to their insurance companies, and the insurance companies turned around and sued the homeowners association for several hundred thousand dollars for negligence. While the lawsuit, which is getting messier and dirtier by the day, is pending, no unit owner can sell their unit because mortgage companies and most buyers won't touch it. Oh, and those costs will be on top of the $5k assessment that each unit owner had to pay to repair the roof and the increase in annual assessments (by several hundred dollars for most owners) to pay for future unexpected contingencies ... like the upcoming gutting and repair of all pipes in several of the units, and the fact that our elevators are ailing and plauged by gremlins and will need to be replaced within 5 years because they can't get parts. And this building's only 35 years old...!
Near where my parents live in LA, there's a beautiful gated community that's centered on an old historical ranchero. The ranchero has a visitor's society that conducts tours and maintains the building. The homeowners association in this community decided it didn't like the amount of visitor traffic that was coming into the ranchero, so they in all their wisdom decided to aim a full battery of high-powered lawyers at the ranchero. Well, the case went to court ... and the ranchero won. Because high-powered lawyers don't come cheap, each homeowner in the community was assessed for something like 20 grand to pay legal fees. Some homeowners ended up defaulting on their mortgages ... and ladies and germs, these houses were priced close to the million mark. Very few people now want to live in this community and the housing values are dropping... so now some people are in over their head.
Moral of the story: You may think that a condo or property with a homeowner's association may protect you from some unexpected costs or some maintenance, and you're right ... they will to a certain point. When it passes over that point, they pass it on to you directly -- and it'll hit harder because of that.
posted by SpecialK at 4:33 PM on April 5, 2004
If you itemize, there's a significant US Federal tax break for mortgage interest. Especially helpful in the early part of the mortgage when it's mostly interest.
If you choose to rent, try to put money aside every month to build some equity. In some areas, property values have gone way up, which is a nifty bonus for homeowners.
There's a certain value to being able to have a garden or put a darkroom in the basement without landlord issues.
posted by theora55 at 3:36 PM on April 6, 2004
If you choose to rent, try to put money aside every month to build some equity. In some areas, property values have gone way up, which is a nifty bonus for homeowners.
There's a certain value to being able to have a garden or put a darkroom in the basement without landlord issues.
posted by theora55 at 3:36 PM on April 6, 2004
This thread is closed to new comments.
Depending on the condition of your home, you might need to make repairs, too. I try to set aside a couple of grand each year to cover those, but it's hard to do.
If you've got home improvement plans, expect those projects to cost about double what you think they ought to. Even if you do it yourself, you'll find that materials for most projects are not cheap.
Most homes need to be painted every 10 years or so, and that gets pretty expensive. You're looking at spending as much as $10,000 to get it done right.
My general advice for anyone looking to buy a home is "if you're worried about the costs, you can't afford it." I'm finding myself drowning under the hidden costs of home ownership -- as well as the not inconsiderable burden of the mortgage itself -- and in the process of selling off. But then, I live in one of the most expensive housing markets in the country. Your mileage, as they say, may vary.
posted by majick at 11:20 PM on April 4, 2004