Homeowner's downfall: Cost of keeping up the place

[HFWR]

This is a huge factor that is easy to overlook. Where building out is constrained, and certain neighborhoods have hard to duplicate amenities, personal housing is often a reasonable investment if you are going to be around for a while. I previously thought that in places like DFW eventually building would be constrained by increasing commuting distances, but I hadn't reckoned on the huge expansion of corporate employment in the various suburban cities They are suburban in layout and planning, but basically live unto themselves rather than function as bedroom communities for Dallas and Fort Worth.

Ha

Yep, and we just bagged Toyota's U.S. headquarters.

 

[haha]

Yep, and we just bagged Toyota's U.S. headquarters.

I saw that. Huge win.

Ha

 

[rodi]

Does that include the earthquake insurance rider? If not the fault is irrelevant since homeowners policies exclude earthquake risk unless a rider is purchased.
But from the insurance premium , you clearly don't live in any area subject to many windstorms. In inland Tx its windstorms and hail that raise insurance premiums. The house I live in had its roof replaced twice, the second time with a metal roof, and would have had a shingle roof replaced a third time in 28 years. The last event meant that every roof in the neighborhood that was not metal had to be redone.

Good point on that. We bagged the EQ insurance after stiffening the house (Husband is an architect) and finding out that we're on "good dirt" when we built our casita. (One of the least likely types of dirt to liquify and slide in a seismic event according to our soils report.) Stiffening meant increasing diagonal bracing, adding bolts/straps between 2nd floor, 1st floor, and foundation. And adding significantly more sheer wall.

 

[Options]

Unless you get lucky in your area (and you could just as well buy a biotech and try to get lucky there) a house is a pretty horrible investment.

...

I got really, really, really lucky. Was in fact, probably the best investment I've ever made.

 

[tryan]

Had a nasty wind storm blow 1/2 dozen shingles off the roof ... It's a 3 story house ... I HATE ladders.

Same thing happened last year. Sooo I rented a 50 ft lift for the day ($250). Then since I had the lift, we:

1. fixed the roof
2. trimmed the lillacs (15ft high ... waay over grown)
3. cleaned the chimney
4. trimmed the tree branches threatening the house.

Not bad for $250. This year it'll be: roof, chimney, clip catipillar nests and drop a dead tree.

Just need to be creative!

 

[someguy]

Very interesting thread. There are some risks that are unique to renting. One is having to move at the end of a lease term even though you've been a good tenant and incurring the costs (monetary and psychological) associated with being forced to move. Another is if the landlord defaults you could end up again having to move, this time without much warning.

 

[Fermion]

I got really, really, really lucky. Was in fact, probably the best investment I've ever made.

Well that is my point, although if you bought before 2006 I am curious if you would have made out better buying Apple stock and just renting.

I did not get lucky in our house, probably worth 50k less than we paid 13 years ago.

 

[rodi]

Very interesting thread. There are some risks that are unique to renting. One is having to move at the end of a lease term even though you've been a good tenant and incurring the costs (monetary and psychological) associated with being forced to move. Another is if the landlord defaults you could end up again having to move, this time without much warning.

Don't forget the risk of rent increases each year. If you don't live in a rent-controlled area - the increases can be significant. With a *fixed rate* mortgage your P&I are a known quantity. Taxes and insurance can still increase, though.

 

[RetireAge50]

Maybe renting is like putting your money in CDs. Safe and predictable. You will not get the big capital gains nor take any capital losses.

My parents house went up 5 fold in 20 years. Not too bad and handily beat renting.

My first house went up 75% over 10 years and our current house value has remained unchanged over the last 12 years. In our case renting was about the same as owning.

Who knows going forward but I am leaning toward renting in retirement for awhile.

 

[Walt34]

Don't forget the risk of rent increases each year. If you don't live in a rent-controlled area - the increases can be significant. With a *fixed rate* mortgage your P&I are a known quantity. Taxes and insurance can still increase, though.

That was why I bought a house as soon as I could in the Washington, DC area. It was definitely a strain and I was "house poor" for several years but four or five years later rent on a one-bedroom apartment was more than my house payment. And I was planning on staying for 15 years at least. So buying worked out well for me.

At the time no one I knew had ever heard of house prices going down. That just never happens.

But it is definitely a local characteristic.

 

[haha]

Well that is my point, although if you bought before 2006 I am curious if you would have made out better buying Apple stock and just renting.

I did not get lucky in our house, probably worth 50k less than we paid 13 years ago.

In Seattle? That seems hard to explain. There was a pretty good run-up to maybe 2005-2007. Although the mortgage induced crash knocked that for loop, many areas have recovered, though not to the speculative highs right before the downturn started. If you have owned for 13 years, taking you back to 2001, I would have thought that you would have a reasonable profit. Is your particular area not participating in the recent job and population growth?

Ha

 

[Fermion]

In Seattle? That seems hard to explain. There was a pretty good run-up to maybe 2005-2007. Although the mortgage induced crash knocked that for loop, many areas have recovered, though not to the speculative highs right before the downturn started. If you have owned for 13 years, taking you back to 2001, I would have thought that you would have a reasonable profit. Is your particular area not participating in the recent job and population growth?

Ha

Well outside of the Seattle area (takes about 50 minutes to get to downtown from our house with no traffic). I guess that is why they say location location location.

It is ok though. Unlucky in house, lucky in stock market, everything balances.

 

[aja8888]

Yep, and we just bagged Toyota's U.S. headquarters.

Nice...and we bagged Exxon's:

A helicopter tour of the Woodlands and Exxon Mobil's new campus (Video) - Houston Business Journal

 

[urn2bfree]

Maybe renting is like putting your money in CDs. Safe and predictable. You will not get the big capital gains nor take any capital losses..

More like a bond than a CD. -you could be forced to move at the end of a lease, which is like a bond being called early. Or Rent can be increased, sort of like rising interest rates lowering your bond's value...

 

[foxfirev5]

In my opinion it's a lifestyle choice. To me there's no choice, even if owning is a little more expensive. I'm not even sure about that. When we paid off our mortgage our mortgage payment was much less than what rental rates were at the time. Even factoring in capital improvements and maintenance I can't find much difference. It only makes sense that the costs are there whether your a renter or owner. The only difference is that I can sell one my houses when I'm done with it. I can't say the same for the condo's I've rented over the years. Good investment or bad it's still cash in the end.

 

[marko]

I don't have any data, but I've always felt that the cost of owning a house goes up exponentially with the size.

A 3000 sq ft house doesn't cost twice as much to run as a 1500 sq ft house...more like 3X when you factor in heat, maintenance, landscaping, snowplowing, extra TVs, etc etc etc.

Secondly, I've never viewed my main residence as an 'investment'. I believe you end up making bad decisions as a result. A friend once wanted a swimming pool so badly...his wife insisted it would bring down the resale/property value so he never got a pool. He died unhappy but his 'investment' value stayed high.

 

[imoldernu]

On owning vs. renting... Two hypothetical cases covering mom and dad at age 80. In both cases, their expenses are $40,000/yr. They are living on Social Security, and a dwindling nest egg of $200,000.
They plan to withdraw $20,000/yr from capital savings to supplement their $20,00 in Social Security. This means they can live to age 90.

Dad has Dementia to the point that mom can't take care of him and he must be hospitalized. He will live on for three more years @ $100,000/yr nursing home costs.

Case #1... Mom and dad, are renting their home.
They will have to pay for dad's nursing home costs out of their savings, until they have spent the nest egg down to $50,000, at whcih point the state medicaid will pay for the nursing home care. When dad passes away, mom will have social security (for one person) and $50,000 in assets, to last her the rest of her life.

Case #2... Mom and dad own their home, valued at $150,000. The state will take all but $50,000 of their nest egg, before paying for the nursing home. The state will not take their home. This means that when dad passes away, mom's net worth will be the home... $150,000, plus the $50,000. A total of $200,000.

just sayin'

 

[foxfirev5]

On owning vs. renting... Two hypothetical cases covering mom and dad at age 80. In both cases, their expenses are $40,000/yr. They are living on Social Security, and a dwindling nest egg of $200,000.
They plan to withdraw $20,000/yr from capital savings to supplement their $20,00 in Social Security. This means they can live to age 90.

Dad has Dementia to the point that mom can't take care of him and he must be hospitalized. He will live on for three more years @ $100,000/yr nursing home costs.

Case #1... Mom and dad, are renting their home.
They will have to pay for dad's nursing home costs out of their savings, until they have spent the nest egg down to $50,000, at whcih point the state medicaid will pay for the nursing home care. When dad passes away, mom will have social security (for one person) and $50,000 in assets, to last her the rest of her life.

Case #2... Mom and dad own their home, valued at $150,000. The state will take all but $50,000 of their nest egg, before paying for the nursing home. The state will not take their home. This means that when dad passes away, mom's net worth will be the home... $150,000, plus the $50,000. A total of $200,000.

just sayin'

This is an excellent point that should not be overlooked. We are all concerned about long term planning and need to factor in the numerous advantages of an owned primary residence.

 

[Fermion]

What if dad had $150,000 in gold and silver coins in a safety deposit box?

 

[NW-Bound]

I hope dad remember where he hid the gold despite his Alzheimer, or left instructions behind for his offsprings ("X marks the spot").

See: California couple strikes gold after finding $10 million in rare coins - CNN.com.

 

[Mulligan]

I don't have any data, but I've always felt that the cost of owning a house goes up exponentially with the size.



A 3000 sq ft house doesn't cost twice as much to run as a 1500 sq ft house...more like 3X when you factor in heat, maintenance, landscaping, snowplowing, extra TVs, etc etc etc.



Secondly, I've never viewed my main residence as an 'investment'. I believe you end up making bad decisions as a result. A friend once wanted a swimming pool so badly...his wife insisted it would bring down the resale/property value so he never got a pool. He died unhappy but his 'investment' value stayed high.

I would have to agree based on Fermions post of $5,000 a year in maintenance. I have spent about 12k over 10 years and that includes a new roof a few months ago, outside a/c unit, and water heater last summer. Not much left to go wrong for several years... I hope.


Sent from my iPad using Tapatalk

 

[imoldernu]

What if dad had $150,000 in gold and silver coins in a safety deposit box?

...couple of points here:
Dad would have had to make the decision 5 years before he went into the nursing home. Have to understand the 5 year look back, and criminal liability.

The example was a $150,000 home... Depending on the state, that could have been more than an $800,000 exclusion.

Five years in the nursing home would have diminished your inheritance by $500,000.

somethin' to think about...

 

[Live Free]

Reflecting on this...

The example was a $150,000 home... Depending on the state, that could have been more than an $800,000 exclusion.

Five years in the nursing home would have diminished your inheritance by $500,000.

somethin' to think about...

That is something to think about. So, if it seems one of my parents may go into nursing care, one strategy to protect their assets for the other spouse, is for them to purchase a home prior to going into the nursing home of at least $500K value? Then when the parent in the nursing home passes, the surviving spouse could sell the house and live off that money? Can the state take the money upon the sale of the house to recover costs?

Just curious. My parents have LTC insurance that is pretty good (I think). They are both retired from the fed govt. Just wondering about this strategy in general.

 

[jollystomper]

Interesting thread. For our house Quicken has the following expenses for the last 15 years:

Property taxes..... 57,485
Insurance........... 15,568
Appliances.......... 10,049
Improvements..... 25,909 (things not required but we chose to do, e.g. finish basement)
Maintenance........ 14,888 (regular/preventative maintenance actions)
Repairs............... 12,279
Supplies.............. 12,853
-------------------------
149,031 (9,935/year, 828/month)

We are planning slightly higher ($900/month) for retirement. Add in our mortgage ($620/month), and the total is $1520/month for our housing.

 

[imoldernu]

That is something to think about. So, if it seems one of my parents may go into nursing care, one strategy to protect their assets for the other spouse, is for them to purchase a home prior to going into the nursing home of at least $500K value? Then when the parent in the nursing home passes, the surviving spouse could sell the house and live off that money? Can the state take the money upon the sale of the house to recover costs?

Just curious. My parents have LTC insurance that is pretty good (I think). They are both retired from the fed govt. Just wondering about this strategy in general.

A little too complicated to go through here, though we've had a older thread that posited different viewpoints. It's an arguable legal subject. In fact, up until now, most states have not elected to sue to recover medicaid costs. My personal experience, with stepfather's estate (he continued to live in the home when my mom went into a nursing home)... .(I was not an heir) there was no attempt at recovery, and my stepsister's family inherited the house when he died. The current value of that home is about $800K, though not at the time of his demise.
one site that has many more links on the subject:
Protecting Your House from Medicaid Estate Recovery | ElderLawAnswers

There is much written on this, and an hour of poking around the web could be worthwhile. Other than that, an eldercare lawyer.