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Old 11-17-2013, 11:09 AM   #101
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I view home ownership as saving money more that making money. A person can make money around here but it is nothing to get excited about. Many of you would enjoy reading this in the wall street journal How Houses Eat Money - WSJ.com
The article reinforces my point which is even if you break even on the out of pocket costs of ownership, you get to use the house rent free. This is a very good benefit. However, to be fair you should also impute the opportunity cost of purchasing a house ie if paying cash how much would you have earned on such cash. The analysis is complicated and dependent on life style. Obviously, by virtue of owning four homes, I have stated my lifestyle preference.
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Old 11-17-2013, 11:26 AM   #102
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This thread is astonishing. As renters for the last few years, our total annual cost for housing (rent, renter's insurance, electricity, water) has been less than what many of you are posting. I wish I could show this to all my peers who have been racing to buy homes because they "hate throwing away money on rent."

Tim
Be sure you are comparing apples to apples, especially wrt square footage.

Speaking of which, I recently saw a house not too far from me that was selling for $69K!! That sure got me to thinking about home ownership costs or lack of same. It was only 600 square feet, but often a single retiree doesn't need or want more than that. Assuming home ownership costs in my neighborhood are proportional to square footage, and then also taking our $75K homestead exemption from property taxes into account, it looks to me like the home ownership costs for that home (once paid off) would be just $204/month.

The house sold, killing that fantasy, but I filed that idea away in my mental "what to consider doing in an emergency" files.
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Old 11-17-2013, 11:45 AM   #103
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The idea of "breaking even," as some people describe it, seems suspect to me. People make it sound, like Jonathan Clements in that old WSJ article, that they could sell today and recoup everything they've ever spent on housing (principal, interest, tax, insurance, maintenance, upgrades, etc.) - like the house eventually paid for itself and all of its upkeep, and the owner lived there for free. I'm skeptical.

In Clements' example, he seems to forget that he's comparing the value of his home in nominal 2005 dollars to money he spent going back to 1992. In retrospect, we also see that he's talking about the value of his home at the peak of an unprecedented bubble.

W2R, you are absolutely right about the apples-to-apples comparison. This thread just reminds me that renting a smaller place can easily be cheaper in the long run than owning a larger place, even after the mortgage is paid-off.

Tim
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Old 11-17-2013, 11:50 AM   #104
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The idea of "breaking even," as some people describe it, seems suspect to me. People make it sound, like Jonathan Clements in that old WSJ article, that they could sell today and recoup everything they've ever spent on housing (principal, interest, tax, insurance, maintenance, upgrades, etc.) - like the house eventually paid for itself and all of its upkeep, and the owner lived there for free. I'm skeptical.



Tim
I think that is true in some houses but not a large percentage. Even if some people get lucky and break even there is still the missed opportunity cost of the money. Like this year the stock market is up 28% it takes some houses a very long time to go up 28%
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Old 11-17-2013, 12:53 PM   #105
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Same as anything else, a person can spend more or less for housing just like he chooses between a Kia and a BMW when he can afford either. It's just not realistic to expect the lived-in home to be an investment the same way as stocks and bonds.

Of course when one's timing is right he can make good money on RE, but over the long run I tend to look at RE as consumption items. You have to pay to live somewhere. It's still a heck of a lot better than a brand-new motorhome. The depreciation on RVs makes me cringe, but then I am a cheapskate.
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Old 11-17-2013, 01:04 PM   #106
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I think that is true in some houses but not a large percentage. Even if some people get lucky and break even there is still the missed opportunity cost of the money. Like this year the stock market is up 28% it takes some houses a very long time to go up 28%
Geography/regional real estate comes into play also. I think I am on the long trek to breaking even, but that is still good in relation to renting. My mortgage including all escrows is $700 a month and renting same type of property would be $1000. I have been slammed with a water heater, outside a/c unit, and roof this past year which totals about $8500. But that has been it the past 10 years. I don't have lost monetary opportunity cost, because renting is more expensive. Amortizing the extra costs over the past 10 years still puts me under renting, while building equity. But that said owning will never be a financial coup for me in anyway.
Another factor for many people is if they didn't own a home the money would be spent some other way and not invested. So at least they may be able to get some reverse mortgage money out of it when retired.
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Old 11-17-2013, 03:27 PM   #107
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Welcome to America. :-) I wonder why don't we just adapt Japanese or Europe's life style where housing are much smaller and doesn't really "eating" them alive.
More small Canadian houses.......including one over a century old.

Toronto's Smallest House
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Old 11-17-2013, 04:19 PM   #108
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16600 per year. Monthly costs as follows. 2000 sqft, $300,000 home in midwest

Natural gas53Water and Sewer56Electric100Home maintenance325Insurance - Auto and Home100Phone/Cable/Cell/Internet200Property taxes/Rent550
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Old 11-17-2013, 06:26 PM   #109
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After looking at all these number, it's astonishing as someone said. My wife and I are thinking about renting or even down size to a 2 bedroom apartment when we call it quit.

It's just doesn't make sense because home maintenance is a money pit PERIOD!. No wonder Lowes and HomeDepot are big sponsor for many major sport event and there are dozens of TV shows constantly telling you to remodel your home.

enuff
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Old 11-18-2013, 07:23 AM   #110
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After looking at all these number, it's astonishing as someone said. My wife and I are thinking about renting or even down size to a 2 bedroom apartment when we call it quit.

It's just doesn't make sense because home maintenance is a money pit PERIOD!. No wonder Lowes and HomeDepot are big sponsor for many major sport event and there are dozens of TV shows constantly telling you to remodel your home.

enuff

SSSHHHHH! I have stock in Lowes. Remodel, remodel!!
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Old 11-18-2013, 08:42 AM   #111
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Break even with what?
Get my money back? Granted, I had to live somewhere, but no windfall profit on this house...
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Old 11-18-2013, 10:15 AM   #112
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In my area, for me, according to my records it has been much cheaper to own my home than to rent a lesser apartment and invest at my AA. (This may differ in different locations and situations so I only speak to my own case.)

On the other hand, renting allows a lot more flexibility when thinking of moving and requires less work and repairs.

There are pros and cons to both renting and buying. If there weren't, it seems to me that pretty much everybody would rent or else pretty much everybody would buy.
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Old 11-18-2013, 11:07 AM   #113
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After looking at all these number, it's astonishing as someone said. My wife and I are thinking about renting or even down size to a 2 bedroom apartment when we call it quit.

It's just doesn't make sense because home maintenance is a money pit PERIOD!. No wonder Lowes and HomeDepot are big sponsor for many major sport event and there are dozens of TV shows constantly telling you to remodel your home.

enuff

I have calculated we will save $37K a year moving to a townhouse 6 minutes away.

The mortgage, insurance, repairs, and utilities will all be lower. Then we have indirect savings added to that. By having lower expenses, we can reduce our business / 401K drawdowns, which keep our MAGI low. This results paying zero income taxes, qualifying for financial aid for 2 kids, and getting close to the max in ACA subsidies.

We knew a guy from one of our hobby clubs who lived in one of the town home development we have looked at. DH used to refer to him as the rich guy because he retired early and traveled all over. At the time I said I didn't think he was rich because he lived in a townhouse in a nice but not affluent area.

I get now that he and his wife had low housing expenses, which helped free up money for travel and ER.
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Old 11-19-2013, 07:43 AM   #114
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4,250 sq. ft. Florida house:
Taxes - $6,700
Assn. Fees - $3,600
Insurance - $2,400
Landscaping - $7,500
Pool - $2,500
Household Cleaning - $3,500
Utilities - $7,000
Repairs, etc. - $8,000
Total - $41,200
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Old 11-19-2013, 08:16 AM   #115
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4,250 sq. ft. Florida house:
Taxes - $6,700
Assn. Fees - $3,600
Insurance - $2,400
Landscaping - $7,500
Pool - $2,500
Household Cleaning - $3,500
Utilities - $7,000
Repairs, etc. - $8,000
Total - $41,200
Wow. I mean, wow.
That is more than my total personal spending for 2013.
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Old 11-19-2013, 08:29 AM   #116
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Wow. I mean, wow.
That is more than my total personal spending for 2013.
We love our big house but it can be expensive. This year we blew the repair budget out of the water by spending $19,000 just to completely resurface the pool and the surrounding pool deck. We have only been in the house for two years, so some expenses represent getting the house to where we want it. Some maintenance items had been neglected by the previous owner. The above figures represent an average per year.

We used to spend our money on motorcycles and cruises. Now we just stay at home and enjoy being there...
Bruce
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Old 11-19-2013, 08:46 AM   #117
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California homeowner -

HOA Dues: $1788
Property Taxes: $4785
HO Insurance: $681
Earthquake Insurance: $1466
Water/Trash/Gas/Electric: $2150
Internet: $460
Gardening Service: $720
Termite Tenting (surprise!): $2000
Tree trimming: $250
Pest control service: $320
TOTAL: $14,620/12 = $1,218 per month

(No cable, no landline)
Curious about the termite tenting - how many sq ft is the house ? one story or two ?
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Old 11-19-2013, 08:46 AM   #118
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We love our big house but it can be expensive. This year we blew the repair budget out of the water by spending $19,000 just to completely resurface the pool and the surrounding pool deck. We have only been in the house for two years, so some expenses represent getting the house to where we want it. Some maintenance items had been neglected by the previous owner. The above figures represent an average per year. We used to spend our money on motorcycles and cruises. Now we just stay at home and enjoy being there... Bruce
If a person enjoys being a "homebody", then there should be nothing more enjoyable than spending your money on your home and it's surroundings. As I find myself becoming more of that myself, I have started to spend some more of it in that manner also.
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Old 11-19-2013, 11:40 AM   #119
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We love our big house but it can be expensive. This year we blew the repair budget out of the water by spending $19,000 just to completely resurface the pool and the surrounding pool deck. ...
Bruce
Last year we had our pool resurfaced and remodeled . The estimates were all over the place from $25,000 to $ 19,000. We found a small company that did it for $4,500 and they did an excellent job. My SO got the name from a company that repairs fiberglass boats .
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Old 11-19-2013, 12:06 PM   #120
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If a person enjoys being a "homebody", then there should be nothing more enjoyable than spending your money on your home and it's surroundings. As I find myself becoming more of that myself, I have started to spend some more of it in that manner also.
+1

I have been thinking this way lately, too. I'm not sure, but next year might end up being awfully expensive!
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