Spending $ now to eliminate recurring costs?

[tb001]

Curious how others think about spending on home to eliminate ongoing costs.

We're exploring adding a well to eliminate ongoing water cost. Part of the complexity is that we won't necessarily know the final cost until we're mid-project, so we need to plan for worst case.

If you look at annual savings vs return on a 60/40 portfolio, the payback period is longer than I would have expected (8-15 yrs, depending on depth needed).

If instead, you look at $ necessary in portfolio to generate the annual spend at 3-4% w/d rate, it's a no brainer and helps significantly with our annual spend.

We expect to be in the home for at least another 15yrs. As of now, DH would prefer to stay here forever, but we'll see if he still feels that way after kids are out of the house...

 

[Finance Dave]

I usually look at a TVM calculation to figure out the pure financial aspect of these things. Of course if you don't know the final cost, then perhaps a Monte Carlo version of the analysis.

But realize there is usually more to decisions like this than pure $$. Convenience and quality of life are other factors you must weigh.

One example I can give is gutter guards to keep leaves out...although there is no pure financial benefit to us, it sure keeps me off the ladder every year and gives me an extra half a day annually to do something more fun.

 

[jazz4cash]

Wow. How much do you spend for water? Pool? Sprinklers? I’ve never heard of anyone choosing well water unless they use huge volume of water.

I struggle and procrastinate to install sub meter so we don’t pay excess sewer charge but we don’t have a pool or sprinklers. I’ve never calculated the payback. I think upfront cost might be $1000 and payback maybe 10 yrs. I’ll get right on that.

 

[tb001]

Wow. How much do you spend for water? Pool? Sprinklers? I’ve never heard of anyone choosing well water unless they use huge volume of water.

I struggle and procrastinate to install sub meter so we don’t pay excess sewer charge but we don’t have a pool or sprinklers. I’ve never calculated the payback. I think upfront cost might be $1000 and payback maybe 10 yrs. I’ll get right on that.

Yes, a high water cost area, combined with sprinklers and a pool... We had a sprinkler leak this month that made things exceptionally painful, which was what started us down the process.

 

[Aerides]

In my neighborhood in S. Fla, at least 30% of the homes are on a well. I can tell because they leave rust stains on the sidewalk and then bitch and moan whenever the HOA sends out notices to clean up.

I have a pavered driveway and patio, so no way I want rust stains to deal with.

But it can mean the difference of about $100 a month on a water bill. And yes sprinklers are needed to have a lawn here, even used sparingly in the wetter months. June was very dry and hot and our city-water bill topped $200, but that's a rare high for us.

 

[tb001]

I usually look at a TVM calculation to figure out the pure financial aspect of these things. Of course if you don't know the final cost, then perhaps a Monte Carlo version of the analysis.

But realize there is usually more to decisions like this than pure $$. Convenience and quality of life are other factors you must weigh.

One example I can give is gutter guards to keep leaves out...although there is no pure financial benefit to us, it sure keeps me off the ladder every year and gives me an extra half a day annually to do something more fun.

Yes, the TVM calculation gives us that 8-15 yr payback, depending on depth. At 15 yrs, it's harder to justify, but then when I run our expenses using the lower costs, it cuts the $ amount needed to RE, largely because I'm assuming we stay here and other expenses stay high as well.

 

[pb4uski]

Curious how others think about spending on home to eliminate ongoing costs.

We're exploring adding a well to eliminate ongoing water cost. Part of the complexity is that we won't necessarily know the final cost until we're mid-project, so we need to plan for worst case.

If you look at annual savings vs return on a 60/40 portfolio, the payback period is longer than I would have expected (8-15 yrs, depending on depth needed).

If instead, you look at $ necessary in portfolio to generate the annual spend at 3-4% w/d rate, it's a no brainer and helps significantly with our annual spend.

We expect to be in the home for at least another 15yrs. As of now, DH would prefer to stay here forever, but we'll see if he still feels that way after kids are out of the house...

I assume that the 8-15 year payback is without interest and that with interest it would be quite a bit longer. IOW, if you take the present value of the annual savings discounted at your expected portfolio rate of return, how many years of savings do you need to break even?

For example, if the payback is 12 years ignoring interest (12 years of water bill savings = initial investment) then the payback with a 4% real rate of return is over 16 1/2 years [NPER(4%,8.33,-100) = 16.68].

Also, will this improvement add any value to your home if you sell in 15 years or so?

 

[tb001]

I assume that the 8-15 year payback is without interest and that with interest it would be quite a bit longer. IOW, if you take the present value of the annual savings discounted at your expected portfolio rate of return, how many years of savings do you need to break even?

For example, if the payback is 12 years ignoring interest (12 years of water bill savings = initial investment) then the payback with a 4% real rate of return is over 16 1/2 years [NPER(4%,8.33,-100) = 16.68].

Also, will this improvement add any value to your home if you sell in 15 years or so?

I've calculated the payback assuming 5.9% rate of portfolio return vs 4.5% inflation on water bill. This is how I get to the 8-15yr estimates. I think this is what you're asking?


Good question on adding to value of home. Theoretically, yes, the well should increase the value of our home, but in practice I'm not sure how much people pay attention to this. Hard to say...

 

[Golden sunsets]

In our area(northeast), being on a well would decrease property value. Public water is much more desireable-no concern about water quality, no potential for well to run dry, no potential for costly repairs, no hard water issues, etc.

 

[pb4uski]

I've calculated the payback assuming 5.9% rate of portfolio return vs 4.5% inflation on water bill. This is how I get to the 8-15yr estimates. I think this is what you're asking?....

Yes. Is 4.5% inflation for your water bill realistic? I don't get a water bill with any of my properties so I have no idea, but 4.5% sounds high off-the-cuff to the uninformed (me that is).

 

[SnowballCamper]

You might get lucky and have an easy install, end up with a relatively shallow well, no water quality issues, and the equipment could work just fine for the first ten years. I'm happy to let the water utility handle all that risk and just pay month to month. If you really want to eliminate some expenses, adjust your landscaping so that it doesn't need irrigation. Also, I've found that my monthly trash bill exceeds the minimum trip to the dump (300lbs.). So maybe give up trash service too

 

[kimcdougc]

We cute the home phone. Of course, there is already another thread on that.

 

[tb001]

Yes. Is 4.5% inflation for your water bill realistic? I don't get a water bill with any of my properties so I have no idea, but 4.5% sounds high off-the-cuff to the uninformed (me that is).

It feels high, but we live in SoCA, so water's not going to get cheaper... It was actually a touch above this last year.

Re decreasing water use, unfortunately there's only so much you can do with grass and until our HOA starts allowing more drought tolerant alternatives, we're a bit stuck. This would be an irrigation only well, so still hooked up to city sewer for house water, etc...

We converted our bedding to drip in our old house and put in plants that were drought tolerant. We cut our water usage by about 30%, but so did half the area, which meant when the drought surcharge was removed they had to raise the water rates significantly to offset the decreased usage.

Appreciate the viewpoints. It's a big check to write and we're torn on the best course of action!

 

[tb001]

We cute the home phone. Of course, there is already another thread on that.

Ah yes, we're exploring lots of other cost cutting measures that don't necessarily impact our lifestyle. We need a home phone for our security system, and DH was living at the heart of 9/11, so wants to keep a landline, but we're looking into alternative cell networks for sure. Cost cutting opportunities there seem significant!

 

[freedomatlast]

Won't you get a bill from the water company anyway (some sort of service charge) even if you use 0 gallons?

And in many municipalities that supply public water, your sewer bill is based on the amount of public water you use. Might be interesting to see how your sewer bill will be calculated if you use well water.

 

[zinger1457]

Surprised that SCal would even allow you to drill a well unless it was absolutely needed. It's getting more difficult in areas of Arizona, the aquifer levels are dropping, can no longer support people just going in and pumping out as much water as they want. They've even talked about putting meters on wells, not sure if that went anywhere. At least when paying for quantity used there is some built in control.

 

[tb001]

Won't you get a bill from the water company anyway (some sort of service charge) even if you use 0 gallons?

And in many municipalities that supply public water, your sewer bill is based on the amount of public water you use. Might be interesting to see how your sewer bill will be calculated if you use well water.

Yes, I’m assuming a basic level of spend to supply house water and sewer/water connectivity. This is purely savings from irrigation/sprinklers.

Zinger, I’m surprised too. About half our neighborhood has a well and we’re in a rural area so have fewer restrictions. We looked into it in our last CA neighborhood and it wasn’t doable because of the regulatory hoops.

 

[pb4uski]

Actually, that reminds me.. our condo association in Florida uses well water for irrigation.... less expensive than using county water... but it also has an obnoxious sulphur odor.... I have to close the lanai glass doors when the irrigation system is operating to keep the smell out of the condo.

 

[mountainsoft]

We're exploring adding a well to eliminate ongoing water cost.

Well water certainly isn't free. It can take thousands of dollars to have a well drilled and have the pump, pressure tank, and associated plumbing/electrical installed. Unless you have completely pristine water you'll need a water filter and possibly an expensive water softener. Either will require ongoing maintenance. Also, the well pump will increase your electrical bill, perhaps significantly.

There are also environmental rules for most wells. You have to be certain distances from sewers, buildings, etc. and you may have to pay to have your water tested periodically. Have you checked with your county or state to see if they would even allow you to drill a well in an area served by a public water system?

Many areas combine water and sewer as a single bill. You may end up paying a water bill even if you don't use any water.

 

[frank]

a lot of people around here have shared wells. I own my own well and have sold water to other people. At one time three people were using water from my well and I charged them a small monthly amount to pay for electricity and we shared the cost of any repairs.

 

[joeea]

We're exploring adding a well to eliminate ongoing water cost. Part of the complexity is that we won't necessarily know the final cost until we're mid-project, so we need to plan for worst case.

You won't know the final cost until many years down the road.

Wells require ongoing maintenance. That costs money. You need to compare all of the costs of owning a well to the cost of your normal water supply.

Are you in a locale that has particularly high water costs?

 

[tb001]

Well water certainly isn't free. It can take thousands of dollars to have a well drilled and have the pump, pressure tank, and associated plumbing/electrical installed. Unless you have completely pristine water you'll need a water filter and possibly an expensive water softener. Either will require ongoing maintenance. Also, the well pump will increase your electrical bill, perhaps significantly.

There are also environmental rules for most wells. You have to be certain distances from sewers, buildings, etc. and you may have to pay to have your water tested periodically. Have you checked with your county or state to see if they would even allow you to drill a well in an area served by a public water system?

Many areas combine water and sewer as a single bill. You may end up paying a water bill even if you don't use any water.

Yes, of course it isn’t free. We’ve gotten two estimates and by all accounts no issues with putting in a well. But it is expensive and a wide range of potential costs, depending on the depth they drill, hence the thread!

I’m not assuming we eliminate our entire water bill, as we intend to still use city water/sewer for our home. I believe this means we won’t need any softening system, though we may need a filtration system. As I understand it, in our area that’s unusual.

Re electrical, we have solar panels that are over generating, so at least for now it’s not an added cost.

 

[tb001]

You won't know the final cost until many years down the road.

Wells require ongoing maintenance. That costs money. You need to compare all of the costs of owning a well to the cost of your normal water supply.

Are you in a locale that has particularly high water costs?

Yes, in my calculations I’ve included budgeting for pump replacement every 8 yrs as well as misc repairs. And yes, water is expensive in our area.

 

[tb001]

a lot of people around here have shared wells. I own my own well and have sold water to other people. At one time three people were using water from my well and I charged them a small monthly amount to pay for electricity and we shared the cost of any repairs.

That’s an interesting idea. I don’t think our immediate neighbor has one, but worth looking around or even seeing if they would be interested in sharing costs. There is a well about 100ft away from our property, but it’s unfortunately owned by a business.

 

[Winemaker]

I've thought about drilling a well for lawn and garden irrigation, but also as a heat source for a geothermal system under the driveway. I've not researched it yet, but just day dreaming inthe past.