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Spending $ now to eliminate recurring costs?
Old 09-09-2019, 11:14 AM   #1
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Spending $ now to eliminate recurring costs?

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...
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Old 09-09-2019, 11:20 AM   #2
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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.
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Old 09-09-2019, 11:24 AM   #3
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Wow. How much do you spend for water? Pool? Sprinklers? Iíve never heard of anyone choosing well water unless they use huge volume of water.

I struggle and procrastinate to install sub meter so we donít pay excess sewer charge but we donít have a pool or sprinklers. Iíve never calculated the payback. I think upfront cost might be $1000 and payback maybe 10 yrs. Iíll get right on that.
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Old 09-09-2019, 11:42 AM   #4
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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.
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Old 09-09-2019, 11:44 AM   #5
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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.
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Old 09-09-2019, 11:46 AM   #6
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Originally Posted by Finance Dave View Post
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.
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Old 09-09-2019, 12:41 PM   #7
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Originally Posted by tb001 View Post
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?
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Old 09-09-2019, 01:13 PM   #8
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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...
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Old 09-09-2019, 02:20 PM   #9
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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.
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Old 09-09-2019, 02:40 PM   #10
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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).
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Old 09-09-2019, 03:32 PM   #11
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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
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Old 09-09-2019, 03:41 PM   #12
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We cute the home phone. Of course, there is already another thread on that.
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Old 09-09-2019, 05:26 PM   #13
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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!
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Old 09-09-2019, 05:28 PM   #14
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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!
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Old 09-09-2019, 06:04 PM   #15
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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.
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Old 09-09-2019, 06:26 PM   #16
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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.
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Old 09-09-2019, 06:44 PM   #17
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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, Iím assuming a basic level of spend to supply house water and sewer/water connectivity. This is purely savings from irrigation/sprinklers.

Zinger, Iím surprised too. About half our neighborhood has a well and weíre in a rural area so have fewer restrictions. We looked into it in our last CA neighborhood and it wasnít doable because of the regulatory hoops.
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Old 09-09-2019, 08:28 PM   #18
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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.
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Old 09-09-2019, 10:26 PM   #19
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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.
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Old 09-10-2019, 05:18 AM   #20
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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.
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