How much does your home cost???

[Texas Proud]

This is a curiosity question... I have read a few of you talk about your homes etc.. and someone was talking about living in NY cheaply.. but I do not think that a small apartment is the same as a nice house.. just me...

SO, I thought... how much per day are you spending to live in your house This would include the opportunity cost of the equity in your house at say 5%.... so, I put all my expenses... electric, gas, phone, water, insurance, TAXES, average repairs per year along with the opportunity cost and house payment... all expenses...

My cost per DAY is $48.03...

My cost per sq. ft. per day is 2.134 cents...

So, who is cheaper... or who is spending the most!!

 

[justin]

$31.45 per day for an 1807 sf house
$0.017 per sf per day

 

[wabmester]

This would include the opportunity cost of the equity in your house at say 5%....

I just calculated this part, and I got depressed, so I don't want to play.

You guys should include owner's equivalent rent if you want a picture of the true cost. Basically, you're giving up rental income by living in that house (and you'd need to pay rent if you didn't own the house).

 

[eridanus]

$48.66/day
$.048/day/square foot

 

[donheff]

I just calculated this part, and I got depressed, so I don't want to play.

Me too. I think I will start thinking about it in terms of the $135K we paid 25 years ago.

 

[justin]

if I rented what I live in at $1200/month assumed market rate plus most utilities:

$44.75 per day
$0.025 per sf per day

I also wanted to mention that my earlier calculations excluded the portion of my mortgage payment that pays down principal. (I know, here goes the debate as to what you include in "cost" of owning a home... ).

 

[brewer12345]

47.95 a day. .025 per sf per day.

But I know that my monthly cost (including mortgage interest but not principal) is less than it would cost me to rent the equivalent, here in the land of high rents.

 

[SteveR]

With the year to year increase in my equity of over 20% I don't think the calculation of 5% cost of keeping equity out of the market is a relevant item unless you balance it against the gain in equity since you purchased the house.  In my case the % gain in 3.5 years is 35%.  Which far out earns a market rate of 5% per year as proposed.

If I include the opp. cost of my equity per year minus the gain in equity per year I get the following:

Cost per sq. ft. is a minus $4.03
Cost per day is a minus    $66.30

So, with this calculation I am making money living there.  

 

[Sam]

SO, I thought... how much per day are you spending to live in your house This would include the opportunity cost of the equity in your house at say 5%....  so, I put all my expenses... electric, gas, phone, water, insurance, TAXES, average repairs per year along with the opportunity cost and house payment... all expenses...

Using your suggested formula I come up with:

$61/day
2.5c/day/sqft

But I don't know why you want to include utilities (elec, gas, phone, water) into the equation.  Those are dependent on the tenants, not on the house.

 

[HFWR]

Around $50/day?

Including two extra mortgage payments/yr, and not including the tax break.

 

[farmerEd]

Yikes!, at 5%, and only including property taxes, insurance and minor maintenance costs its costing me $249.31/day to live here!

The good news is however, that every four years that cost drops down to $248.63 per day...
for leap year...

If I use my cost basis instead of current value, then its only costing me $97/day...all not including electric, heat, etc..

 

[WanderALot]

Yikes is right! Due to SoCal's inflated market, 5% of the house that we have owned since 1999 is a TON! Additionally, this calculation penalizes people who have a 15 year loan. If I rationalize taking out the 5% equity cost since it would cost about that much to rent a house then our numbers are around:

$67/day including P&I (mostly P now) + taxes + utilities + minor maintenance
0.05/day/sf (1300 sq SFR)

Our taxes are only 3k a year so that helps a bit, but it still seems quite high.

 

[Texas Proud]

OK... here is the reasoning for some of this...

I used 5% since it is a MM rate... I did not want to get involved with who could make more money investing in whatever..

You can not put in GAIN... your house has a value today... yes, for some it will go up a lot or has gone up a lot, for others (like me) not much at all..  

I agree, you can exclude the P part of your monthly payment...

I think that the cost for the coasts will be pretty high..  especially NY and SF..

 

[sgeeeee]

Okay. By your rules . . .

$52 per day
$0.022 per sq ft per day

But don't you need a more complex formula that considers acreage?

 

[SteveR]

Ok, using your requested formula of:

5% of the equity put in the house at the time of purchase. This excludes any appreciation since the original purchase. The 5% is for only a one year time peridod.

Add in annual utilities---gas, electric, phone, sewer, water

Add in annual premium for home owners insurance and any additional Umbrella policies.

Add in annual mortgage interest payments.

My result is:

$111.78/day
$6.80 per sq. ft.
$0.018 per sq. ft. per day


I have a lot of initial equity since I put down almost 50% when I bought the house. This inflates my daily cost due to higher "opportunity costs" on the large amount of equity in the house.

The above assumes it is day one after the purchase of the home. There is no additional equity added in due to mortgage payments and no consideration of appreciation or depreciation on the value of the home. The number has very little real value several years after the initial purchase or when a home is paid off.

 

[Texas Proud]

5% of the equity put in the house at the time of purchase.  This excludes any appreciation since the original purchase.  The 5% is for only a one year time peridod.

The above assumes it is day one after the purchase of the home.  There is no additional equity added in due to mortgage payments and no consideration of appreciation or depreciation on the value of the home.  The number has very little real value several years after the initial purchase or when a home is paid off. 

Thanks... but I do not remember saying not to include appreciation in your value of your house... if that is what came across I am sorry...

What I was trying to say is you can not use the appreciation on the house in the last year to have a negative expense.. you should use your current equity as the basis for opportunity costs.

 

[cute fuzzy bunny]

Dinging the coasters for high costs without measuring back in the high annual gains does make for a bit of a lopsided equation.

My numbers are high, but i'm making $50k+ a year in appreciation.

 

[Texas Proud]

Dinging the coasters for high costs without measuring back in the high annual gains does make for a bit of a lopsided equation.

My numbers are high, but i'm making $50k+ a year in appreciation.

For how many years have you made this?? And how many more??

And yes, the coasters will be a lot higher... but then again, they are high cost areas, are they not And are you not giving up opportunity cost to live on the coast? It is a real cost.

 

[cute fuzzy bunny]

Years: 12.

How many more: Dont know.

What is your definition of "opportunity cost"? Not having the money invested in something else? Cant see anything else thats given me the same return, and since I use the home as my 'ballast' instead of bonds, my nearly all equity portfolio is doing far better than if I used that 'opportunity' money in stock/bond investments, which would force me to take on more bonds/cash to maintain balance...at a far lower return than what I'm getting.

This is so wildly different based on person, type of housing, region, quality and quantity of home, land, local features, etc.

Nice exercise, and interesting to consider as such...but...

 

[farmerEd]

If I compare my property, to others sold recently or currently on the market, my property has appreciated $150-$200K per year for 6 years...no way I expect that to continue.

 

[kcowan]

Years: 12.

How many more: Dont know.

What is your definition of "opportunity cost"?  Not having the money invested in something else?  Cant see anything else thats given me the same return, and since I use the home as my 'ballast' instead of bonds, my nearly all equity portfolio is doing far better than if I used that 'opportunity' money in stock/bond investments, which would force me to take on more bonds/cash to maintain balance...at a far lower return than what I'm getting....

I do not know why you consider a real estate holding to be in the same class as bonds. It is not liquid. It does not return any revenue (although it offsets a cost). And there are maintenance costs that you would avoid if you rented.

 

[cute fuzzy bunny]

Hmmm...well, lets see. Perhaps its easier if I frame it this way: if I had a mortgage, I would in effect be taking a negative bond from the bank and paying the bank a dividend.

My property is exceeding the growth of my personal rate of inflation. The value is unlikely to drop as fast and as far as equities. Not having a mortgage means I have a very limited monthly spending budget. Owning the home outright means I'm "making" (or spend avoiding?) whatever the average mortgage rate is, which is more than many bonds are paying right now.

And its completely liquid. Within a week or less I can have a HELOC or mortgage on it and get a lump sum up to 100% of its value. It can turn a revenue stream by renting a room or renting the entire thing.

So yes, its quite liquid, while its not returning a positive revenue stream I am avoiding a number of costs, which reduces my withdrawal and my tax load. I compare it to a bond because by owning the home outright, and not paying rent or a mortgage, my monthly spending is low enough that I can consider increasing the percentage of my equity holdings without much fear of volatility.

But there is maintenance. Newer house, low maintenance materials and I do my own work, so its pretty limited.

Rent is fine for some people. However I've 'made' half my net worth on three pieces of real estate over the last 12 years. Had I been renting, I'd be out about 175k in rent over the same time period with nothing to show for it.

 

[Texas Proud]

Interesting... CFB..

I agree with what you say on the house.. but have never put it in my 'portfilio' as an investment... and also had left out a small trust fund since my Mom has first right to use if she needs the money..

But, if I put both of these in as 'bonds'.. my bond/equity ratio goes from 11%/89% to 27%/72%!!! Big difference...

And... I have a HELOC with zero balance.. but they gave me a checkbook, so I can get at the money today if needed..

 

[SteveR]

...And...  I have a HELOC with zero balance.. but they gave me a checkbook, so I can get at the money today if needed..

Seems to me that a HELOC is sort of like a liquid asset. You can borrow the cash against the equity in your home and buy what you want with it. You can only pay back the interest so it is an interest only loan using the house equity as collateral. But, if you were renting you could not do that so the HELOC is liquidification of your equity without selling the house.

 

[cute fuzzy bunny]

Interesting... CFB..

I agree with what you say on the house.. but have never put it in my 'portfilio' as an investment... and also had left out a small trust fund since my Mom has first right to use if she needs the money..

But, if I put both of these in as 'bonds'.. my bond/equity ratio goes from 11%/89% to 27%/72%!!! Big difference...

And... I have a HELOC with zero balance.. but they gave me a checkbook, so I can get at the money today if needed..

Yeah, we 'talked' about this in one of the other threads.

If I had a mortgage or was renting, my annual withdrawal would go up by $20-25k minimum per year, which means I have to pull more money out of the investment pile which means I have to be more cautious about volatility in my regular investment holdings. And would vault me into a much higher tax bracket.

Without that, my monthly bills are less than half that, can be satisfied with just the dividends thrown off the investments and volatility isnt really that interesting anymore.

Or I could hold a mortgage, invest the proceeds, probably eke out a few percent benefit over a very long period of time, need to hold a larger percentage of bonds to hold down my volatility, take a higher withdrawal, pay more taxes, and probably worry more.

Seems like you're creating a problem and then trying various means to solve it, all for a small potential financial benefit.

By dropping my bond holdings, I may end up getting that financial benefit anyhow, and then some.

And yeah, I can always write a check against the equity. You can bet that if stocks drop 50, 70, 80% like the doomsayers predict that I'll cash out a quarter mil of my home equity and be buying like a madman...