Your housing cost in retirement

[Danmar]

1100 SqFT "apartment" - Don't know how to figure opportunity costs directly, so I would estimate it this way:

Paradise Rent: $2600/mo (We own, but our bldg. is right in this rent range.)
Prairie apt. Rent: $ 600/mo
HOA dues: $ 600/mo (with hot/cold water/trash/cable/Bldg. insurance
RE Taxes: $ 100/mo
Elec: $ 80/mo
Personal INs. $ 15/mo
INternet $ 60/mo
Phone(s) $ 60/mo

Total/mo $ 4115 (Round it to $4000/mo)

I know this isn't a contest, but I'm guessing that's close to a record among our players on this thread. The good news: We could move to the Prairie and it would be $750/mo. (incl. phone/internet/cable, with all utilities). So why paradise? Come on over and see. Of course, YMMV as my mom hated it.

I assure you that isn't even close to a record. Also agree it isn't a contest.

 

[Running_Man]

It would be more interesting for me if the opportunity cost of the housing was included in the numbers reported here. For example, using 4% with $500K of equity would add $20K to the annual housing cost.

Just want to see how outrageous my $27K/year of rent is compared to others.

I do not believe opportunity cost is a factor, the value of the housing is invested in an asset class - Real Estate which is actually one of the better performing asset classes out there right now. There are also other values in owning a home for legal reasons on asset protection purposes.

My Costs:
Property Taxes $1,800 yr
Insurance 900 yr
Utilities 2,700 yr
Internet/TV 960 yr
H2o 1,200 yr
Trash 240 yr

Total $7,800 $650/mo

OP did not include Maintenance so neither did I, I budget $4,000 annually for all maintenance and deduct any of those funds that are remaining from maintenance not yet incurred in my portfolio from the short term cash investments. That would put the total with maintenance at $983/mo

 

[youbet]

I do not believe opportunity cost is a factor, the value of the housing is invested in an asset class - Real Estate which is actually one of the better performing asset classes out there right now. There are also other values in owning a home for legal reasons on asset protection purposes.

That's all well and good until I need to liquidate several hundred kilobux of my portfolio to pay for the house........

When folks say "why rent when you can buy a house or condo and just pay RE taxes and maintenance" and they never talk about how the cost of the house or condo gets covered, I wonder what they're thinking..... I guess if opportunity cost is not a factor, no one should ever rent.

There are lots of good, valid reasons for owning a home and I'm a long time home owner. But there is an opportunity cost. It might be large. It might be small. It might even be negative (a gain). But there is an opportunity cost.

 

[NW-Bound]

There are lots of good, valid reasons for owning a home and I'm a long time home owner. But there is an opportunity cost. It might be large. It might be small. It might even be negative (a gain). But there is an opportunity cost.

Yes.

Since I bought the 2nd home in 2005, the S&P index has doubled if one includes dividends. Does the home double in value? Heck, if I were to sell it now, I would be taking a loss of perhaps 20%.

Still no regrets though.

 

[Running_Man]

Yes.

Since I bought the 2nd home in 2005, the S&P index has doubled if one includes dividends. Does the home double in value? Heck, if I were to sell it now, I would be taking a loss of perhaps 20%.

Still no regrets though.

But what if it were reversed and as in the 1970's with housing prices soaring and the stock market falling, does that then mean there is not an opportunity cost? the median house was worth $17,000 at the start of the 70's and $47,200 by the end of the 1970's. Total real return for the S&P500 was -1.4%. Using logic of markets investing in stocks instead of housing in the 70's resulted in opportunity costs.

therefore to me, these are strictly portfolio investment decisions, they are investments in real assets, the fact they are viewed by their owners with a sense of pride does not make them less of an investment.

https://www.census.gov/hhes/www/housing/census/historic/values.html

S&P 500: Total and Inflation-Adjusted Historical Returns

 

[youbet]

But what if it were reversed and as in the 1970's with housing prices soaring and the stock market falling, does that then mean there is not an opportunity cost? the median house was worth $17,000 at the start of the 70's and $47,200 by the end of the 1970's. Total real return for the S&P500 was -1.4%. Using logic of markets investing in stocks instead of housing in the 70's resulted in opportunity costs.

therefore to me, these are strictly portfolio investment decisions, they are investments in real assets, the fact they are viewed by their owners with a sense of pride does not make them less of an investment.

https://www.census.gov/hhes/www/housing/census/historic/values.html

S&P 500: Total and Inflation-Adjusted Historical Returns

Because a house is an investment, it has an opportuniyt cost.

 

[NW-Bound]

I read somewhere that in the long run house prices only keep up with inflation, hot markets excepted. So, houses are not great investments.

I did not expect to make money from my homes, and if I get out what I put into them, it is fair. The operating expenses such as maintenance, utilities, tax, and insurance are the costs to use and enjoy them, hence sunk costs. Houses are still better than other personal properties because they generally hold their value, compared to cars, boats, RVs, and airplanes.

 

[aja8888]

I read somewhere that in the long run house prices only keep up with inflation, hot markets excepted. So, houses are not great investments.

I did not expect to make money from my homes, and if I get out what I put into them, it is fair. The operating expenses such as maintenance, utilities, tax, and insurance are the costs to use and enjoy them, hence sunk costs. Houses are still better than other personal properties because they generally hold their value, compared to cars, boats, RVs, and airplanes.

Ever own a house in proximity of central Detroit?

 

[NW-Bound]

One like dis?

 

[aja8888]

One like dis?

Yeah, like those...holding value?

 

[NW-Bound]

Yeah, like those...holding value?

No, I have a feeling that they don't hold value. It looks like they don't even hold their shape.

 

[kcowan]

2 locations.
$3/sq.ft. per month all in

 

[papadad111]

The information is insightful for a few reasons

1. See where we stand versus others in terms of absolute cost / expense. Sorta like knowing someone's net worth ... Just for comparison it's interesting. Eye opening what average spend is, what average percentage of overall budget this component is (arguably the second biggest category behind insurance ...maybe 3rd place for some behind travel /entertainment)

2. Stirs an intellectual thought process of what ifs... How low could you go if you needed to cut expenses. Deluth may not be your idea of a dream location but it's an option that is cheap by comparison to today's spending if something hit the fan. It's not exactly down by the river in the RV ... but a step along those lines.

3. Also gets one thinking about various expense trade offs - Example: Deluth isn't so bad if it affords me the option of living in paradise coast for those nasty winter months. Sure better than staying put in Armpit,NJ .... Now if I can convince my spouse...

Recognize that 90 percent of folks do not change their location in retirement ... They have found or have convinced themselves that they have found their nirvana. Combined with change being hard for at least 50 percent of the population, i tend to believe point 1 above is the most relevant here for this audience.

Thanks for sharing. Is insightful. Only thing missing from OP question was percentage of total annual budget does housing comprise.

 

[NW-Bound]

One can look at the housing cost in many different manners such as in the form of total dollar cost, or cost per square foot. Compared to earlier posters, I am not in the cheapest location in the US, yet still pay a lot less than they do.

Here's another way to look at housing costs: as a percentage of your total after-tax expenses (no mortgage). I just did that, and for 2 homes (2,700 and 1800 sq.ft.) it's 34%. That includes all maintenance, utilities, taxes, insurance, etc..., and even some upgrades. And the number was computed over the last 5 years to even out some expensive years.

What's yours?

 

[Danmar]

One can look at the housing cost in many different manners such as in the form of total dollar cost, or cost per square foot. Compared to earlier posters, I am not in the cheapest location in the US, yet still pay a lot less than they do.

Here's another way to look at housing costs: as a percentage of your total after-tax expenses (no mortgage). I just did that, and for 2 homes (2,700 and 1800 sq.ft.) it's 34%. That includes all maintenance, utilities, taxes, insurance, etc..., and even some upgrades. And the number was computed over the last 5 years to even out some expensive years.

What's yours?

As I posted a while back, about 22% of after tax spend. No mortgages. Would be largest category grouping but covers multiple places. Most expensive place is our home in Arizona. Least expensive our Toronto condo.

 

[NW-Bound]

That number for 4 homes that are also maintained by hired help is impressively low. My large deck looks bad after 10 years, and I am thinking about a DIY project next spring to save costs.

Don't you want another home, in the Puget Sound with a water front perhaps?

 

[doneat54]

We live in New England also, 3700sf home. I run irrigation in the summer too, so water bills are high.

Insurance 1600/133
Taxes 8800/733
Mortgage 15012/1251
Elec 3600/300
Gas 1680/140
Water 2400/200
Internet/Cable/Phone 1800/150


Annual total 34892
Monthly total 2908

 

[Major Tom]

No, I have a feeling that they don't hold value. It looks like they don't even hold their shape.

*Rimshot* Good one!

My housing cost in retirement is $640/month rent for a 285 sq foot studio apartment in a rather characterful old house in a fairly nice part of Oakland, CA. The rent includes utilities and hasn't increased since I moved in 5 years ago. Typically, the elderly owner only raises the rent about once every 10 years and even then, only by a modest amount. To keep in line with the original post, I have no cable TV, but do pay a total of ~$45/month for a landline, internet, and a cellphone, making my total housing and essential service costs ~ $685/month. I don't have renters insurance - it's a calculated risk. By far my most valuable "possessions" are my 3 cats, and no amount of insurance could possibly replace them.

I'm 52, the owner is 80, and when he's no longer able to manage and maintain his properties, there is a strong possibility my place will not remain a rental in the long term, so I'll be looking for a new abode. Rents have gone up so much here that I'll probably be looking in a new area, or perhaps hitting the road in a Class C. Lots of possibilities, and I'm open to them.

 

[W2R]

I'm 52, the owner is 80, and when he's no longer able to manage and maintain his properties, there is a strong possibility my place will not remain a rental in the long term, so I'll be looking for a new place. Rents have gone up so much here that I'll probably be looking in a new area, or perhaps hitting the road in a Class C. Lots of possibilities, and I'm open to them.

What a great attitude you have! You are so adventuresome and calm about all this. I'd be twitching out if I was in your situation. What about health insurance if you hit the road? Or your cats if you don't? What about your girl friend? What if he dies tomorrow? What if he lives to be 110? As you can tell, I like my ever-so-predictable life these days.

 

[tmm99]

What a great attitude you have! You are so adventuresome and calm about all this. I'd be twitching out if I was in your situation. What about health insurance if you hit the road? Or your cats if you don't? What about your girl friend? What if he dies tomorrow? What if he lives to be 110? As you can tell, I like my ever-so-predictable life these days.

Oh boy, I am not Tom and you are even making ME nervous with all the what if's!


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[W2R]

Oh boy, I am not Tom and you are even making ME nervous with all the what if's!

It's not easy to be me..... I am such a worrier.

 

[Danmar]

That number for 4 homes that are also maintained by hired help is impressively low. My large deck looks bad after 10 years, and I am thinking about a DIY project next spring to save costs.

Don't you want another home, in the Puget Sound with a water front perhaps?

If you are referring to me, it is, I think, a reasonable percentage of spend. The last place we bought, (Arizona) was a difficult decision. The opportunity cost when combined with the additional expense was maybe 12% of spend. Decided to cut our travel budget back a bit as we would now have a warm weather destination.

Puget Sound would be lovely but we are full up on real estate. Decks are really expensive to maintain. Our lake house deck has to be refinished every three years or so to the tune of about $20,000. 2500 square feet all cedar.

 

[NW-Bound]

That's too bad about you not wanting a waterfront place in the Puget Sound. I could be your house sitter, and I would take good care of it while not charging very much.

 

[Danmar]

That's too bad about you not wanting a waterfront place in the Puget Sound. I could be your house sitter, and I would take good care of it while not charging very much.

 

[nun]

Here are my annual numbers on a two family close to Boston

Home Insurance	1400
Property Taxes	6000
Gas	1000
Electricity	600
Maintenance and repairs	1500
Water and Sewer	500
Internet/TV	600

So that's out goings of $11600 and I get rent of $14400 from the 1st floor apartment. Some of the outgoings are tax deductible and I get to depreciate stuff too.