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The real cost of owning a home

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Re: The real cost of owning a home

#611

Post by fsckboy »

>You've probably heard someone say something to the effect of "renting is just throwing your money away". Don't believe it. It's a glib statement that simply isn't true. There are so many hidden costs to home ownership that most people who have never owned a home don't know about.

I appreciate your saying all you said. I just want to add on, the ownership picture is even uglier. (what I'm about to say will break your brain, frequently to the point of downvoting; don't blame the messenger for the bad news you don't want to hear.)

When you buy a house or a condo apartment, you now have the right to rent it out to other people. That rent would be income to you, and you are entitled to it.

if instead you choose to live in this piece of property you just bought, it is an identical financial situation to you being the payer of the rent. Owning the property did not eliminate rent (the monthly rental value of your property) from your budget.

Now, you are paying the rent to yourself, so isn't that break-even? well, it needs to be compared to the opportunity cost of the capital you had to put down and the interest you need to pay on the mortgage.

due to many govt subsidies for homeowners, it can work out in your favor, but at the same time the stock market does offer higher returns. But more importantly, why are non-homeowners on a very large scale being expected to subsidize wealthier homeowners in the form of an unfair tax burden?

Re: The real cost of owning a home

#612

Post by kccqzy »

jedberg wrote: post #164

The benefit of owning a home is almost always psychological, not financial. If you take the money you'd use for a down payment and mortgage and invest it instead (after paying rent) you end up in about the same place. But the psychological benefits can be huge. You have much greater control over the place you spend most of your time. You can change it to your liking. You don't have to worry about rent increases or ow…

There are plenty of psychological drawbacks as well. Consider for example that the fence between your house and your neighbor has become dilapidated. But your neighbor thinks it is fine and will not pay for a replacement. What do you do? Replace the fence without cost sharing? Argue with your neighbor on the condition of the fence? Or even after your neighbor has agreed, the act of selecting a mutually acceptable contractor to carry out the work? A lot of this feels like being a project manager, and if your day job is a project manager or even a senior engineer who sometimes wears the hat of a project manager, this could feel like a second part-time job.

Re: The real cost of owning a home

#613

Post by password4321 »

asdff wrote: post #473
m463 wrote: post #467

Earlier quoted context omitted.

I don't think home ownership is an "every single weekend" thing unless you bought a fixer-upper. Honestly, it sounds like you enjoy it. If you are doing it with that frequency I think you just are "into" your house.

Depends where you live. In the midwest you might legitimately need to mow 3x a week and you might have a huge lot. If you say screw it and let it go to knee high weeds, city might show up and cut your grass and fine you for it.

Apparently robotic lawnmowers work pretty well these days, though it sounds like only one might not keep up if the lawn needs regular mowing that often.

Re: The real cost of owning a home

#614

Post by iamalizard »

carlosjobim wrote: post #247
bloomca wrote: post #223

Earlier quoted context omitted.

The biggest advantage of buying a house is that it forces people to actually put money into a giant savings account which is not easily accessible. Otherwise people just spend the vast majority of the money they have. As an investment, houses are historically mediocre outside of some hot areas.

Why is that good? That is horrible for economic development and employment. It is worse for a country than being nuked.

I'd also like an answer to why it's good, but also to why it's horrible or "worse than being nuked". I admit I know nothing. :)

Re: The real cost of owning a home

#615

Post by thelastgallon »

Owning a home is as much responsibility as having infant which never grows up, can never be potty trained. There are thousands of things that need to continuously monitored and maintained. Time, money, mindspace and the stress are the huge operational costs of owning a home. Property taxes, insurance and repairs/maintenance, these three are increasing YoY will cost 3X the initial cost over a 30 year mortgage.

There is no incentive for homebuilders to build better homes, once they sell, they don't deal with the ongoing costs in multiple dimensions.

Re: The real cost of owning a home

#616

Post by barchar »

bombcar wrote: post #499
barchar wrote: post #464

Earlier quoted context omitted.

It's not true that paying off the mortgage makes it more advantageous to buy, home equity creates portfolio drag.

It is possible to find weird inversions where it never makes sense to buy - prices are too high and rents are too low. CA has these places, where property tax arbitrage by renters can be less than the new property tax would be if sold.

Many high cost-of-living places have this property. People bid up owner occupied home prices even when rents can't support them.

Re: The real cost of owning a home

#617

Post by onecommentman »

EdgeExplorer wrote: post #319
relium wrote: post #15

I think 1% per year is insufficient for repairs. Even a paint job will cost more than that these days. There's also a potential HOA fee, even in many neighborhoods with freestanding homes. But there are tax benefits of home ownership too. The interest deduction used to very significant, although less now since they raised the standard deduction. There's also a $250K/500K non-taxable capital gains benefit when you sel…

Seriously. My experience with 15 years of home ownership is probably more like 3% per year. I don't think I've ever had even a single year where 1% was accurate.

35 years, .75% per year, newish home when bought, high desert

Re: The real cost of owning a home

#618

Post by jameson »

Some other costs that may incur:

- Pool

- HOA

- HOA (if the community belong to larger community association that maintains things like park)

Summerlin area in Las Vegas for example have summerlin association you pay HOA to in addition to your residential HOA.

Re: The real cost of owning a home

#619

Post by dwd »

m463 wrote: post #467
dividefuel wrote: post #315

Beyond financial costs, I was caught off guard at how much time home ownership took up. House maintenance and projects have taken up most of every single weekend of mine for the past few years. Part of it is simply that I bought a house with more space than the places I usually rented. More to clean, more to maintain, more things that can go wrong, etc. But the biggest thing is that I'm the only one in charge of main…

I don't think home ownership is an "every single weekend" thing unless you bought a fixer-upper. Honestly, it sounds like you enjoy it. If you are doing it with that frequency I think you just are "into" your house.

It depends. If you own a single block dwelling and have a yard with trees, plants, lawns or a pool there are always things to do.

$500/year for the garden is very conservative, even when you're doing all the labour.

It would be more like $500/month were you to get a gardener in. If you need an arborist (for example cutting back tall trees close to power lines or encroaching on neighbours) it gets expensive very fast.

A pool also costs at least $500/year just in chemicals.

Re: The real cost of owning a home

#620

Post by onecommentman »

rambambram wrote: post #369

For me, the biggest 'cost' seems to be peace of mind. I rent my place, and even thinking about all this home owner sh!te gives me a headache. To each their own, and I'm probably pissing money away, but I want to live with the feeling that I can quit this 'housing subscription' (that's what it is, just another subscription) within a month and not even have to think about it.

And be homeless, if you are truly not thinking (and assuredly acting) about it. It’s not “just another subscription” in many ways. The idea of renting being the “peace of mind” choice rings false with me.
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