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The real cost of owning a home

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Re: The real cost of owning a home

#861

Post by hx8 »

itsmek wrote: post #859
hx8 wrote: post #272

Earlier quoted context omitted.

I own single family homes in a few different states. None of them are seeing the HOA + Insurance + Tax increases you are describing in the last 2 years. I'm guessing you bought in a place that is seeing a rapid increase in property values, which I saw in 2020-2022 by owning in a zoom town. That would explain why insurance and taxes are increasing.

It's probably Florida or some other gulf state with weather risk. Could be California with wildfire risk but then they wouldn't have tax increases. In both of these states insurance is going crazy without the property value cause you mention. If it's a condo then insurance can single handedly explain HOA rates (since they buy insurance too) as well as HO insurance rates.

Florida's median property tax is about $2,500, so it's unlikely to go up $1000/yr. Places with high property values within the state of Florida like Miami Beach are mostly seeing decreasing or flat home values in the last couple of years.

I don't want to speculate too much on this poster's property, and I'm not super familiar with gulf real estate. I just wanted to highlight that I have a very different experience even though the post made it sound like their experience was the overwhelming popular one.

Re: The real cost of owning a home

#862

Post by bottlepalm »

antisthenes wrote: post #849
bottlepalm wrote: post #723

Earlier quoted context omitted.

Taxes goes up, insurance goes up, repair costs goes up, and with a 30 year mortgage you lose like 50% the value of the home in interest payments.

> with a 30 year mortgage you lose like 50% the value of the home in interest payments. You don't lose anything. The interest is the price you pay for the time value of the loan given to you. You also get a tax break on at least 200k in "profit" (really more like inflation) when you sell the home.

Money spent that isn’t transformed into equity is considered lost.

Re: The real cost of owning a home

#863

Post by warumdarum »

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…

Get good at one thing that needs regular doing, trade work with other homeowners who got good at another thing.

Re: The real cost of owning a home

#864

Post by rogerrogerr »

Vaslo wrote: post #827
rogerrogerr wrote: post #634

Been thinking about this a lot. Curious what the rational folks of HN would suggest for me. Fact pattern: - I'm in the 25-30yo range, single male - Living with parents because I can; there's no friction and I mostly enjoy it. And I'm saving a ton of money. - Remote senior SWE for a non-FAANG, but still doing around $200k/yr between my W2 and a few other things - NW somewhere around 400-500k. I could easily go buy a h…

What about the relationship thing? Most significant others don't want to live with their in-laws and fear failure to launch. Clearly not the case of a failure with your great income. That said, this isn't as much a buy a house point as it is a get your own place point, which could be either rent or buy.

Oh sure, if I found an SO I'd move out. No question. Nothing on the horizon and I've never even met anyone I would be seriously interested in, but that can change quickly.

But as you say, that's orthogonal to the rent/buy question.

Re: The real cost of owning a home

#865

Post by scoofy »

BirAdam wrote: post #860
scoofy wrote: post #555

Earlier quoted context omitted.

The road, water, sewer, and various other public services that make your house valuable are not free. I would familiarize yourself with your city’s municipal budget before complaining about paying taxes. You’re likely being subsidized by urban dwellers if you live outside the city center.

I pay water, sewer, gas, and power to those utilities directly. The taxes to my county don’t pay for roads as that’s handled by the state DOT. The bulk goes to county police, fire, and schools. Yet, these haven’t seen increased costs, the people in those jobs haven’t received pay raises (which, my God, why not?) and overall, I can’t see why my taxes then got raised.

Your water bill almost certainly is not pricing in the replacement cost of the infrastructure it relies on.

Re: The real cost of owning a home

#866

Post by lesuorac »

skew-aberration wrote: post #650
lesuorac wrote: post #578

Earlier quoted context omitted.

> Unless you think landlords are running a charity, some part of your mortgage is going to them as profit This isn't true due to market dynamics. If a homeowners mortgage is say 4k/month and they list the property at 4.5k/month and receive no renters they can only do this for so long before they are forced to down the price. Of course, what actually happens is that they list it for 5k/month because other properties a…

Maybe OP is saying when you buy from a landlord, they still get their profit (you pay them the NPV of the expected future rents - it's neutral from their perspective). In cases like your example, what forces landlords to lower the rent? Usually only a) cost of credit, as you said b) opportunity cost, and c) government intervention [land tax, property tax]. a) not all landowners have mortgages! many own outright. they…

> a) not all landowners have mortgages! many own outright. they make pure profit

I mean they don't. They have expenses like taxes and maintenance regardless of the properties vacancy. Nominally this is more profit than somebody with additional expenses (mortgage) but not always more than somebody who has additional income from say stock returns (the whole buy-vs-rent argument).

While your entire post has been directly about homeowners, (a) is also a crucial point about investment rentals. Other commenters have pointed that many commercial loans allow you to tack onto the end of the loan periods of vacancy. So during a bull market you can refinance and draw out your initial investment so that only the bank's money is backing the mortgage and then during a bear market when you have vacancies you just tack onto the end of the loan.

> b) the game theory of this case is frequently misunderstood

It's not misunderstood. It's exactly market dynamics. You don't list your property for rent at 3.5k when you have a 4k mortgage; you live in it yourself!

The reason people get 4k/month mortgages to rent out a property for 5k/month is exactly because the current market demand is 5k/month. They didn't buy a house first and then decide to price it at 5k/month because it's higher than their mortgage; they saw the market demand first and then bought the house.

> Landownership is one of the most lucrative and profitable enterprises in (American) history, so you might want to question the logic which has convinced you that market dynamics is so effective in taking its profits.

If you have an item of limited supply and demand increases since you obtained that item then you're going to have an (on paper) profit according to market dynamics.

Re: The real cost of owning a home

#867

Post by CrimsonCape »

rmwaite wrote: post #472
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…

Agree completely about the time thing. Indeed, every time I’ve fallen into the trap of somehow believing I’ve moved “past” the time sink it inevitably has bitten me down the road when something breaks or I learn about some maintenance task I should have been doing but didn’t even know existed. More than anything, I’ve come to admire those who learn how to do this stuff consistently because it is hard .

Haha for example, to the homeowners out there, you should change your water heater anode rod ASAP if you have not. Good luck getting the rod out, because the caps on the water heater get corroded shut. And did I mention you need to drain the hot water heater to do so. You ever tried draining a hot water heater when that task has not been accounted for in the design? You need a way to drain it.

Re: The real cost of owning a home

#868

Post by themeiguoren »

com2kid wrote: post #9

It is suggested to set aside 1%-3% of your home's overall value for repairs every year. Most people do not do this, and many homes thus slowly degrade in value. It is a fast track way to destroy potential generational wealth. Home repair issues also tend to be bursty (rule of three...). You'll have a few years of nothing that'll lull you into a false sense of security, then suddenly three major issues will come up. S…

I’ve found 1% to be a wild overestimate on required home repairs if you DIY. 3% is crazy, that’s half a mortgage. On my $500k home I’ve spent only ~$3k total on necessary maintenance over 5 years (0.1%/yr), and that includes resealing a leaking flat roof, some furnace repairs, a new dishwasher, some electrical that went bad, cabinets that came off the wall, rotting fence posts, and a separate section of fence that fell down. Insurance is always there for true catastrophes like a tree falling on you or flooding.

But it’s also a small home in an urban area, so more expensive to its size than most. My take on the rule would be to save your square footage in dollars each year.

Now, I’ve spent a lot more that that on the house, but the rest have been cosmetic or quality of life upgrades. I struggle to think of any single realistic necessary repair that would cost more than $2k in materials to do myself.

Re: The real cost of owning a home

#869

Post by taneq »

bombcar wrote: post #627
taneq wrote: post #608

Earlier quoted context omitted.

Yeah but then I have to deal with my tenant. :P

Evicting yourself and taking yourself to court could have fun Fogerty vs Fogerty vibes!

You jest, but a couple of years ago I added myself to my company’s workers compensation insurance in case I get injured. If I ever do I’ll have to put in a claim against myself and hope my insurance covers it. :P

Re: The real cost of owning a home

#870

Post by littlexsparkee »

MagicMoonlight wrote: post #424

Rent goes up every year, your mortgage goes down. 30 years of renting and you’ll have nothing except more renting. With buying, you’ll own a house. That house is now effectively free to live in, as a rentoid still has to pay rent and make repairs to avoid losing their deposit. What a meaningless slop article.

Somehow it's taken as given that rent goes up - SF took 6 years to recover its 2020 rent, other cities saw a dip during COVID too. Similar thing took place during the dotcom crash.
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