From the Record:
Little things carry big tickets
Chris Bartlett and Kim Queren had carefully calculated what buying a home would cost.
Within 48 hours of moving in, however, each learned something that takes most first-time buyers much longer to discover: Home ownership costs a lot more than the mortgage and taxes.
Bartlett knew the house he and his wife, Valerie, bought in Waldwick three years ago needed some work, but that didn’t prepare them for the flooded basement — and the hundreds of dollars in repairs — on their second day there.
Queren didn’t even get that much time. Less than 24 hours after moving into her Leonia home, the hot water heater burst, leading to the first in a continuing series of unexpected bills.
Like most home buyers, Bartlett and Queren carefully calculated how much they could afford to pay for the mortgage, taxes and insurance, as well as the closing costs. And they knew upgrades and maintenance would cost more.
But it wasn’t until they moved in that they learned just how much more they would spend on the annual chores, occasional repairs and replacements, and emergency expenses on the less blissful side of home ownership.
Shovel the snow. Clean the gutters. Seal the driveway. Clean the chimney. Paint the trim. Fertilize the lawn. Weed the garden. Prune the trees. Service the furnace. Spackle the cracks. Maintain the pool. Stain the deck.
Or open your wallet wider and pay someone else to do it.
“When you’re buying a home, you never think about the potential costs above and beyond what you’re putting out,” Queren said.
Great article!
One of the best investments we ever made was buying a home warranty. Our previous house came with one, and renewed it even though we didn’t use it the first year at all. Year 2 our furnace starting acting up and it would have cost us $500 to repair it; instead we paid $50. We had dropped $350 on the policy though, so no big gain there.
However, we bought our current house in the winter and therefore couldn’t test the AC or the pool. Plus the systems, while in great shape, still had some age on them.
We got the MacDaddy homeowners warranty for $960 through AHS. To date, we have received over $10K in benefits — pool filter needed replacement, AC needed a repair, pool sprung a leak in the copper plumbing, and our fridge wasn’t cooling right. Today an electrician is coming to look at the short that just occurred in one of our lights.
AHS must hate me, but I sure love them!
If I remember correctly the warranties were like $200 pool, $160 well pump, $600 home. You can darn well bet I’ll be renewing them. There’s nothing worse than having to spend money that you haven’t planned on spending; it hurts to write out this check once a year but it hurts worse to wake up one day and SURPRISE have to spend serious dough on a new problem.
This never seems to be addressed in the rent vs. buy comparison. You better have excess cash after you close to start feeding the money pit.
Funny story, in one house we had a bat problem, not inside the house. We get an expert over and he drives up with the Batman insignia on his car. I kid you not, can’t make up this s*it. He wanted to charge $2,500. I asked him why so
much. He said he is in the hospital at least 1-2 times a month for shots after getting bit. I ended up getting the work done for $350 from somebody else.
Bats,termites, ants, gutters,plumbing, water mains,basement taking onwater,appliances,landscaping, heating/cooling maintenance, etc….. YIKES!!!
The costs are only half of the battle. It’s the time that it takes to do everything that is the killer. I spent the weekend working on projects in the house. I really don’t have a lot to show for it.
This is another reason to keep monthly home ownership costs low. If you don’t need the money for repairs, you will need them for upgrades.
Home ownership = many sleepless nights.
Amen:
When I bought my first home I had no clue of the effort and money it took to maintain the house. Since I sold and moved to a rental townhome, my cash flow situation has improved dramatically. No sudden house related major expenses.
First time home buyers who buy fixer upper crap for 700K have no idea what is coming to them in repair costs.
So, does that mean, buying a townhouse is a much better bet than buying a House ?
I currently rent an apaprtment and am thinking about buying a townhouse – but I am not able to figure out the correct rent Vs buy equation.
Any pointers ?
regards
Neal,
I’m not sure why you would think the costs would be significantly lower. As owner you are still responsible for many of those same costs.
Additionally, you may be partially responsible for the public areas and shared facilities.
jb
before you buy a townhouse interview the
board members and take a close look at
the financial statements of the association.
Make sure the asso.is solvent. Many times
the association is BK but the board members
are so stupid they don’t even know it.
Consider the type, age of house. Mid century simple ranches are cheap to keep. Sheetrock walls easy to repair (including pipes and electrical behind). Easiliy accessible systems (hot water heater / heating system) are another plus – less to maintain and replace. An unfinished basement will allow easier access to all of this. Plain roofs with few valleys and complex aareas will not leak as much – and are cheaper to reroof.
Older homes with tile roofs, plasterwalls, antique plumbing and hot water systems – will suck you dry.
Also, complex landscaping and retaining walls, etc will be a headache to maintain. And long driveways will be a snow problem – and sealing problem.
You are much better off with a simple house, even better than a Condo – which will force you to pay fees for repairs you may not want.
Go for a practical home and you can control the costs. Keep it simple and keep it manageable.
Thank you so much for your thoughts on this ( James, pesche22, bubblewatcher )
Here is the calculation I did recently. As I mentioned, I am planning to move to 2BR condo or townhouse. Just to keep calculations simple I am keep interest I pay back to Bank out of equation ( as I will be paying major portion as cash down)
Cost: If I rent a 2BR apartment
——————————-
Rent : $1500/mth
Cost: If I buy a 2BR Condo ( for $225K)- built in mid 80s if you are wondering.
—————————————
Since I am paying cash down, Interest that this money was earning in Bank CD is 5% taxable, so 3.5% after tax
= $600 /mth ( approx)
Tax = $212 / mth
Maint. =200/mth
——————–
Total : $ 1012/mth
Questions:
a) To be in seems that I should surely buy it. But the fear that prices are constantly going down- I am afraid to commit.
Even if prices go down 10% for this place in a year –
If I rent , I would have spent $1500* 12 = 18000
If I own – my paper loss would be 10% of 225 = $22,000
b) I am presuming that there are most costs involved in maintaining a Townhouse as compare to a condo. Can someone please help me here figuring out other costs involved if I own a townhouse.
many thanks for reading this long post
O’Neal