A year ago this month I purchased my current residence with the goal of not only making an investment but also to improve my cash flow. I made a few assumption back then and some of those can be found here where I discuss why I felt at the time my decision to purchase a foreclosure with cash was one of the best financial moves I could make. Was I correct in my assumptions or did I miscalculate? Todays post takes a look at the actual cost of owning my home and comparing those costs to what I was paying in rent.
It has been interesting going back to those early posts about what I was hoping to achieve at the time and comparing it to how things actually unfolded over the past year. At the time I wasn’t sure what insurance and taxes were going to cost or what the utility bills would look like compared to when I was renting. Just as I’ve kept careful records of the rehab expenses I’ve also kept an eye on the cost associated with owning a home. One of the reasons often given as to why renting is better than owning a home is all of the expenses associated with owning. Maintenance is the owners responsibility as well as insurance/taxes and we can’t forget all of the utilities that come with home ownership. Renters often have some or all of the utilities covered. Even though you don’t see all of the individual expenses that come with property upkeep when you are renting, you can be sure they’ve been accounted for and conveniently covered for you under one heading called “rent”.
Previously I calculated rent payments in 2013 to be $8100.00 for the year plus $99.00 for a yearly renters insurance policy. Ownership has definitely been a better route. My ownership costs in the year that I’ve owned the place have come to $2471.90!!
$8199.00 vs. $2471.90 is a significant difference! A 69.85% reduction to be exact. That makes a big difference in cash flow on a monthly basis. Below is a break down of the individual cost of home ownership:
I think most everything here is self-explanatory expect for maintenance. Included in this expense is the purchase of an $80.00 push mower and $10.00 for gas. Taxes were by far the most expensive category, but I will be getting a break on those for this year. Last year I was taxed at the last known value for which the property sold which was $94,500.00. I’ve received this years assessment and it is for the amount I purchased the house for, $36,000.00. I can’t plan on that savings to be there every year going forward as I’m sure a new assessment is just around the corner, but I’ll enjoy the savings while it’s here.
One other expense increase that I haven’t listed here is electric. My apartment was all-electric and I’m sure much more energy-efficient than the house. I also have a combined gas/electric bill which has contributed to the increased cost for this utility. The chart below shows the changes:
Although I’ve attempted to control the electric/gas expense with my conservation efforts part of it is out of my control. The utility company charges a separate service charge for both electric and gas which adds and additional $13.50 to my bill regardless of how much gas I actually use.
As you can see homeownership has not been very expensive for me, but it’s important to remember that I have taken a non-traditional approach to ownership. I didn’t buy an oversized house, I don’t have the financing costs that typically come with ownership and I try to keep the expenses I do have in check. What I want you, dear reader, to take away from this is that owning a home is not always an expensive endeavor. If reading so many of the negative articles on owning a home has kept you from considering it then I would suggest you step back, question the assumptions that have been given and ask yourself if those assumptions apply to you or if there are ways you could do things differently. Your experience is only guaranteed to reflect that of others if you follow in those same steps. Create your own steps and your experiences turn out to be uniquely your own and that is a rare occurrence these days.
Any ideas of how I could decrease my housing expenses even more? I think I’m nearing bare bones levels here, but would love to here any suggestion you may have.