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.
The Stoic Investor 
Your house cost $36,000? That’s about half of my down payment!
$8199.00 vs. $2471.90 is a pretty significant difference! If I was still renting, I would be spending about $26,000/year on housing and I’m only spending just under $14,000 this year, which includes mortgage interest , electricity, property taxes, HOA dues, any improvements/repairs, and income tax savings.
Do you have programmable thermostats? That has been a huge help on my electricity bill. Could you improve window insulation or make them double-paned instead of single paned?
Yes, that was the cost. Couple of things to consider. I’m sure real estate prices in your area are higher than mine and you weren’t buying a foreclosure that was in need of lots of TLC. You also have to factor in the total cost of he rehab work.
You’ve made quite a reduction on your end as well. Sounds like buying was a better option. Any regrets?
The windows I had replaced are double-paned and well insulated around the frames. I’ve looked at the programmable thermostats but haven’t made a move yet. Do you suggest a specific brand? I’ve looked at the Nest, but it’s a bit pricey.
Also this past winter was one of the worst ones we’ve had temperature wise. I have no doubts that my heating costs would have been higher last year as well if we had the same temps. as this past winter.
Thanks for stopping by!!
No regrets really. Sometimes I feel like it will make it harder to make my condo feel like home with a significant other and other times, I realize that’s silly when buying new furniture and painting is cheaper than selling. Otherwise, the numbers have pretty much been a slam dunk and I am comparing against renting a much smaller place. If I was to look at buying now, I would probably keep renting because my place would cost at least another $50,000 today and my mortgage would be two percentage points higher.
My programmable thermostats are actually ~$50 Honeywell ones. I have electric heating and single pole wiring on my thermostats (we learned that after taking one of the old ones apart!) with a fan on my baseboard heating, so I only had one programmable option. The Nest is way overkill. Here is the one I bought on Amazon after some research at Home Depot and buying a double pole one initially: http://www.amazon.com/dp/B008DF626K You need a gas one though this should at least show you that they don’t have to be expensive!
Thanks for tip Leigh. I will definitely look into it. I’ve thought about it and passed them several times on my numerous trips to Big Blue and Big Orange over the past year, but never made the move. What kind of savings did you notice after you installed it?
I had programmable ones before, but they were from the mid 80s. I just replaced them in March or April, so I’m not sure how much improvement I’ll see until November/January.
Stoic,
Wow. Very impressive stuff there. The difference in cash flow is huge.
Congrats to you for taking the path less traveled and coming out far ahead. You learned some valuable skills, saved a ton of money, and now have your own space for as long as you want it. Pretty awesome!
I don’t have any tips on how to lower the costs. I don’t think it can get much lower than that. And now that you’ve done so much rehab work you shouldn’t need any major repairs for quite a while. You’re on easy street, my friend!
Best wishes.
DM,
Thanks for stopping by! I’m really happy with how things played out. I remember being so scared in the beginning to make the leap for fear of the unknown. There were several really good deals that I let slip by because I was afraid to make a decision. What if there were surprises during the rehab, what if I went over budget, what if I couldn’t do the rehab work myself like I intended? It’s always the unknowns that keep us from acting.
It’s nice being able to look back over the past year and know that I made the right move.
I agree with you on additional cuts to housing expenses. This are about as low as it can go. I’ll save some on taxes this year and I might be able to get a better rate for insurance but those will be small amounts.
Pingback: The Value Of Sweat Equity | The Stoic Investor
Pingback: Homeownership Costs Reduced, Again | The Stoic Investor
Pingback: The Stoic’s Spending Revealed! | The Stoic Investor