Never ending house costs

You stretch your budget and enslave yourself to a mortgage. Move in to your palace. And then kick back and enjoy the home that now owns you, right? Wrong! You have just entered an arrangement with a money pit that will suck your wallet dry!

Take my neighbors for example. They bought a nice ten year old home. In the first year, they put in new sidewalks, landscaping, trees, and an air conditioner. In the second year, they black topped the driveway. And now I year three? They are replacing the "builder grade" windows.

Each of these projects cost thousands of dollars per year!

You might believe a 10 year old house wouldn't need much work done to it. But you would be surprised!

Our View

We built our house 12 years ago into a new subdivision. I wanted to be in a subdivision because I believed it would help us should we ever want to sell our house. I had an old house that was in a low traffic area of a town and it took over two years to sell that place. I didn't want to make the same mistake twice.

The new subdivision was awesome. I was surrounded on all sides by farm fields and I had an expansive view in every direction.

And then the subdivision grew. Each year more and more houses were built all around us.

It has reached a point where we are now boxed in, 

The construction of this latest house will take away most of what was left of our view.

On the one hand, I wanted to be in a subdivision to protect my property value. But on the other hand, I would prefer if there were no houses around me, especially houses whose back windows can look directly into mine!

Thankfully, I still have a nice view out the front of the house.

So, that's the trade off. Want to be in a neighborhood? Or by yourself out in the country?

Work List

I have been putting in a ton of hours at work. When I get time away from work, I am too exhausted to do very much around the house.  This has caused my house maintenance work to fall behind. The following is a short list of immediate work for this weekend:

Fix rope light on deck - it is falling down

Drywall in office by window repair

Fill hummingbird feeder

Replace old power strips around the house

Fix kitchen aid mixer (leaking oil)

Smoke alarm battery replacements

Oldest son's TV doesn't work

Caulk 2nd downstairs bathroom sink

Van battery replacement

Replace broken Flood lights 

Kitchen light bulb replacement

Teach oldest son about sump pump

Meter read the water meter 

Building permit for shed

Dig out then fill in Eve troth hole

Investigate digging a storm drain in front of garage floor to prevent garage flooding 

I wonder how far I will get?

Renting versus home ownership

I have rented for 13 years of my adult life, and I have been a home owner for 13 years. I guess I became spoiled as a renter.

When renting one only needs to hang pictures, move furniture, and do house cleaning. Everything else is the Landlord's job (and if you get a good landlord, they do their job). When you own, all that work becomes yours to do. You take on all the risk of a leaky roof or bad hot water tank. All the taxes of home ownership aren't hidden in a rent check. One pays a kagillion dollars to the bank for the mortgage. The equity one builds is tiny compared to all the costs, taxes, an interest. If you miss a couple of mortgage payments, the bank can  take that away. Or miss some tax payments and the town takes the house. Insurance is crazy higher compared to renter's insurance.

Something I have heard often: "when you rent you don't have the freedom to make changes." When you own a house and want to make changes, it'll probably require a permit and an inspector. I don't know about inspectors in your area but mine want all the work done by professionals. That makes everything you want to do be very expensive.

But all this negativity aside? Home ownership is the American dream. A little house with a white picket fence and a yard. That's what we have been told anyways. And maybe that is the dream but it has been savaged by opportune vultures who all want a piece of your pie.

That is one of the focus of this blog: challenging the American Dream. My goal is to shed some reality onto the dream to show how the American dream is a lot of work and very expensive.

If you are thinking about buying a house - read my blog and go into the purchase with correct expectations. If you are already a home owner (or perhaps the bank technically owns the home and you are paying a mortgage, or, you are renting the house from the town via your taxes) then you can read and relate. Either way, I hope you enjoy my unique perspective.

The American Dream is not an Investment

I have written in the past how the American Dream is not an investment. I purchased my first house in the 90's - a first home fixer upper. I lived in the house for two years before job changes required us to move closer to the city, so, I put the house on the market and rented an apartment. It took two years to sell the house (so I owned the house for four years). During those two years I was paying a mortgage, taxes, and maintenance on a vacated house. When the house finally sold, I did the math and determined I had lost $28,000. All the work, time investment, and everything I had done to the house was rewarded with difficulty selling it and ultimately a huge loss.

Because I had been burned, I wasn't a fan of home ownership. We rented for five years, during which time our family grew and outgrew the apartment we were renting. My wife had the american dream in her heart. But this second house would be different: new construction instead of a fixer-upper. We wanted to settle in a house where we weren't starting off behind the 8-ball with an impossible amount of work.

We have been in our current house for eleven years. Home ownership has a lot of benefits. But financial benefit really isn't one of them. In these eleven years, we have payed over $70,000 in property taxes, over $70,000 in mortgage interest, and over $10,000 in PMI. That is $150,000 that I will never get back. The likelihood we could ever sell our house and regain that $150,000 is very unlikely.

In the past 11 years, we have put a lot of money into the house: landscaping, finishing the basement, adding a deck and a patio, and more. There has also been (and will be) maintenance done on the house and property. The best I could hope for when selling the house someday would be to recoup some of the investments we have made.

Home ownership makes people rich. Not the homeowner. The banker, politician, lawyers, hardware store, insurance companies, and contractors. But not the home owner.

The financial benefit to home ownership is the tax write-off on interest paid. Also, if I weren't paying a mortgage, I would be paying rent. That taken into account, I estimate the total cost of ownership roughly twice the cost to rent a suitable house or apartment for me. So why do we, as Americans, do it? Because home ownership is the American Dream.

Reoccurring Monthly Worklists

Part of the reason for this blog is to celebrate all the work that comes with home ownership,

Every month there is work that must be done. For example, in November I drain the outside water spickets, bring in the houses, and bring in the lawn furniture. Then, every May I do the opposite.

I keep a month by month worklist on the back of my basement door.

It tells me what needs to be done this month. And whenever I have a spare few minutes? I try to finish a few things on the list.

Home Ownership as an Investment

I have often questioned what I want this blog to be about. The Blog has gravitated toward funny vacation stories and celebrating the work involved with home ownership.

Home ownership is the American Dream. It is as if we are not truly free unless we own a home. It is a great investment. At least, this is what we are raised to believe. And is what I always believed.

Then, in 2007, my friend sold his house in upstate New York, rented in Boca Raton, and said he would never own a house again. This was followed by the real-estate  crash of 2008. This made me question traditional views on home ownership.

Purchasing a house is not an investment. 

When purchasing a house with a 30 year mortgage, $1 of every $2 you pay will go to interest. The cost is worse if you have to include PMI insurance (for those who don't own 20-24% equity). Property taxes are on top of this. In upstate New York, my property taxes almost equal my mortgage payment. Therefore, only $1 of every $4 go toward my equity.  When I was paying PMI and a higher interest rate? It was less than $1. 

Most people argue that the increase in house value plus the tax write-off offset these costs. But do they? If lucky (and if there isn't another crash) your house might increase in value 4-5% per year. The tax write-off involves reducing your taxable income by the amount of interest paid, the tax implications dependent on your tax bracket, which pays back just a fraction of the interest paid. And property taxes seem to increase every year.

To further show how bad of an investment home ownership is? Consider the cost of homeowners insurance. And depending on where you live? You might need flood or hurricane insurance.

As if those costs weren't enough, consider the regular maintenance and unexpected repairs. New roof, hot water tanks, furnace maintenance, driveway, etc. Last year I needed emergency work performed on my kitchen due to a rotting    subfloor. Properly maintaining a house can be expensive.

If you are considering home ownership? Approach it with eyes wide open. Do things to reduce your financial exposure: large down payment, low interest rates, avoid PMI, pick areas with low property tax, and get a home inspection that explains when to expect major maintenance costs. Look for buyer's markets, sellers in hardship, foreclosures, and other opportunities that might let you buy below value. When you do home improvements, only do improvements that you need because it is unlikely you'll get the cost back out when you sell the house. Plan to DiY home improvements and maintenance to reduce those costs (having a buddy that is handy helps a lot). My recommendation? Don't buy a house as an investment because, in my opinion, you can make more money elsewhere. But that is just my opinion.