We’re only three weeks into January so far, and we’ve already received a notice from our property managers* that our dishwasher is on the fritz again. Depending on what course of action we take (replace the circuit board @ $390 or replace the entire thing @ $650 (both costs include parts and labor)) we’ll be dumping even more money into a home we could care less about.
This is just one of the joys of home ownership. And yet another reminder of the stupidest decision we ever made with our money 8 years ago!! Even though it completely changed my life and this blog and all my money and best friends/partners/colleagues and everything else in my world for the good, haha… So I can’t bitch too much, even though yes – it’s no secret I’m not a fan of home ownership ;)
Or should I say, I’m not a fan of home ownership if you’re not mentally and financially prepared for it. Yes it’s smart for maybe 90% of the population and in the end saves you lots of money blah blah blah, but make no mistake about it – home ownership is not an investment. It’s a place to live, and a major responsibility at that. If you don’t believe me, check out this article from JL Collins who articulates it much more eloquently than I can: Why your house is a terrible investment.
That being said, it is what it is and all we can do now is learn from our mistake and wait until that glorious day comes to off load it ;) In the meantime, we have one foot out the door already by having renters in the place and automatically becoming landlords by default. Something else not for the faint of heart, btw, but fortunately there’s property managers to help!
Here’s how much it cost us to own this house of ours in 2014:
- Repairs and maintenance: $618.80
- Homeowner Association fees: $1,620.00
- Property management and license fees: $1,948.75
- Taxes paid: $2,420.70
- Principal paid: $6,405.84
- Mortgage interest paid: $14,985.37
Total costs to “own” our home: $27,999.46
That’s $28,000 out the door in one year – ouch. And I put quotations around “own” because we all know that the banks own our home and not us until it’s all paid off. And look at what they charge us for the pleasure! $15,000 in interest fees compared to the $6,500 in principal pay off, ugh. That’s with me rounding up and throwing in an extra $150 or so every month too to help speed up the process!
On the plus side, this is $20,000 less than we paid last year for our house – hah. (That means we’ve paid over $75,000 in two years btw, even though we did do massive renovations getting it ready to be rented out). We also collected rent on our house to the tune of $20,100.00 for 2014, so the total out of pocket was “only” $7,899.46. And of course our equity went up by $6,500 (no longer underwater – woo!) and there’s tons of tax write offs to snatch up as well. It being a rental property and all.
What would it have cost us had we been renting instead? I’m glad you asked. Because I can tell you with 100% certainty that it would have cost $20,100.00 because that’s exactly what it did cost for us to rent a place last year! We’re living in someone else’s house coincidentally for the same amount we’re renting our old house out :) Only one is far from a city and the other is almost inside it – the reason for the move. But do you know what’s even better than the lower costs? The fact we don’t have to worry about the repairs on this home or the maintenance or homeowners fees, property management, licenses, taxes, principal payments, and all those damn interest payments like we do on ours! It’s all someone else’s problem because we rent! Huzzah!
So don’t let anyone tell you it costs more to rent than it does to own a home… That may be the case in some/many circumstances, especially when a lot more time has been factored in (if we fast forwarded 10 years from now we’d not only be MAKING money off our rental property, but the rent we’d be paying ourselves would have skyrocketed as well!), but you always have to factor in your goals and priorities too. And even more so, your personality. If you don’t like feeling tied down or caught up in tons of responsibility like myself, the freedom can more than make up for the savings in the end.
And I’ll be the first to admit I focus on the personality/emotional part of the puzzle more so than others. Almost everything I do with my money is based on how it makes me feel vs the “correct” smarter way. There’s a reason I flip flop between paying off debts hardcore (mortgages), going on saving binges like my current Challenge Everything series, and even making less money with my businesses to focus on stuff that makes me more excited in the end. This doesn’t work well if you have a penchant for shopping and hate managing your finances (if this is you click away now!!! :)), but it’s amazing how much more enjoyable life is when you structure it around one simple question:
“What would make me happy today?”
Sounds kinda cheezy/lame, I know, but what a powerful question to answer. Imagine if you did whatever it was that brought you joy every day? Do you think it would matter whether you paid the largest interest credit card off first vs the smaller one, or made .05% less money off your investments than another way, or were “being bad” for renting vs owning? Of course not. You’d be happier in the end and what’s better than your own happiness??
I recognize this is incredibly oversimplified here – there’s no way you can do whatever you want every day because of LIFE – but it’s still a great question to ask yourself every day. I recommend even throwing it on a sticky note and putting it somewhere you’ll see every morning as you wake up! Even if you do have to slosh through an unavoidable $hitty day, at least you’d know it’s temporary and can get back to scheming up “happy action items” again once it’s over! It’s all about being conscious with our decisions, whether financial or not. And the question takes you 2.3 seconds to answer! :)
Anyways, I meant for this to be a warning to all those thinking about buying their first house out there, or even those looking to pick up a rental property, but I managed to somehow make it more about feelings – woops. But hopefully it still helps! And to be fair, going into a house for the sole purpose of renting it out vs living in it yourself are two completely different things. You don’t typically buy a house with the purpose of losing money every month as an investment, haha… So my landlording stories should definitely be an example of what *not* to do.
At any rate, have a great day! And a *happy* one at that ;)
PS: What would your answer have been if you asked yourself this question in the morning?
*It does cost more using a property manager than doing stuff yourself. But when you live far away AND hate maintenance stuff it can be well worth the premium… There’s nothing worse than getting a call in the middle of the night from your tenants – blech.
[Painting up top by OXLAEY.com]
Jay loves talking about money, collecting coins, blasting hip-hop, and hanging out with his three beautiful boys. You can check out all of his online projects at jmoney.biz. Thanks for reading the blog!