It's been almost 5 years since I bought my first house. I decided to look at the hard numbers and see how it turned out.
Closed 11/1/2013. My real estate agent negotiated "seller pays closing costs" and ~$5,000 off the listing price. The house was sitting on the market for about 8 months so we had some leverage, it seemed like a pretty good deal.
These numbers are calculated over 56 months of residence so far.
House is a 3BR/2BA 1400 sq. ft. on a 10,000 sq. ft. lot. with 2 car attached garage built in early 1980s.
Transaction
Cash Paid to Agent
$300
Down Payment (5% down)
$6,718.56
Loan Amount
$127,000 @ 3.375% for 15 years
Grand Total
$134,018.56
Loan Payments
Interest
$15,404.66
Principal
$35,902.75
Extra Payments to Principal
$22,260.04
Grand Total
$73,567.45
House Expense Totals
Outside Maintenance and Materials
~$1,500
Inside Maintenance/Repair and Materials
~$6,500
Homeowners Insurance
$4,750
Property Taxes
$9,500
Mortgage Insurance (from having less than 20% equity for a few months)
$335
Utility Differential (estimated extra cost of utilities for my house vs. my old apartment. The house has really good insulation and shade).
$2,240
Grand Total
$22,585
Total Cost Values
Total Non-Equity Cost (interest + expense + agent cash)
$40,529.66
Total Equity Cost (principal + extra principal)
$58,162.79
Grand Total
$98,692.45
House Cash Valuation
2018 Sale Valuation (what I reasonably think I could sell it for based on similar houses selling in the area)
$160,000
Estimated Cost to Sell (8% as a rough estimate)
$12,800
Loan Payoff Cost
$68,837.21
Grand Total
$78,362.79
Apartment
Rent (2013 - 1BR / 1BA 750sq ft with no garage / outside parking only) When I moved Out
$725/month
Rent (2018, according to their website for the same unit type as I was in)
$1,100/month
If I assume the $375 increase happened somewhat linearly:
2013: $725 ($725 for December)
2014: $725 ($8,700)
2015: $818.75 ($9,825)
2016: $912.5 ($10,950)
2017: $1,006.25 ($12,075)
2018: $1,100 ($8,800 so far this year)
Estimated Total Rent Avoided
$51,075
Stock Market Missed Gains
Investment Cash (total house cost - estimated rent avoided)
$47,617.45 or $850/month
$10,200 added at start of each year, and $6,800 for 2018
2014 (13.7% return) $11,600
2015 (1.3% return) $22,084
2016 (11.93% return) $36,135
2017 (21.93% return) $56,496
2018 (~0% return) $63,296
Grand Total
$15,678.55
The Conclusion
I spent $98,692.45 over 56 months ($1,762/month) to live in a house when I could have spent $51,075 ($912.05/month) to live in an apartment instead. I have equity of $78,362.79 but missed out on at least $15,678.55 of stock market profits.
Financial
I never really considered how owning a house ties up a TON of your wealth into one thing, and reduces your ability to invest in much better performing assets. I was very lucky to buy when I did in this area, however I don't get any financial benefit unless I sell, unlike if I had gone the stock market route I'd have $63,296 in liquid high-performing assets vs $78,362.79 in non-performing, inaccessible cash.
I always thought owning a house was much better than renting from a financial sense, and I thought I played this really well, but looking at the numbers, if the housing market was normal (1-4% gains each year) I would have not only made less money, but also that money wouldn't be accessible. Something to consider on top of the "unexpected costs" of repairs + the "expected" extra maintenance costs.
Also, I probably should not have made extra payments beyond getting to 20% down, with only a 3.375% interest rate. I plan to make only the minimum $900 mortgage payment from now on, especially with my bank account giving me like 1.7%.
Lifestyle
Money aside, I enjoy having a place to call home. In the end it's a lifestyle choice I suppose. Nowadays with the prices up I'd still probably buy a house knowing it would very likely cost me in the long run, just because I like the privacy and autonomy of having my own place plus 1BR is too small for my boyfriend and I.
Anyway, hopefully this is interesting to see a complete example of the numbers behind home ownership.
Edit: Messed up newlines
Submitted July 29, 2018 at 03:45PM by sneekee_snek https://ift.tt/2AlfCcZ
