The real cost of living in your own house

[getvictor]

Say I own a $200,000 house with mortgage paid off. How much does it cost to continue living in it?

If I didn't have the house, I could invest the $200K and draw an additional $8,000/year to cover my expenses. This is the opportunity cost of my house.

So from an accounting perspective, the cost of living in my house is $8,000 + taxes + utilities + repairs.
Mr. Mustache doesn't account for this opportunity cost in his budget, which makes his cost of living seem considerably less than it really is.

Now, you could argue that the property value will on average go up every year, making up for the opportunity cost. Yes, it is fair to assume that the property value will keep up with inflation. However, the other factors that affect property values are too unreliable to count on for retirement planning (population growth/decline, state/county/city/HOA politics, economic opportunities in the area, additional nearby development/roads, quality of schools, neighbors, etc.).

How is everyone dealing with this cost in their retirement planning?

[herbgeek]

You have to live /somewhere/.  If you didn't have a paid for house, you'd be paying rent somewhere.  That's why we ignore the opportunity cost. 

[FIRE47]

You have to live /somewhere/.  If you didn't have a paid for house, you'd be paying rent somewhere.  That's why we ignore the opportunity cost.

Correct - however I think the right answer combines both approaches and I would add one more factor: home appreciation.

I would think the true cost (or benefit) would be something like this:

Opportunity cost of capital + utilities + property tax + maintenance  - Equivalent Rent - home appreciation

Of course this would only apply to a fully paid off house, if you have a mortgage you would have to account for other factors primarily the interest rate vs investment returns.

[rantk81]

We all are born "short" one house...
Some people never get the opportunity to "cover" that "short" position ;)

[Syonyk]

I like being able to put holes in my wall without worrying about filling them on move out. And changing switches and outlets around if I want. And not having neighbors sharing walls.

That's worth a good bit to me.

[FIRE47]

I like being able to put holes in my wall without worrying about filling them on move out. And changing switches and outlets around if I want. And not having neighbors sharing walls.

That's worth a good bit to me.

Don't I know it...

Anyone remember this ongoing saga?

http://forum.mrmoneymustache.com/ask-a-mustachian/dealing-with-a-horrible-tenant/msg1072534/#msg1072534

Never again.

[homestead neohio]

How is everyone dealing with this cost in their retirement planning?

We consider that we'll have a "real cost" of living anywhere, and where that will be is a lifestyle choice we need to be able to afford.  Keep in mind that you are indirectly paying for taxes, utilities, and repairs when you pay rent.  It is just more predictable and a short term commitment.  Your landlord is making a profit (most of the time).

We have chosen to create a homestead out of an old farm house and a few acres, which is something one builds and cultivates over years, so not just looking for a place to cook meals and sleep.  Our lifestyle revolves around our property and home, and unless/until we make a different lifestyle choice, we aren't going to pick up and move.

Knowing this is our lifestyle choice, we've designed our FIRE plans around affording it.  Unlike a lot of folks on here, we don't count paying down mortgage principal in our savings rate, and we don't count home equity as part of our FIRE target, which we track by net investable assets.  We instead consider it a higher "current expense" toward reducing a "future expense".  Our current budget includes a full mortgage payment (PITI), our FIRE budget just taxes and insurance.  Our overall FIRE target is lower because we need 25x a lower RE budget number which does not include principal and interest payments.  We will pay off our mortgage to have really cheap rent indefinitely.  It just makes sense to us this way.  In the same vein, we don't consider our paid off cars depreciating assets, they are cheap transportation until they need to be replaced, which is a planned future expense.  If we want assets and not vehicles, we sell one and convert it to investable assets.

I understand we could refinance for a 30 year mortgage, keep a larger 'stache of investable assets and have a FIRE budget with a higher # that includes that mortgage, and this might even be financially superior (probability is higher it is based on historical).  We'd just rather have a smaller budget to cover, and need a smaller 'stache with which to do it.  Keeps things simpler, peace of mind, and we'd like to own our homestead and property, not be beholden to a bank that owns it.

For us it is about the lifestyle choice.  If we ultimately want to change our lifestyle and sell our homestead, obviously we'll get some money.  We'd determine our new FIRE needs based on the lifestyle we want, evaluate our stache' and determine if we have enough money.  If not, reduce expenses by altering the desired lifestyle in ways acceptable to us, or bring in some more money to offset the difference between 4% WR and new expenses, whichever is more desirable.  We don't intend to tap our home equity, we'd rather bequeath it to our offspring, but it is always there as a safety if needed.  And who knows what we'll want in 20 years.  20 years ago I didn't think running a homestead would be my life's joy and ambition.  We'll keep it flexible, that's what freedom is all about.

[MrMoogle]

Opportunity cost of capital + utilities (home) - utilities (rent) + property tax + maintenance  - Equivalent Rent - home appreciation

I made a few modifications.  I wouldn't use the 4% rule for opportunity cost of capital, I'd use 7% if it was in stocks.  Also it's not really equivalent rent, it's whatever rent you would pick if you weren't living in the house.  Then yes as Syonyk said, there are other non-financial aspects too, that are hard to add in.

I like being able to put holes in my wall without worrying about filling them on move out. And changing switches and outlets around if I want. And not having neighbors sharing walls.

That's worth a good bit to me.

It depends how big your holes are, and what changes you're talking about.  I've never had problems with nails in my walls.  And if I cared how my outlet looked, I could change it, then change it back when I left. 

For the sharing wall bit, in my last apartment, the only walls that were shared were my kitchen and bathroom, so if you look, you can apartments that don't share any key rooms.  Then there's always renting a house.

[zephyr911]

Mr. Mustache doesn't account for this opportunity cost in his budget....

Actually, he has addressed this issue in several blog entries, and his stance is that a paid-off house is a great component of a FIRE strategy, DESPITE the opportunity cost. Mathematically, you might see better total returns; from the standpoint of risk management, the 100% predictable nature of the cost savings can still be better for someone preparing to live for decades on investments, especially if you're investing just enough to get by on. A bad run in the market doesn't affect your not having to pay a mortgage.

[getvictor]

You have to live /somewhere/.  If you didn't have a paid for house, you'd be paying rent somewhere.  That's why we ignore the opportunity cost.

Sure, some people live in a $2M hovel in the Bay Area, while others live for free with their parents. Housing is likely the biggest expense for most Mustachians, so let's not simply ignore it.

If I could live for free with my parents for a few years (and also save on daycare since they'll be watching my kid), it'll definitely accelerate my FIRE date.

[fishnfool]

A homeowner can also rent out a spare bedroom to more than cover what you're calling opportunity costs. I've done that in the past, rented to a friend for 3 years. It was a great arrangement and the extra money was sweet!

[phwadsworth]

  For me, the flip side to the "money not invested in greatest gain asset" opportunity cost must be balanced with the reduction in risk, just like when we pay for insurance or invest in  lower yield fixed-income assets instead of equities.  Being dependent on a landlord to renew a lease is a risk.  Tenants are forced to move out sometimes through no fault of their own.  You can greatly reduce this risk by owning your home.  The opportunity cost of having money tied up in a very non-liquid asset is offset by much lower risk to losing your home or having the cost of your home increase.

[Kitsune]

How is everyone dealing with this cost in their retirement planning?

Well... when my husband and I talked about hopes and dreams 7 years ago, we said that, in the far far future when we had enough money to do what we wanted, we would want to move to X small town in rural Quebec, live in a house with 3-4 kids and eventually open up to fostering, have animals (chickens, sheep, goats, and rabbits) and a big garden, spend time at the lake in summer, and read a lot of books from the library. BIG DREAMS. We figured we'd build that house in 20 years and keep working in the city until then.

2 years ago, we had the opportunity to move to that small town (and by 'town' I mean 'it's 1 street wrapped around a lake, with a general store at one end of it') and commute part-time to the city 45 minutes away. So: 15 years ahead of schedule, we live in the place we wanted to live in in our dreams. We stop by the lake on the way home from work all summer. We have our kid and are trying for another. We have a big garden (just shoveled 12 cubic yards of dirt into the boxes last weekend, and ow, my shoulders). The chickens will be coming next week, the sheep the week after that.

Cost:
- Mortgage is about what we'd pay in rent in the city, but we also pay taxes and whatnot on top of that. Opportunity costs for the investment, obviously.
- Costs more to heat a house than an apartment
- We need a car, can't use public transit, and are likely to put about 30K miles on that car every year. WE LIVE IN THE COUNTRY.

BUT:
We're living our 'dream retirement' 15 years ahead of schedule. That's worth some opportunity cost. ;)

[slugline]

Homeownership should represent a reduction in expenses because you are insourcing the responsibilities of landlord and property management. That is what you're supposed to be getting in the opportunity cost tradeoff.

[Kitsune]

Homeownership should represent a reduction in expenses because you are insourcing the responsibilities of landlord and property management. That is what you're supposed to be getting in the opportunity cost tradeoff.

Which works in non-rent-controlled places.

I wouldn't buy in Montreal, for example: I used to rent a 2-bedroom apartment for 950$/month, heating included. A similar 2-bedroom condo across the street was, at the time, selling for about 350K, PLUS heating, taxes, condo fees, and the hassle of repairs. NO THANKS.

[slowsynapse]

When you own your own home, a landlord cannot force you to move out at the end of a lease.  Being forced to move with very little notice can be a reality of renting.  Also, my house payment is literally $1,200 less than what I could rent my house for in our current ridiculous NW markets.

[undercover]

I think you're overthinking this. Whether you rent or buy, once your investments cover your expenses, you're financially free. That's all that matters. Thus, savings rate matters more than whether you rent or buy, or include those expenses in your calculations (because you're not actually paying opportunity costs through cash flow out every month). The difference in someone that owns their own home outright vs someone that rents can largely be accounted for in their net worth allocation.

The person with the paid off home is getting a "return" off their equity per year based on the difference saved between owning outright vs renting. Therefore, it would be silly to say that this house is "costing" me X amount in opportunity costs per year when it's actually saving vs renting. The person renting must have investments elsewhere to cover their cost of renting.

People will generally agree that buying, long term, is better than renting for retired persons since most of their costs (excluding taxes and insurance) are locked in, and better controlled by owning the house. The return on owning vs renting also increases with inflation as rent goes up. A primary home is not an investment in itself (unless counting the difference saved v renting), so opportunity costs are irrelevant.

[Syonyk]

Plus you can save money by doing your own work on things. YouTube makes learning how to do home maintenance easy!

[slugline]

Homeownership should represent a reduction in expenses because you are insourcing the responsibilities of landlord and property management. That is what you're supposed to be getting in the opportunity cost tradeoff.

Which works in non-rent-controlled places.

I wouldn't buy in Montreal, for example: I used to rent a 2-bedroom apartment for 950$/month, heating included. A similar 2-bedroom condo across the street was, at the time, selling for about 350K, PLUS heating, taxes, condo fees, and the hassle of repairs. NO THANKS.

That's a good call in what I would call a broken market! Good thing I used the word "should" instead of "always". LOL

[Northwestie]

I'd say it depends.  You have to live somewhere so you are either tossing money down the rent hole or getting some feedback from investing in real estate if you own.

And appreciation can vary.  In our case we bough the house for $210k in 2000 and recently paid it off.  A similar sized house that needs some fixing was on the market for 8 days and sold for $750k -- but this is the crazy Seattle market.  So hell yea I'd do it again.  Wish I could have purchased two.

[mskyle]

I'd say it depends.  You have to live somewhere so you are either tossing money down the rent hole or getting some feedback from investing in real estate if you own.

And appreciation can vary.  In our case we bough the house for $210k in 2000 and recently paid it off.  A similar sized house that needs some fixing was on the market for 8 days and sold for $750k -- but this is the crazy Seattle market.  So hell yea I'd do it again.  Wish I could have purchased two.

Right, but would you pay market price for your house NOW? If I could go back in time and buy a house in my neighborhood 15 years ago, maybe I would (not sure it would have made sense with all the moving I've done in the meantime). But I did not and now I'm in a situation like Kitsune's Montreal example (only the numbers are $2K rent per month vs. ~$700K for a condo), not because of rent control (my rent has gone up 30 freaking percent this year, which is definitely a disadvantage of renting), just because of insane appreciation. No way would I buy on my street (and I think my landlords ought to sell, but fortunately-ish for me they disagree).

[MilesTeg]

Say I own a $200,000 house with mortgage paid off. How much does it cost to continue living in it?

If I didn't have the house, I could invest the $200K and draw an additional $8,000/year to cover my expenses. This is the opportunity cost of my house.

So from an accounting perspective, the cost of living in my house is $8,000 + taxes + utilities + repairs.
Mr. Mustache doesn't account for this opportunity cost in his budget, which makes his cost of living seem considerably less than it really is.

Now, you could argue that the property value will on average go up every year, making up for the opportunity cost. Yes, it is fair to assume that the property value will keep up with inflation. However, the other factors that affect property values are too unreliable to count on for retirement planning (population growth/decline, state/county/city/HOA politics, economic opportunities in the area, additional nearby development/roads, quality of schools, neighbors, etc.).

How is everyone dealing with this cost in their retirement planning?

Comparing apples to apples, owning your own home is almost always cheaper. By apples to apples, I mean comparing the same house/apartment/etc. either rented or owned.

Rent is almost always more than the total cost of principal, interest, HOA, tax and other costs, because the landlord is using your rent to pay for all of those costs plus usually some margin above that.

it depends somewhat on the local housing market too. In my area rents are pretty out of control. The house next to mine is rented for nearly 3x what the 80% mortgage value is.

Obviously if you are comparing the possible living spaces that you could rent vs the possible living spaces you can buy, you can pretty easily find a place to rent that is a lot cheaper than almost all buyable spaces.

[Northwestie]

I'd say it depends.  You have to live somewhere so you are either tossing money down the rent hole or getting some feedback from investing in real estate if you own.

And appreciation can vary.  In our case we bough the house for $210k in 2000 and recently paid it off.  A similar sized house that needs some fixing was on the market for 8 days and sold for $750k -- but this is the crazy Seattle market.  So hell yea I'd do it again.  Wish I could have purchased two.

Right, but would you pay market price for your house NOW? If I could go back in time and buy a house in my neighborhood 15 years ago, maybe I would (not sure it would have made sense with all the moving I've done in the meantime). But I did not and now I'm in a situation like Kitsune's Montreal example (only the numbers are $2K rent per month vs. ~$700K for a condo), not because of rent control (my rent has gone up 30 freaking percent this year, which is definitely a disadvantage of renting), just because of insane appreciation. No way would I buy on my street (and I think my landlords ought to sell, but fortunately-ish for me they disagree).

That's a good question.  If I were in the same situation - looking to stay put for 20 years or more - yes, I would.  Great neighborhood, etc.  The option would be the 'burbs and commute - no friggin' way.   And rents are on just as steep an upward climb.

[ptgearguy]

There is the lost opportunity cost for sure, but not everything of value is just measured in dollars and cents. I have rented most my life and for me I just don't give a rats arse about rentals. Ilove to garden but have zero motivation when I am renting. I never know when I will need to move or I will find a better deal etc.

I think one of the real benefits of an owned home is that you also invest your life in that spot. Now, this can also be a big disadvantage for some. If you are a strong family oriented person I think it can help add stability to your life.

For myself, I also get a lot of joy tinkering, fixing and doing maintenance on things. It is fun to me.

What I am really saying, is that owning a house is more fun than renting. So for myself it is totally worth it. 

[david51]

My place is paid for. Costs about 400$ a month for everything to live here. Was a rental for 20 years before I moved in.  Paid 193k for it. Worth 950k today. That kind of appreciation is how I deal with the cost of living in my own house.

[Frugal D]

My place is paid for. Costs about 400$ a month for everything to live here. Was a rental for 20 years before I moved in.  Paid 193k for it. Worth 950k today. That kind of appreciation is how I deal with the cost of living in my own house.

Are you including property tax in that $400 per month cost? If so, I'd like to know where property taxes are that low on a $950k house.

[mak1277]

How is everyone dealing with this cost in their retirement planning?

I don't consider home equity in my computation for "how much do I need to retire?".

[MVal]

I contemplate this frequently since I've never owned and wonder if I ever should. Actually, I wonder even about renting my own place as I currently live with a roommate. When I compare with what I'm paying now to even what I'd pay having my own apartment, it seems that my expenses would probably double. Right now I'm paying about $500/mo and that includes ALL the utilities, cable, internet, etc. Renting alone would mean monthly rent of at least $650, I'm sure, plus maybe $200/mo in utility bills and whatnot, I'm guessing. So my housing cost would probably go from about $6200 a year to over $10,000/year if I moved out and rented my own place. I'm really starting to get tired of the roommate situation, although she's a great one. I've decided until I can make an additional $5,000 more per year than I am now, I need to stay put because otherwise I won't be able to max out all my tax advantaged accounts if I rent on my own.

[Cassie]

It is cheaper for us to own then to rent since our home is paid for. Our property taxes are 700.00/year. WE would still have to pay for utilities, etc even if we rented.

[jsstylos]

I’ve been thinking recently about what the best way to compare opportunity cost of home ownership, so I’m glad to see others’ thoughts.

Inflation seems to be constant across owning outright or renting (although not so for mortgages), so the question seems to be what the expected appreciation of the housing market (on top of inflation) is relative to other investments like stocks, and what the variance of the two are. If the housing market appreciates faster than the stock market, then owning will be a good investment (assuming that the taxes, repairs and utilities of ownership are less than rent and utilities), and not owning will likely mean rent increases roughly corresponding to the housing increases.

If the housing market grows slower than the stock market, then owning can still be profitable, but not necessarily so. For example, in our area in eastern Massachusetts, the cheapest house within 10 miles of our work is $250,000, with property taxes around $4,500 a year and combined utilities — gas, electricity, water, garbage — of $4,000 +/- $2,000 a year (not including repairs, with a lot of the cost and variance here coming from heating in the winter). We currently pay (a sub-market rate of) $950 / month including utilities for an apartment 3 miles from work, which means that even if the real estate market and stock market were comparable, we still would not necessarily save money by owning.

There are other factors — we rent a private apartment inside of a house, and while buying would give us more space, the corollary is that it’s not easy to buy a small single dwelling (and the few that exist aren’t discounted based on their size, and often have HOA fees).

Another cost of ownership is the opportunity cost of being able to easily change jobs. The transaction costs of buying and selling mean that, unless we’re interested in becoming landlords, buying may not be financially lucrative, either due to closing costs or income lost by not accepting other job offers.

[Syonyk]

It's a place to live, not an investment.

[tobitonic]

How is everyone dealing with this cost in their retirement planning?

I do it by not viewing my home as an opportunity cost. And frankly, a roof over your head is the default "retirement plan" of the vast majority of people on the globe. A bit of perspective goes a long way.

[Kitsune]

It's a place to live, not an investment.

Depending. If you're living in your dream place and intend to be there until you're too old to live on your own (I'm 32, and that's where I am right now) then it isn't an investment. But if you're in,may, Seattle, or Toronto, or San Franciso, and own a home that's raising rapidly in value, and intend to sell it and retire in the Midwest or a LCOL area, then there's an argument for it being an investment.

That's a really personal evaluation, though - I don't think there's a one-size-fits-all model.

[Miss Prim]

We own our home outright.  We rent out our basement apartment and also pole barn spaces for storage of cars, boats, etc.  We also have enough room to grow most of our vegetables and also raise meat chickens for our consumption.  So the real cost of living in our house is very minimal and it would not be cost effective to sell our house, invest the proceeds and live off of 4%.  We built our house and saved a lot of money doing so and the appreciation alone plus all of the income it produces probably makes it practically free to live here.  I could not do that in a rental house. 

We also own a vacation cottage.  We recently sold one we had and bought one 3 times the size of the old one with 6 bedrooms on 1 1/2 acres with a beautiful lake view.  It is a family cottage and we have enough room now for all of our family.  I am already trying to monetize this one too.  We will probably rent outside storage for shrink wrapped boats in the winter and my daughter has an idea for renting the house out in the spring and fall for scrapbook retreats.  She goes to some already and we would be well equipt with enough space and layout to host these.  Also, we have a separate apartment upstairs with a kitchen and two bedrooms and small living room.  We may put it on Air BNB and sometimes rent it out.  We already have contingency plans for how we can still all fit downstairs and rent the upstairs.  So essentially, this one will also pay for itself and potentially make money.  Meanwhile, our lake is getting more and more popular and property values are increasing.  We have 2 extra lots that are buildable on the back of the property, so when these increase in value, we may sell them off.  It was a win-win situation buying this property.

I really love passive income and buying a house that you can monetize is the best thing going!

                                                                                                      Miss Prim

[Hadilly]

I have seen a lot of posts recently on nextdoor about help needed in finding new rental for an elderly couple or family with kids because their long term landlords died and the heirs are selling. Granted,  I'm in a ridiculous property market,  but if staying in an area long term is a goal, one shouldn't rely on continued access to rentals.

[scrubbyfish]

I owned a very modest house in a lower COL area. My required home insurance (no claims) was close to $3000/yr, ditto property taxes for a total of $6000/yr on those two elements alone. I also had: the mortgage, hassle of tenants, plumbing costs, yard maintenance, etc.

I sold, have been paying $500/mo-$650/mo since, including in "high COL" Vancouver, BC. Currently I'm at $500, all told, no tenants and no neighbours. I definitely prefer this, financially and otherwise.

I agree, though, that my willingness and ability to relocate factors in. (Willingness to stay in one cheap spot also would, but I don't have that willingness. I love relocating.) This said, my willingness and ability to relocate also allows me to buy in a place with $700/yr (like Cassie's) in property taxes.

All factors considered, mobility more than owning vs renting is key to my FIRE.

[The Happy Philosopher]

Say I own a $200,000 house with mortgage paid off. How much does it cost to continue living in it?

If I didn't have the house, I could invest the $200K and draw an additional $8,000/year to cover my expenses. This is the opportunity cost of my house.

So from an accounting perspective, the cost of living in my house is $8,000 + taxes + utilities + repairs.
Mr. Mustache doesn't account for this opportunity cost in his budget, which makes his cost of living seem considerably less than it really is.

Now, you could argue that the property value will on average go up every year, making up for the opportunity cost. Yes, it is fair to assume that the property value will keep up with inflation. However, the other factors that affect property values are too unreliable to count on for retirement planning (population growth/decline, state/county/city/HOA politics, economic opportunities in the area, additional nearby development/roads, quality of schools, neighbors, etc.).

How is everyone dealing with this cost in their retirement planning?

Actually MMM has mentioned several times he considers his house to be about 15k/yr so he is really living off of about 40k rather than 25k, but that's not really all that important.

In my mind here are a few factors to consider in retirement planning(Or at least I think about them):

Inflation: Owning a home is a hedge against inflation in that you have taken an item out of your budget and either eliminated it (paid off house) or fixed it (fixed rate mortgage). You can think of a fixed rate mortgage as shorting the currency you have the mortgage in. Note the taxes, insurance and maintenance costs will increase with inflation. Remember though, every time you hedge against something there is a cost somewhere else on the balance sheet.

Stability: Usually owning a house is a more stable action that renting. It is more likely you will be forced out of a rental than a place you own. The downside is that stability comes with a financial price. There is more time and money involved in selling real estate than there is in just picking up and moving to a new rental. Everyone will see this dilemma differently.

Opportunity cost: Tying up capital in real estate that is not producing income means you are losing the opportunity to put this capital to work somewhere else. There are endless debates about the true impact of this (non-leveraged paper assets vs. leveraged real estate) on these forums and elsewhere.

Liquidity: A house or other real estate has limited liquidity. Sure you can borrow against it, but this is not the same as having non-leveraged paper assets. For most in these forums liquidity is not that big of a consideration.

MAGI: With a paid off house you will need less modified adjusted gross income (MAGI) to cover your expenses, and therefore may glean some increased benefit from ACA subsidies. This is a very complicated topic, but should be factored in.

Non-financial: These are probably the most important. Some people love to rent. Some people love to own. I own because I want stability right now in my life. I don't want to have to figure out housing for the next 10 years. I  don't want to move, change school districts, etc. I'm lazy and I like my life. I pay a premium for that luxury. Maybe that will change and the flexibility of renting will seduce me. Regardless I think me housing costs will probably be lower in retirement as I will simply need less housing (I already have too much).

[FIPurpose]

Ahh good point on the taxes. If you're in retirement, and withdrawing funds, you may save a good bit on taxes by needing to withdraw less. This will depend on your situation, but most mustachians don't seem to be too Roth heavy, so your savings potential could be a few  thousand.

[FIPurpose]

Something else that I often don't see on these discussions is that when calculating "investment opportunity cost" remember that most Americans selling their primary home will do so tax free. Small benefit, but if you're in the long-term capital gains bracket, it can be significant.

[Cassie]

I love to own because I want to personalize the house the way I want it.  Also although our property taxes are low in general they go by the age of the home. So we bought a 1950's home and completely remodeled it and our taxes are dirt cheap. If we bought a new home they would be much more although still a lot less then other states.

[scrubbyfish]

Also although our property taxes are low in general they go by the age of the home. So we bought a 1950's home and completely remodeled it and our taxes are dirt cheap. If we bought a new home they would be much more although still a lot less then other states.

$3000 taxes was on my 1940s home, no upgrades*, in lower middle class land :(

*Every time I wanted to do a simple thing, I had to do a complex one instead. i.e., Replace tub faucet = tear out wall to remove and replace copper plumbing.

[Trudie]

It's a place to live, not an investment.

Agreed.  I choose to live in a house as a lifestyle choice.  At some point I may choose a different lifestyle.  You could maybe argue that it's a forced savings plan, but most people aren't going to get a big "return" on it.

I do think renting would be cheaper, but I enjoy the space we have (for the most part).  Still, I will admit that there are lots of hidden costs of home ownership, and in our case that is the land that came with the house.

[MrsPete]

Don't forget the intangibles that play into the equation.  I've spent the majority of my life in a home of my own, but recently I spent the night in my college daughter's apartment, and it made me remember some negatives about apartment living -- and I'm not talking about money at all:

- Her rooms are tiny; she has only a love seat in the living room and two bar stools at a counter in place of a table.  Her full-sized bed fills her bedroom.  True, not all apartments are this small, but the ones I lived in did tend towards smaller than the house in which I now live. 
- The walls are thin.  Throughout my stay, I could hear her neighbors opening /closing doors, using the toilet, taking a shower.  No one was loud or rowdy, but I was always aware that other people were nearby.  Likewise, we heard cars coming /going and doors opening /closing.
- The neighbors were smoking pot, and we were definitely aware of it, especially in the kitchen, the room that "backs up to" the other apartment. 
- She shares a parking lot.  On weekends when people have guests, she often ends up parking waaaay across the lot. 
- She lives on the third floor, which means she has to haul groceries, etc. up those stairs on a regular basis.
- She has cheap appliances.  They're in working condition, which is all the apartment complex promises, but the dishwasher is so loud that they wait til they're going out to start it.  The stove is old and icky.  Likewise, she has cheap kitchen cabinets that don't close well. 
- She has to carry her garbage across the complex to throw it away in a community dumpster. 

To balance out these negatives, she does have access to a pool and hot tub and a nice work-out room. 

[scrubbyfish]

^ Though this compares more "small unit in multi-family urban dwelling" vs "detached house on large lot" vs owning/renting. A lot of us are renting houses, renting large units, renting in rural areas, renting units far apart from the closest occupied dwelling, etc.

Heaps of renters aren't in small units within multi-family urban settings. Conversely, when I owned, I had tenants above and below me and a (detached house-owning) neighbour partying not 30' from my head every night.

[BTDretire]

I'd say it depends.  You have to live somewhere so you are either tossing money down the rent hole or getting some feedback from investing in real estate if you own.

And appreciation can vary.  In our case we bough the house for $210k in 2000 and recently paid it off.  A similar sized house that needs some fixing was on the market for 8 days and sold for $750k -- but this is the crazy Seattle market.  So hell yea I'd do it again.  Wish I could have purchased two.

I found some online calculators and checked your growth rate, about 8.5%.
 I was thinking that was good but not great, until I checked the stock market growth,
it turns out the market was at a peak in 2000 and a terrible time to invest.
 If in the year 2000 you had invested $210,000 in the S&P it would be a little more than
$400,000. Even worse if invested in the Nasdaq about $260,000. This all really surprised me.
 2000 was just a terrible time to invest.

[Sofa King]

- The neighbors were smoking pot, and we were definitely aware of it, especially in the kitchen, the room that "backs up to" the other apartment. 

OH GOD PLEASE NO........NOT THE EVIL WEED!!!!  : )

[Syonyk]

OH GOD PLEASE NO........NOT THE EVIL WEED!!!!  : )

It's possible to support legalization and still think the stuff stinks like someone lit a field of decaying skunks on fire.

[electriceagle]

Homeownership should represent a reduction in expenses because you are insourcing the responsibilities of landlord and property management. That is what you're supposed to be getting in the opportunity cost tradeoff.

Which works in non-rent-controlled places.

I wouldn't buy in Montreal, for example: I used to rent a 2-bedroom apartment for 950$/month, heating included. A similar 2-bedroom condo across the street was, at the time, selling for about 350K, PLUS heating, taxes, condo fees, and the hassle of repairs. NO THANKS.

That's a good call in what I would call a broken market! Good thing I used the word "should" instead of "always". LOL

Be careful. Rent controlled jurisdictions (just about?) always include a continuous political battle between landlords who want to either raise rent on existing tenants or evict so that they can bring in new tenants, and tenants who want rents to stay the same and for evictions to be impossible.

Politics is notoriously fickle. If you are renting a place that is dramatically under the market, the politics only need shift once for you....

[Kitsune]

Homeownership should represent a reduction in expenses because you are insourcing the responsibilities of landlord and property management. That is what you're supposed to be getting in the opportunity cost tradeoff.

Which works in non-rent-controlled places.

I wouldn't buy in Montreal, for example: I used to rent a 2-bedroom apartment for 950$/month, heating included. A similar 2-bedroom condo across the street was, at the time, selling for about 350K, PLUS heating, taxes, condo fees, and the hassle of repairs. NO THANKS.

That's a good call in what I would call a broken market! Good thing I used the word "should" instead of "always". LOL

Be careful. Rent controlled jurisdictions (just about?) always include a continuous political battle between landlords who want to either raise rent on existing tenants or evict so that they can bring in new tenants, and tenants who want rents to stay the same and for evictions to be impossible.

Politics is notoriously fickle. If you are renting a place that is dramatically under the market, the politics only need shift once for you....

In Montreal, changing tenants means a slight increase in rent, but that's also regulated. And he only way a landlord can make you leave is to either move in themselves or a member of their immediate family, or take you to the Régie and prove that you're either not paying rent or that you're destroying the property. It is a VERY renter-friendly place, and I wouldn't want to be a landlord there, but it doesn't make sense to buy in that environment. So... I rented for 10 years, and bought in the country near another city now that I don't need to be there for work.m

[MrsPete]

- The neighbors were smoking pot, and we were definitely aware of it, especially in the kitchen, the room that "backs up to" the other apartment. 

OH GOD PLEASE NO........NOT THE EVIL WEED!!!!  : )

I'd rather not be around such things, and it's easier to avoid in my own single-family dwelling.