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The Cost of Buying a Home: Projected Improvements

This article was written by in Real Estate and Home. 5 comments.

Last week, I cited an article in the Wall Street Journal outlining the true cost of owning a home over 30 years, which includes much more than just the mortgage. The main issue within the article is a warning to those entering retirement counting on not much more in the way of savings other than the equity in their house. It also outlines how the home you live in cannot be considered the great investment many people tout it to be. Remember, we’re not talking about income-generating rental properties, this is the house you live in, the house you must maintain.

The author of the article, David Crook, drew a lot of commentary about his figure for projected “major repairs and improvements.” His expectation for this category is $300,000, and many seem to feel this number is too high for repairs and upgrades over 30 years. Without knowledge of his methodology, I assumed that this included interest costs on the typical home equity loan that the average owner of today’s $300,000 house would take to finance these improvements. That’s not the case.

Since there was such a vocal dispute over the number, I emailed the author to see if he could provide some details. I’m happy that he has done so. The journalist drew upon his own experience owning homes in California, New York, and Connecticut, a 35-year history of working on fix-up houses, and data from RS Means to come up with the numbers. I’m satisfied with his details, which I’ll summarize here.

The important point is that the figures assume the $290,000 house is purchased today with a 20% down payment and owned for the next 30 years. The costs draw upon the average number and types of improvements one might expect to be made on a house over the next 30 years, with future costs adjusted for inflation. Here are some of the repairs and improvements the typical house will see.

* Two mid-level roof replacements (repair).
* Three exterior paint jobs (repair).
* Two HVAC / furnace systems (repair).
* New kitchen (improvement).
* New bath (improvement).
* Master suite or family room addition (improvement).
* Modest lawn/patio upgrade (improvement).

The repairs are almost guaranteed to be necessary over the course of owning a house over the next 30 years, while the improvements will see more deviation from house to house. Some will have fewer, while some will have much more. As I mentioned above, the costs Crook outlined for each of these expenses takes inflation into account. I won’t reprint all the details, but as an example, the two mid-level roof replacements are estimated at $20,000 for today’s improvement (about average) plus $40,000 twenty years from now.

Taking all of the figures into account, Crook expects the total paid for repairs and improvements, taking inflation into account, will range from $316,000 to $466,000. The details behind the numbers make the chart published in the Wall Street Journal look conservative.

Updated February 10, 2011 and originally published March 21, 2007.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 5 comments… read them below or add one }

avatar 1 Anonymous

This is actually one of the biggest things I tell friends buying or contemplating buying a house. Maintenance and repairs/replacements, even on a new or relatively new house, WILL be substantial. Our house is ten years old or so. The previous owner of four years was very handy and maintenance-oriented. And in the seven years we’ve owned the place, we’ve replaced a water heater, had to repair the air conditioner and furnace both, had a flooded basement two-and-a-half times (twice caused by burst pipe and once by rain)…well you get the idea. Talking to other homeowners, this is typical.

We haven’t even gotten to the things that make up the bulk of Crook’s estimate – kitchen and bathroom improvements and roofs. I’m depressing myself.

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avatar 2 Anonymous

Thank you for sharing this information. I struggled to explain the $300k number when I read the article; it’s an important detail to make the analysis work as the author describes.

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avatar 3 Anonymous

if he’s adding in a kitchen, bath and another room, he’s basically paying for half of a new house.

the plumbing in a new kitchen and bath is every expensive.

But i still don’t see how he’s better off renting as oppossed to buying. If he moved from a small house to a much larger house his rent would go up too.

I understand & believe his numbers, but I’m still not buying the argument. :-)

If you can rent for the close to a mortgage payment, you should definitely buy a house.

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avatar 4 Anonymous

I’m no expert, but i have rented an apartment for 5 years, on the low end, but very well-kept property in Midwest – about $450 – $500 a month. My electric bill is the only extra, between $90 and $14 a month, depending on the season. I am also only bringing home less than $30,000 a year net. I have helped various persons with their own home improvements, and i have come to the same conclusion as WSJ & Flexo.

Yes, it’s a 1BR, but very bearable, and just what i need. I am able to save at least $200 a week to invest. I have seen how tempted I would be if i owned a home to spend at least half of that every week on home furnishings, gas bills, home repairs, and taxes. I know my rent will go up, but i’ve known numerous people whose mortgage payments have gone up, their taxes have gone up, etc.

While my situation is modest, in my situation renting seems like a good way to go, and i could easily save up for a house that i want to “end up” in eventually, paying outright for it after saving and investing for the next 10 years. That would be at LEAST a $104,000 home in 10 years, which is still modest, but quite nice.

For those of us who need to move frequently for work or volunteer work, renting definitely is NOT a way to throw money away. And a lot less worry. Just my opinion. vb

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avatar 5 Anonymous

I bought a one car garage ten years ago and it was only $20 a month. Now after 10 years it has cost me $500.000. Did I get giped or what? Oh, I forgot , I added 5 bedrooms ,4 baths, a inground pool, and a tennis court. I guess I just should have parked on the street and saved all that money.

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