In this post I will not ask you to not have a house of your own. This post will simply state a few expense that you will be incurring when you are a home owner, probably unknowingly, over your house. Just be aware of them and see if you can somehow put a plug in the hole.
After getting the money to finally purchase a house for yourself, the best advice you will give yourself and the best advice you will get from family and friends will be to buy the absolute best house that your money can buy. Following this advice, you look for the best location to buy your house; some of the things you look into include the neighborhood and all it has to offer in addition to the views you will get among other amenities.
Before buying the house, you might have thought that buying a house is easy, simply look for the one you like, pay for it and its all yours! Unfortunately, oftentimes, being a house owner comes with a few headaches of its own, top most being losing money on it, especially since a house is supposed to let you earn money not lose it!
A look at ways in which your house is losing you money:
1: Through taxes
Picture a scenario where you bought a house to make a statement, a house that will show whoever cares to look that you paid top-dollar for it. You figure, let me buy the house at today’s price, sometime down the road, I will be able to sell it for a profit, after all it is a glamorous house in a glamorous neighborhood.
Unfortunately with the house come taxes, which ultimately mean you are losing money on your house.
Take an example of a house bought at $400,000 in an up-scale neighborhood. Depending on the city in which it stands, there is a percentage price levied on properties, meaning that if yours is levied at 2% for example, then when you make calculations, you will have paid over your purchase price.
As if that is not enough, when you finally decide to list your property, the listing prices of other properties may not measure up to your asking price, since they cost less, this means that you will ultimately have to drop the price or take it off the market!
2: Through Interest Expenses
This is especially for the case of people who don’t buy the property with upfront payment from themselves, because unfortunately, the average person may not afford a house all on their own minus making use of a mortgage. Your house may also lose you money through interest expenses.
In other words, your interest expense will relate to the cost of borrowing money.
3: Through Upkeep
Your house needs to be maintained, especially if you desire to sell it off later in life. With maintenance comes money spent, which equates to money lost. Granted there are also scenarios where in the long-run, the money you spend on maintaining your house will pay off at bigger rates.
Every year, you will need to shell out money that will go towards maintaining and repairing your house. With this being the case, you might want to think real hard before purchasing that really expensive property, because its upkeep may end up costing you an arm and a leg.
In your calculations, you might come to realize your maintenance and repair budget equals a heart-stopping percentage of your principal and interest payment.
On the flip side, for a house that is purchased for investment purposes, it is assumed that it will grow in value over time. This may not be the actual case if you consider that in America, home values go up to approximately 4% on any given year.
4: Through Energy Leak
As described in a previous post is energy leaking through your window, leaks and tears are responsible for heat leak during winter and higher AC bills during summer months. More the rooms and more the windows are in your home, there more chance of energy leaking.
Now if you factor in inflation which will mean an increase in maintenance costs that always equates to 1% of the home’s value, then technically, your house only gains 3% per year.
There are other ways you may lose money being a home owner. These are just a few. Readers what other expenses you may incur due to your negligence or otherwise?