What Our House Actually Cost

This was the “back-of-the-envelope” analysis (to which I’d previously alluded) that convinced us to buy a house in Fresno for the duration of Stephanie’s 3-year doctoral program.

Estimated Costs
(over 3 years, as a % of purchase price)
Commission 6.0%
Property Tax (~1.27%/yr) 3.8%
Insurance (~0.33%/yr) 1.0%
Closing Costs at Purchase 0.4%
Closing Costs at Sale 1.2%
Total 12.4%
Purchase Price $340,000
Cost per Month $1,171

My overall picture of the cost of homeownership was pretty fuzzy until I put that table together. I wasn’t ignorant of any one part, but the novelty of owning a house for a fixed period forced me to consider the purchase, ownership, and sale costs at the same time. We planned to finance the purchase with the net proceeds from the sale of our condo in 2017, hence the absence of mortgage interest. It bears pointing out that even without a mortgage, a $340k house burns over a thousand dollars per month! Estimating appreciation and opportunity cost would have been speculative over such a short time frame, so I ran the numbers as though we’d sell the house for exactly what we paid. Of course that outcome represented a kind of worst-case scenario, but it also allowed me to directly compare the cost of owning with renting, which was the obvious choice given our circumstances. I discovered that purchasing a $340k house and then selling it 3 years later for $340k would actually save us $15,000—at least compared to renting a 2-bedroom apartment for $1,600 per month.

( $1,600 - $1,171 ) × 36 months = $15,444

However, once we had committed to the purchase, reality began to diverge widely from our original assumptions. Right off the bat, we knew we needed to renovate the master bathroom, so it wasn’t that big of a leap to consider renovating the hall bath as well. I thought I might tackle the kitchen at a later date, but I convinced myself to let the professionals handle it. And the fact that they’d need to open so many walls gave us a rare “window” of opportunity to replumb the entire house. Which is how we found ourselves reviewing a general contractor’s proposed $216k renovation budget (that we whittled down to just under $150k). The proverbial paint on the renovations was not yet dry when the pandemic hit, most of which I spent overhauling our quarter-acre lot’s landscaping and irrigation. All we could do was hope that each subsequent improvement would make the house that much more irresistible to a future buyer, and maybe, just maybe, we’d recoup some of what we put into it.

Which of course begs the question, how much did we put into it? I realized early on that I needed to track every single penny that went into the house, so that when we eventually sold it (we closed on the sale in mid-September), I could say with complete confidence what it actually cost. Every month I would download the transactions from our credit card statement, cross-reference them against a small pile of Home Depot receipts, and tally them in a spreadsheet. The table below summarizes that effort, and somewhat remarkably, even after investing a breathtaking $206k in the house, the “cost per month” ended up only $4 higher than my original estimate (and still much cheaper than renting, which by then was pushing $2,000 per month). Hitting that estimate was not entirely luck; my recordkeeping helped inform how we priced and marketed the house, and what we ultimately recouped. I would have loved to breakeven (let alone turn a profit), but we were pushing the upper limit of what the Fresno market would bear, especially given the prevailing economic headwinds circa July–August 2022. Many prospective buyers told our agent that though they loved the work we’d done, they wanted something with more square footage—which amused us, as we always felt the house was a little too big.

Actual Costs
(over 3 years, 6 months, and 7 days)
Lodging (during inspections) 393
Inspections (home, pest, pool, hvac, sewer) 903
Closing Costs (recording, escrow fees) 549
Total 1,845
HVAC Repair, Termite Treatment (at purchase) 4,172
Contractor Renovation 148,690
Owner Improvements 31,020
Landscaping and Irrigation 21,603
Termite Treatment (at sale) 250
Total 205,735
Homeowners Insurance 3,392
Umbrella Insurance 735
Property Taxes 15,065
Total 19,192
Lodging (during open houses, private showings) 800
Inspections (home/pool, pest) 655
Commission (6%) 33,000
Closing Costs (title fees/insurance, transfer tax) 3,265
Total 37,720
Sale Price 550,000
Purchase Price -340,000
Cost of Purchase, Renovation, Ownership, Sale -264,492
Rentback (3/6/19–4/11/19) 1,810
Rebate for Gas Fireplace Insert 3,000
Cost -49,682
Cost per Month $1,175

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