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How to Budget for the Costs of Owning a House

Dear Ali;
I'm wondering if you have any suggestions on how I can put together a budget for the costs associated with owning a home. My husband and I live in a co-op apartment where we pay our mortgage, maintenance (which includes real estate taxes) and ConEd, cable, and phone bills. I'm trying to figure out how much, if anything, we'll save if we move to a house in the suburbs. I'm really stumped by utility costs, annual maintenance costs and other things like water and garbage pick-up, if you pay separately for those things.
A: My first piece of advice to potential homeowners is always this: marry a plumber.

Since it's probably too late for you to do that, I appreciate the care and consideration that you're trying to bring to this problem by figuring out in advance what your expenses will be.

It's a tough exercise because houses always break in unexpected ways -- be sure to watch the Cary Grant/Myrna Loy comedy Mr. Blandings Builds His Dream House before you do anything -- but I think the following expenses are the biggest:

  1. Maintenance. Your co-op dues currently cover the cost of repairing your building's facade, replacing the roof every 30 years or so, and getting your heating system cleaned out. For a house, the expenses are more irregular -- when the basement floods you have to take care of it, stat!
    However, I found that I ended up spending between 2 to 4 percent of my house's purchase price every year on a combination of big repairs (the roof that my inspector said would last for another decade didn't), small repairs (getting the gutters cleaned twice a year) and renovations (updating a tired bathroom). Even on years when you don't have to spend this much, try to budget and bank it, because sooner or later your boiler will fail, trust me.
  2. Property taxes. This is a tricky one, too, because if the economy's good, property values in the neighborhood rise, and so do property taxes. If the economy's bad, the local municipality starts running out of money, and they come looking for it -- by raising property taxes. That said, the last boom was especially bad. I bought a house at the beach for around $400,000 in 2003. By the time I sold it five years later, its price had gone up 50 percent -- but its $5,400 taxes had nearly doubled. So all you can really do is look at homes in your price range, see what their taxes are currently, and add a fudge factor. Since the economy is lousy and local governments are broke, I'd budget a rise of 10 percent a year from whatever "average" number you're looking at.
  3. Utilities. Cable and telephone aren't really as much of a concern here as heating and cooling. I think the fairest way to figure this out is house-by-house. As a real estate agent, I say it's perfectly okay to ask the current homeowners to show you their heating and/or air-conditioning bills. Asking for twelve months' worth seems a little invasive, so go for whatever is most pertinent: In Phoenix, asked to see the electric bill for running the air conditioners, and in Buffalo, ask to see the gas bill for running the heat.
  4. Gardening and landscaping. Not to scare you with the fact that this wasn't even on your list, but unless you have your own captive teenager, you're either mowing the lawn or paying someone else to do it. That's even before we get to big jobs that require "tree doctors." While you can maybe get it done for less, a hundred bucks a month during the growing season should cover you, depending on ...
  5. Water costs. Let's thrown in other municipal-type charges here, like garbage pick-up and sewer. You'll also probably meet your local firefighters and get hit up by them for donations, and it's hard to say no when you meet friendly faces. Again, this is a town-by-town thing, so ask current homeowners what their bills are, or go on our sister site Urban Baby and ask the moms in your target city what they pay for water, garbage, and sewer.
  6. That's the list, I hope it helps. You can see I'm cheating a little by letting you fold some renovation costs into your house maintenance budget. If you want to compare apples to apples, you'll have to take a stab at what it would cost to do renovations if you stayed in your co-op for a decade. Roughly, roughly, roughly figure $30K-$50K for a new kitchen and $15K-$20K for a new bath.

    If everybody wants to refine those numbers by telling me how much better their contractor is and how he/she can do it cheaper, be my guest.

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