Buying Is Just the Beginning. What Does It Really Cost to Own a Home?

Most people underestimate the cost of maintenance and repairs, as well as the resale value of any upgrades they’ve made to the property. That makes the historically poor investment return on residential real estate even worse.

The only upgrade I’m willing to make on my current home is the free $8,000 heat pump courtesy of the Inflation Reduction Act.



The usual rule is make improvements you will enjoy or a new buyer will pay for.

Marketability does require keeping up the basics. Discount on run down property can be large.

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As opposed to the historical poor investment return on rent?


That’s why you do a rent vs. buy calculation. It’s very rare to find a single-family residence that’s going to deliver the price appreciation of the S&P 500. I’m fine with buying when that rare opportunity presents itself, otherwise I’m a renter and I’m going to keep my down payment invested in the stock market.


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I don’t know. I have a real life experiment going on in the condo development where I now reside. 20-year-old units are selling like hotcakes, but the difference in sales price between units sold as-is with the original appliances and decor and those upgraded to the latest fashion and standards don’t appear to be completely covering the remodeling costs. Maybe it would be break-even if you did all the labor yourself, but who does that?


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I’ve heard of a number of studies that say the best remodeling improvements only return something like 80% or 90% of their cost in resale value. And tha’st just the best projects. Many are down at 50% or less.

That tells me you should never do a remodel project unless it is an improvement that you will use and enjoy while you live in the house.



Retailers routinely say that paint and carpet (or new floor coverings) give the best returns. For most that’s $5K or so and well worth it. The $30K remodel is questionable. But might be ok if you plan to live there five years or more.

Usually a well maintained home sells better. In a hot market it may not matter. And pay back might be hard to identify.

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It really depends on and varies a lot with location. I have made a lot higher % return in residential real estate than in securities by

  1. Seeing where housing prices are going up and comprehending why so as to judge if the effect will be in place for years or only a little while. E.g., buying a view home in a relatively depressed section because of soon passing problems (E.g. old druggie hippies, retired film industry wookies who were living out there last days and not doing home maintenance) in the Hollywood Hills. Similarly anywhere near but not right on a beach in Los Angeles area.
  2. Carefully thinking through and strategically implementing up-marketing remodels but doing the work your self on the cheap making sure you have time and money resources to do the job right and on schedule (and you have to know some carpentry, plumbing, electrical, painting treatments or learn it!)
  3. Having good taste a little ahead of its time (not hard if you have friends who know their stuff).

david fb


Most likely the idea of doing expensive (mostly cosmetic?) remodels comes from the real estate agents. Newly remodeled means sells faster, not necessarily sells for enough more to cover the remodel costs. To a realtor sells faster means more sales per month which means they make more. Period. Even if the seller doesn’t net as much.



Of course, just another thing to consider when you do your “rent vs. buy” analysis.


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Someone else can do the numbers, if they want. It’s morning and I haven’t had coffee yet. But here’s what’s just happened in my neighborhood. Two houses, sold within two months of each other.

One, nicely kept, remodeled kitchen, painted throughout, landscaping tended, went for $675k. The other, owned by an elderly single woman, no improvements in the 40-year-old house, no landscaping, bought by a flipper who is now tearing it apart almost to the bones, went for $197k. People in both houses for approximately the same amount of time, both left so the elderly owners could retire to a retirement home.

I have no idea what the original prices were, but pretend they were close to comparable.

Across the years if you had paid rent, it would have kept going up, and at the end you have nothing. Presumably both of these owners had mortgages and both were paid off. (I don’t know the particulars, obviously.) In one home there were no additional expenses save food, energy, & basics, and in the other you had those plus “upkeep”, including a large remodeling which expanded the kitchen and (yes) added a modest swimming pool. (The wife had serious muscular & nerve issues, so the pool was both medical and an oasis for someone who could not travel easily.)

The third scenario is “rent”. Having been a landlord, I was thrilled to have renters who paid my mortgage and the associated living costs, including heat, water, energy, etc, and at the end I wound up with a million dollar condo (since sold.) The renters? Well, they got a place to stay, and the price kept going up over the years.

Don’t forget to include “terminal value” when you do the rent vs buy calculation. Having a many-hundred-thousand dollar payday is good for something, I’ll say.


Doesn’t this depend on the numbers and what you did with the money? For example, if the rent was $500 bucks a month less than buying, and you invested that $500 into an S&P index fund for 40 years, how much would you have “at the end”?

Obviously, the majority of people, even if they do the calculation in the first place, will spend that remaining $500 rather than invest it. That’s one of the non-number-related benefits of buying, the forced savings via paying down a little of the equity each month over the period of the amortized loan, and thus the eventual decline to zero balance.

Most other modern countries have formal “forced savings” plans that are directly deducted from ones paycheck, in the USA, all forms of savings are optional. I’m not sure which is better, but sometimes it appears that forced savings has a better end result for the wide swath of average people in the middle.

I suppose in the overall value calculation, you would also have to account for whatever enjoyment the renter described above got from spending that extra $500 a month.

The other HUGE benefit to owning a home is that it is the only common asset (“common” in the sense that nearly everyone has access to it) that allows a very large leverage multiple. You can’t buy S&P500 index funds with 20% down over a 30-year period. If you could, you would have MASSIVE gains at the end of that 30-year period. But when buying a home, you can routinely put 20% down, yet end up receiving 100% of the increase in equity after 30 years.


I’m not. People just can’t comprehend the effect of putting your 20% down payment in an index fund for the next 40 years vs having it tied up in a home appreciating at inflation plus 1%. The difference is massive.

Of course, as MarkR states, you have to actually invest the rent savings in the stock market. Most people will just spend it.



True. But do the calculation. Whats $100,000 earning 1% real per annum after 30 years vs. $20,000 earning 6%? Answer: $135,000 vs. $115,000.

Now add in the 30 years of what you saved by renting vs. maintaining a home for 30 years. Plus, real estate doesn’t always go up. You don’t want to be holding a leveraged investment in a down market.

I know I’m not going to convince anyone, but if you add up all the costs, it’s very rare to get an S&P 500-like return on a US single-family residence – even with “leverage”.



Where are you getting 1% for 30 years? 30 yr average for home value appreciate is 4.5%.

And how is that an argument for investing in the stock market - that doesn’t always go up?

You don’t have to, just stop using MUS for your argument.

But you get to keep 100% of the appreciation of the home, not just the 20% you put down. In the meantime, you also get to keep the imputed value of rent. In my case, about one year of imputed rent is now equal to the original 20% down payment.

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I’m sure there were some periods when the rent I got was less than my mortgage payment, but not many. Interest says “Oh but the maintenance”, but I can assure you I wasn’t paying for the maintenance, the tenants were, they just didn’t see the bill from the plumber/electrician - it came to me. I paid it out of their rent.

Meanwhile, as syke points out, I was getting 100% appreciation on my 20% outlay, and even if you point to the bank’s vig (as so many do) even that was being paid by the tenants.

Yes, all the standard caveats apply: you can lose money with a bad investment (a house or condo) just as you can with a bad company, and a bad tenant is as detrimental as a bad CEO. But on the whole, it’s a pretty good game to be in - which is why so many are.

Oh yeah: and MAJOR tax advantages at cash in time.

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If it is your primary residence by the time you sell it to move elsewhere it is often a swap minus $50k to sell and buy again if not a lot more in taxes and fees.

We create wealth to afford a home more than our homes create wealth.

In my area when 2008 rolled around the McMansions were crushed going from $2 million to hovering at $1.2 million give or take for a few years. The mortgages were a mess. now in 2023, we are back to $2 million.

Investing in RE is either a numbers game with a very large number of rents or timing.

I have a friend who has flipped 21 houses in rougher neighborhoods. He never really made money. As an immigrant, he fell into it and had to later escape it. He became a home inspector. His now ex-wife became a RE broker. She was a hard sell that he does not flip houses going into mid-2007. He had no clue the markets would shatter. I saw it coming.

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Goofy, I think you are discussing something different than the rest of us are discussing. Buying real estate and renting it out is usually an excellent investment with nice returns. It was aptly described (I think here on this board a few decades ago) as “a very low taxed low effort second job”. What the rest of us are discussing is the calculations between owning a personal residence or renting a personal residence.

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Yes, I understand that perfectly. All I’m saying is when someone advocates “renting”, what they’re really doing is “paying somebody else’s mortgage” instead of their own. At the end of the rental period they have nothing. If you own a house, even just a year or two later you have some equity which usually, not always, can be sold or traded for money in your pocket. The longer you rent, you end up with the same equity: zero. The longer you own; you end up with more.