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Is Your House A Money Pit?

Posted by: Chris Palmeri on August 10, 2009

money and house.jpg, a company that links home owners with local contractors, has come up with a formula to figure out if your house is a money pit. According to a survey the company did, 23% of Americans believe they are spending way too much to keep their house maintained.

According to ServiceMagic., if you are spending more than 2% of the home’s value annually on repairs——then you’ve got a money pit.

“Everyone’s going to have a bad year when the furnace goes out and the roof needs to be repaired,” says David Lupberger, a former remodeling contractor and now ServiceMagic’s Home Improvement Expert. “But when things keep happening, at some point, you have to stop what you’re doing, take a step back and objectively ask yourself – is this worth it?

ServiceMagic came up with other categories besides Money Pit. A house is a Sinkhole if your repair costs are between 1.6% to 2% annually. It’s just a Drain if it’s from 1% to 1.5%.

Here’s a list from the same source of typical home expenditures in the first year after a purchase. These numbers seem low to me. I’m not sure how much roof you can get for $1,376, for example. That won’t even cover a garage. It’s all a good reminder though that those monthly mortgage payments are just the beginning of your costs when you buy a home.

Flooring $1,457.40
Roofing 1,376.35
Heating/Air $1,238.01
Appliances $846.40
Wall Repair $695.98
Plumbing $685.09
Paint $561.60
Electrical $516.51

Reader Comments


August 10, 2009 4:32 PM

The link to ServiceMagic is broken. Looks like you have some weird characters in there or something.


August 10, 2009 9:36 PM

My guess is that the cost numbers include both repairs and installations, which would drive the price down. For example, I just had a minor roof repair completed for $250.

I wonder how ServiceMagic would classify my house, given that I've spent almost 10% over 2 years? An "abode abyss"?

tom h.

August 11, 2009 12:45 AM

Unless there's an identifiable structural problem with the house, the homeowner is usually the one digging the money pit. Some people are just appalling housekeepers.


August 12, 2009 2:46 AM

Contrary to what Palmeri, your real estate agent and the NRA propaganda say about real estate investment as a good investment, the fact is that all homes are a money pit; some are just bigger than others. In addition to the eight expenses cited above, there are other cost such as: property tax, fire insurance, gardening, termite abatement, and other regular wear and tear on rugs, curtains, and hard floor surfaces. If owning a home can lead to riches, why would any American bother to work? Buying a house and transforming it into a home is foremost for the purpose of raising a family, not for get-rich-quick speculation. Like the several Wall St scams called derivatives, default swap, and structured investment vehicles, real estate speculation also collapsed because it too was based on lies. Those in the NRA, real estate business or the media whose livelihood depends on perpetuating the lies will masquerade their propaganda as truth; some even call it worthy BW journalism.


October 27, 2009 2:54 PM

I moved from a beautiful 2bdrm 2bthrm new apartment to an old house that was built in the 1950's (which my grandmother lived in when my mum & her siblings were small). My dad bought this "money pit" at an auction. At the time it seemed very cute & perfect for me and my son, but little did we know that I should have kept my apartment. My parents looked at it once & because it was going up for sale at auction they had no time to actually check it out inside & out. It has no central heat or air, only old, old propane heaters that they don't even make anymore, very scary & very dangerous. There are ac units in a few rooms but none of them worked for very long & instead of placing them in windows like a normal person would do, the previous owners cut holes in the walls & stuck them there since none of the windows even open! The windows are just single payne glass. There is 1 window in the dining room that opens & 3 windows upstairs but none of the other windows thruout the house open. The kitchen floor had to be redone since the linoleum was set on top of the original wood floors & the fridge had leaked & rotted the wood floors out underneath the linoleum. There is no insulation in the house except for that asbestos stuff that looks like kitty litter that fell out of the walls after ripping out some carpet in one room & removing the baseboards. I had no idea what it was & actually thought that it was litter until I kept vaccuming it up & it kept falling out of the wall. I later found a picture of it in a magazine & then looked it up on the internet. The wiring has never been replaced in the home since it has been built & half of the outlets thru-out the house don't even work. The previous owners had added on a den a extra bedroom and enclosed a porch which is like a sunroom. The seams on the roof & ceilings where the new roof connects the old parts of the roof on the house are leaking everytime it rains. I know have holes, literally holes in the ceiling in each of these rooms. This is because my lovely father only put fire insurance on my house & just a few months ago the insurance co. contacted me & told me that we need to redo my insurance policy, I had no idea my dad had just fire on my home! So I can't file thru insurance to get a new roof & get my ceilings fixed since they will see that the damage has been there for quite some time & probably won't cover it. The enclosed porch or sunroom as you call it still has the what was once the outside flower bed in it & from this I have had 2 snakes inside my house! The first one I found stuck in my hot water heater & was just a small garden snake about 12in long & he had hooked himself on a screw at the base of the heater & gotten to hot being next to it & died. Now the second one my cat found alive in the kitchen one evening while me and my son were cooking dinner. It was "very alive". Polly my cat at the time was staring very intently underneath a kitchen hutch cabinet & would mew at me when I asked her what was wrong. I had in the past seen a mouse or two in the house, so I guessed it was either a mouse or a bug or spider. I move the cabinet away from the wall & there behind it is a huge bullsnake ready to strike. He was btwn 4-5ft long & not very happy that I had disturbed him. I had my son watch him while I went outside to find a shovel to kill him with since I couldn't shoot a gun in the house! There is a half wall abt. 3ft tall btwn the kitchen & dining room & when I made it back inside with the shovel it was going over this half wall & my son was on top of the cabinet. None the less, I killed the snake & am currently house-sitting for my mom & stepdad & do not live at my money-pit house since there is no way me being a single mom that I can ever afford to fix it up where it would be energy efficient or safe for us to live in. Maybe some day it will just burn down from all the electrical problems or a twister (we live in Central Oklahoma) will come thru town & blow it away, lol! Although I love the layout of the house & I can see it being all fixed up & new but it just isn't going to happen in my lifetime. I would greatly advise anyone that is considering buying an old fixer upper not to do so unless they check it out first to see what they are getting themselves into. =D


March 9, 2010 5:06 PM

I like what that one guy said about real estate being an "investment"! He's right houses don't age like wine and demand a lot of upkeep. It's just like cars, but for some reason homes go up in value as they age and rot!
Wierd world we live in.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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