ServiceMagic.com, 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.
Wall Repair $695.98
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.