Estimating the Expenses of Owning Property
Because the cost of owning and maintaining property varies by region, city, and sometimes neighborhood, hands-on research is invaluable. Whether you are interested in buying a residence for yourself, a vacation property, or an investment property, the time to start gathering information is before you consult a lender about prequalifying and becoming preapproved for financing. The following sections describe some of the steps you should take.
Get to know the neighborhoods where you want to buy like the back of your hand. If there's a street you like, a school you want to be near, or public transportation you want to keep handy, start getting to know individual properties in the area. Go online. Many newspapers and local governments keep databases that provide past home-sale data on particular addresses so you can start getting an idea of what those properties would price at today.
Even if you're not thinking of buying a particular property, if it's in your target area and up for sale, go to the open house. The open-house information sheet will give you an idea of heating costs and taxes on that property, which may give you an idea about similar costs for other properties. Keep in mind, however, that some of those household operating costs could be underreported. Some sellers might provide additional information, such as the age of appliances or when the roof and furnace were replaced, which will help you determine if you need to negotiate the cost of replacement of such expensive items into a future bid you make for any property. In any case, an open house gives you an opportunity to ask the agent hosting the open house questions about the neighborhood. He or she may not tell you everything, but even a refusal to answer gives you information.
If you already know people in the neighborhood, or if you see someone outside working on their yard, be friendly. Introduce yourself and, without becoming obnoxious, see if the person knows anything about the property you're interested in. Friends of the seller might be reticent to speak, but you might find a neighbor who knows if there were major repairs on the property or other factors to be wary of. It's a good way to find out general information about the neighborhood as well.
Your city, county, or state attorney general's Web site may provide online access to crime rate information. If not, call the local public library reference desk and ask if they have access to local statistics. Why? Higher crime can mean a neighborhood you want to avoid entirely. At the same time, if a neighborhood is on the verge of renewal, you might score an attractive purchase price on a property that will be worth far more in the future. Of course, you would be balancing your personal safety, your insurance costs, and your lender's willingness to take a chance against the hope of significant gains in the future. It's a gamble, but this information is also an important factor in determining property value and expenses.
If you are thinking of doing anything to a property you want to buy, check with the municipality to get an idea of what permits or restrictions might apply to that work. Reliable brokers will tell you if a property has landmark status or certain building restrictions. If you suspect such a situation might be the case, check with city hall before you buy.
If you've never spent much time in a home superstore or plumbing supply center, start wandering around and see how much things cost. You're going to be spending a lot of time there after you buy, so start getting the hang of pricing.
Talk to friends and acquaintances with property similar to that you'd like to buy. Ask them politely about what they pay for annual maintenance and sudden repairs. (Maintenance expenses are particularly important since they save a lot more money down the road.) Start writing down the names and phone numbers of repairmen, contractors, and home services they recommend so you'll have people to call for various jobs when you finally buy.
Are any extensive construction projects planned for your street of choice? Sewer repairs? Is this an older neighborhood where developers are buying smaller homes and tearing them down to build “McMansions” that you don't want to live next to? Get to know what the insiders know — it could mean that your prospective home is worth more or less.
