Scary House Numbers

Yesterday, I was at a Lunch and Learn for first time home buyers. (I am not a first time home buyer, but we helped organize the session so I stayed to listen.) A cool 'rule of thumb' that was mentioned was that every $100,000 of house costs about $500 a month, in rent or mortgage. Obviously this is pretty rough, since changes in down-payment amounts can really change monthly mortgage payments, but I did find it pretty accurate in a more general sense. When I added up the total rent paid from all three of the units in the house I live in, it would suggest that it has close to a million dollars in value, which is about what I have seen similar places in my area selling for. Sadly, when I also look at what I am currently spending for Rrunuv Bayit and translate that to what I could afford in house value - I can't even buy a condo in Toronto and keep my mortgage payment comparable to what my rent is right now.

The second interesting number-ratio-rule thing that was discussed was putting aside money for repairs, maintenance, and general house upkeep once you own a property. The mortgage broker and real estate agents that were running the session suggested 1% of the value of your home per year put aside for maintenance. Then, last night, I was watching Til Debt Do Us Part, and Gail Vaz-Oxlade (who I have been in love with for a very long time, she really is the greatest) told a couple that they should be putting aside 3% to 5% of their house value per year. This might be because the show was filmed about 10 years ago when house values were different or that the state of repair and age of the house is an important consideration.

I have created my own 'rule of thumb' related to maintenance and upgrades, I think that for every 25 years of age of a house the owners should save (and then spend) 1% of the homes value on repairs and renovations. This would mean that a newer home would cost less and an older home should be getting more frequent and expensive upgrades.

I am going to use my parents as a rough example for my new theory. (The numbers are very very rough seeing that I live in Toronto and don't really have any concept of small town Ontario or cottage country housing costs, so please don't even consider these numbers estimates, they are more like uneducated guesses.) So, when living in a 'century home' in Paris that was worth let's say $200,000 a lot of money should have been put into upgrades (and I think it was, looking back on my childhood, it was spent in pretty much a constant state of house renovations.) The house was slightly over 100 years, so that would be 5 sets of 25 years, so 5% of the value meaning  $10,000 a year. That would mean a new roof, or saving for a couple of years for a new kitchen, but basically it would cover large projects. Now, they live in a brand new place down at the beach, possibly worth $400,000 meaning that 1% a year is $4,000. There aren't a lot of large repairs to a new house (or at least there shouldn't be) and it would be silly to upgrade something that was just built (especially in my parent's case since it was custom to their specifications.) However, $4,000 could pay for a small plumbing repair, or save up to upgrade appliances, large bathroom fixtures, fireplaces, or built-in features.

I really like numbers, and ratios, and rules, and everything to be cut and dry - black or white. (Yes, I know reality isn't like that, but I really wish it was.)