The Cost of Home Ownership

There are many expenses associated with buying a home, and a lot of them are “hidden” expenses that you don’t realize until it’s too late. We will quantify everything so that you can make a more informed decision when purchasing a home.  In all, we will consider the following cost elements of home ownership:

  • Mortgage Payments
  • Property Taxes
  • Homeowner Association Fees
  • Homeowners Insurance
  • Opportunity Cost
  • Private Mortgage Insurance
  • Utilities
    • Heating/Cooling
    • Electricity
  • Water Bill
  • Trash Service
  • Maintenance
  • Commuting
  • Appliances
  • Furniture
  • Yard Care
  • Transaction Costs

To start off, let’s look at a sample of home ownership options:

Now let’s dig a bit deeper at each cost element of home ownership to understand why our average house in L.A. costs so much (and how Chris Farley was living the cheap life in his van down by the river).

Mortgage Payment

The expense associated with a mortgage payment is fairly easy to calculate. The more expensive of a home you purchase, the larger your mortgage payment will be. The relationship between purchase price and mortgage payment is 1:1 linear. In laymen’s terms, this means that your mortgage payment increases at the same rate as the purchase price of your home. For instance, the mortgage payment on a $200,000 home will be twice the mortgage payment of a $100,000 home. A rather boring graph of the relationship between the amount of a mortgage and the mortgage payment is shown below:

Note: We showed payments assuming a 4.4% interest rate and 30-year term, but the linear relationship between principal amount and mortgage payment holds true for all interest rates and time periods.

One unusual feature of mortgages is that interest payments are tax deductible. This can make paying for a larger mortgage cost less (per dollar of house value) because of the interest deduction. However, when you deduct interest payments, you have to itemize your deductions which takes away the standard deduction. In 2017, the standard deduction for single filers is $6,350 and for joint filers it’s $12,700. This means you have to pay $6,350 or $12,700 in interest deductions before you can reap any tax benefits (because you first have to make up for the lost standard deduction before you realize any benefit).

In order to pay $6,350 in interest payments in the first year, you must have a mortgage of around $140,000 (using a 4.5% interest rate on a 30-year mortgage). In order to pay $12,700 in interest, you’d need a mortgage of around $280,000. Therefore, you need a fairly large mortgage to qualify for the deduction.

Below is a graph which shows the “payment before tax benefit” and “payment after tax benefit” for single and joint filers that are in the 25% tax bracket.

For expensive homes, mortgage payments no longer have a 1:1 linear relationship with the mortgage value. Instead, you start to only pay 75% of the interest that exceeds your standard tax deduction. This means that if you buy a house that is 50% more, your payments won’t go up by 50%. The exact amount must be calculated directly, but using the examples from above, if a single filer goes from a home valued at $200,000 to $400,000, the mortgage payment would usually double, but with the interest rate deduction, the payment is only 1.86 times the original payment.

This is by no means an endorsement to spend more money on your home. You shouldn’t spend a dollar to save 25 cents. However, it is interesting to note that the interest rate deduction causes expensive homes to cause less per dollar of principal.

Alternatively, you can skip a mortgage and pay for a house in full if you have enough capital. In this scenario, you “save” money by not paying any interest on a loan. However, the full payment has an associated opportunity cost. If you had taken your home payment and invested it in the stock market, then you could have investment gains on the capital. We’ve written a whole separate article Should You Buy Your House With Cash or Pay Off Your Mortgage Early since this is a complicated issue.  For this analysis, we will just assume you have a mortgage.

Calculation: Mortgage Payment

Below are the mortgage payments for each of our properties assuming a 20% down payment, 4.5% interest rate, and 30-year term:

House Market Value Mortgage Payment
Van Down By The River $5,000 $0
Small House (Arizona) $125,000 $505
Big House (Arizona) $250,000 $1,010
Beach House $300,000 $1,212
Small Apartment (Manhattan) $600,000 $2,423
Average House (Los Angeles) $900,000 $3,635

Property Tax

Property tax is a function of two home attributes:

  • Market Value
    • The higher the market value of your home, the more in property tax that you’ll pay.  Generally, if you double the value of your home, you’ll also double the property tax paid.
  •  Geography
    • Property taxes can vary by state, county, and city.  And property taxes can vary by a lot.
      • In a state like Arizona, you might pay $1,500 annually in property taxes.
      • In a state like New Jersey, you might pay $8,000 annually in property taxes for a similar home (no, we’re not kidding)

We have a separate article titled The Best and Worst States for Taxes which goes into taxes by state in detail if you’re interested. For the purposes of this article, let’s use the table below which shows the median property taxes paid in each state for owner-occupied homes:

State Median
New Jersey $7,625
Connecticut $5,472
New Hampshire $5,408
New York $4,982
Illinois $4,354
Massachusetts $4,106
Vermont $3,920
Rhode Island $3,905
California $3,548
Wisconsin $3,323
Maryland $3,267
Alaska $3,260
Texas $3,223
Washington $2,867
Pennsylvania $2,856
Oregon $2,710
Nebraska $2,666
District of Columbia $2,649
Maine $2,500
Michigan $2,325
Minnesota $2,266
Ohio $2,250
Virginia $2,209
Iowa $2,118
South Dakota $2,069
Kansas $2,001
North Dakota $1,884
Florida $1,808
Montana $1,792
Colorado $1,560
Georgia $1,506
Utah $1,488
Missouri $1,485
Nevada $1,472
North Carolina $1,461
Hawaii $1,423
Arizona $1,401
New Mexico $1,400
Delaware $1,326
Idaho $1,290
Oklahoma $1,286
Wyoming $1,277
Kentucky $1,233
Tennessee $1,174
Indiana $1,154
Mississippi $1,047
South Carolina $936
Louisiana $911
Arkansas $835
West Virginia $737
Alabama $603

If you’re looking to minimize property taxes, you’ll want to move to a state with low property taxes and buy a low value home in that state.  Or if you move to a state with low property taxes, maybe you don’t need to buy a low value home.  An expensive home in Colorado will have lower property taxes than an cheap home in Connecticut.

Calculation: Property Tax

Although property taxes are usually determined by a “property tax rate”, it can be difficult to determine the base to which the “property tax rate” applies.  The base should be the market value of the home, but sometimes there are “assessed values” of the home by the government which don’t come close to the actual market value.  Therefore to determine the property taxes of each home, we will look data from the American Community Survey, which includes information about the median real estate taxes and the median real estate value (using a more consistent definition of real estate value than local governments).

Van Down By The River: Since we live in a van down by the river (illegally), then we don’t have to pay any property taxes.  Score one for the average Joe!

Small House (Arizona): On owner-occupied homes, the median real estate tax in Arizona is $1,401 and the median real estate value is $194,900.  This translates to an effective tax rate of 0.72% on the market value of homes in Arizona.  Since our home is priced at $125,000, then the property tax will be $125,000 * 0.72% = $900 per year.

Big House (Arizona): Using the real estate tax rate derived in the previous example, the property tax will be $250,000 * 0.72% = $1,800 per year.

Beach House (Florida): On owner-occupied homes, the median real estate tax in Florida is $1,808 and the median real estate value is $173,500.  This translates to an effective tax rate of 1.04% on the market value of homes in Florida.  Since our home is priced at $300,000, then the property tax will be $300,000 * 1.04% = $3,125 per year.

Small Apartment (Manhattan): The property taxes for our small apartment will be paid in our HOA fees.  However for completeness, we can try to calculate the expected taxes on our apartment. On owner-occupied homes, the median real estate tax in New York is $4,982 and the median real estate value is $299,500. This translates to an effective tax rate of 1.66% on the market value of homes in New York. Since our home is priced at $600,000, then the property tax will be $600,000 * 1.66% = $9,981 per year.

Average House (Los Angeles):  On owner-occupied homes, the median real estate tax in California is $3,548 and the median real estate value is $427,700. This translates to an effective tax rate of 0.83% on the market value of homes in California. Since our home is priced at $900,000, then the property tax will be $900,000 * 0.83% = $7,466 per year.

House Market Value Property Tax
Van Down By The River $5,000 $0
Small House (Arizona) $125,000 $900
Big House (Arizona) $250,000 $1,800
Beach House (Florida) $300,000 $3,125
Small Apartment (Manhattan) $600,000 $9,981
Average House (Los Angeles) $900,000 $7,466

Homeowner Associations Fees

A homeowner association (HOA) is a corporation formed by real estate developers for the purpose of managing an area of homes.  Depending on the duties of your HOA, they may be responsible for maintaining common areas, landscaping yards, or another of number of other functions related to maintaining the look and feel of the neighborhood.  In condos located in urban areas, the HOA fee may even include property insurance, property taxes and property management staff.

When purchasing a home, the HOA fee will be disclosed upfront.  From a cost perspective it’s generally better to avoid HOAs because they can spend money without your consent (they may just need a majority of homeowners to agree to an expenditure), and the HOA may make unsound financial decisions, but in many cases HOAs are unavoidable.

Calculation: Homeowners Association Fees

We are going to assume that none of our single family homes are located in a neighborhood with an HOA.  However, our apartment in the city will be forced into an HOA.  The HOA fee will include common property insurance, property taxes, management staff, and general building maintenance.  Using real estate listings in New York, we found that a typical HOA fee for a $600,000 apartment in New York was $900.

Homeowners Insurance

The cost of homeowners insurance is based on a lot of home attributes, people attributes and even pet attributes.  Below is a description of the some of the most important attributes that determine the price of your homeowners insurance:

  • Home Value
    • A more expensive home results in more expensive insurance because it will cost more to replace the home in case of damage
  • Geography
    • If you live in an area with severe weather, such as a lot of rain or hail, then your roof (or other parts of your home) are more likely to get damaged and your insurance rates will be higher
    • If you live in an area where catastrophes occur (such as tornadoes, hurricanes or earthquakes), then your insurance will cost more because of the risk a catastrophe will destroy your home
    • If you live in a flood area, you will also probably have to buy flood insurance from the government, which can be costly
  • Credit Score
    • A better credit score results in less expensive insurance because people with better credit scores trend to have less insurance claims (perhaps due to their increased level of responsibility)
  • Presence of a Wood Burning Stove
    • Many house fires are started because of a wood burning stove.
  • Construction Material
    • Some construction materials are more resistant to fire, which will lower your insurance rates
    • Roof material will also play a key role in your insurance rates.  A more sturdy roof material will result in lower priced insurance
  • Age of Home
    • A new home will have newer materials which are more resistant to all types of hazards.
  • Claims History
    • If the home has a history of insurance claims or you personally have a history of insurance claims, you may pay more for your homeowners insurance
  • Pets
    • Certain breeds of dogs, such as Pit Bulls, may cause insurance rates to be higher

Calculation: Property Insurance

We’re going to use the average insurance premium in a state, and the average home value, to determine the insurance premiums for each home.

Van Down By The River: We don’t have any property insurance on our van, but we do need to buy car insurance.  We’ll use the average auto insurance premium across the U.S. in our analysis, which is $900 per year.

Small House (Arizona): The median real estate value in Arizona is $194,900 and the average home insurance premium is $700 per year.  Since our home is smaller than the average Arizona home, we’ll assume that we pay $500 per year.

Big House (Arizona): Using the statistics from the previous example, and the fact that our home is a bit bigger than the average Arizona home, we’ll assume that we pay $900 per year.

Beach House (Florida): The median real estate value in Florida is $173,500 and the average home insurance premium is $2,000 per year.  Since Florida is exposed to hurricanes, home insurance is fairly expensive in Florida.  Our home is right on the beach, too, so we should expect to pay a lot in home insurance.  After doing some research into actual insurance quotes for homes near the water, we found that we should expect to pay at least $4,000 a year for our home next to the beach.

Small Apartment (Manhattan): The HOA fees charged by our apartment complex will include insurance for common property areas (which means all of the property outside of your apartment and surrounding it).  However, we will still need to buy condo insurance to cover the personal property inside our apartment and for guest liability purposes.  Condo insurance rates range between $100 to $400 a year nationally.  Considering our apartment is in Manhattan, we’ll assume that we are paying somewhere near the top end of that range ($400).

Average House (Los Angeles):  The average cost of homeowners insurance in California is $1,000 per year.  Our home is a slightly bigger and more expensive than average, so we will assume that we pay $1,200 per year.

House Market Value Insurance
Van Down By The River $5,000 $900
Small House (Arizona) $125,000 $500
Big House (Arizona) $250,000 $900
Beach House (Florida) $300,000 $4,000
Small Apartment (Manhattan) $600,000 $400
Average House (Los Angeles) $900,000 $1,200

Private Mortgage Insurance

Private mortgage insurance (PMI) occurs when you put down less than 20% of the home value as a down payment.  (There are some types of loans which don’t require PMI even with a small down payment.  However they are usually hard to qualify for.  If you can qualify for one of these loans though, we would recommend them.)

PMI is usually a percent of the home value (between 0.5% and 1.0%).  For instance on a $200,000 home, PMI may cost $2,000 per year.

PMI should generally be avoided.  PMI is a type of insurance that is to the benefit of the lender instead of you, even though the mortgage holder has to pay for the insurance.  Sometimes it might make sense to pay PMI if you believe the real estate market is going to appreciate in the near future and you’re looking to get into the market at current prices, but you don’t have a 20% down payment.  However, most of the time PMI is a fee to be avoided.  In our analysis of home costs, we’ll assume that you make a 20% down payment on a home and therefore don’t have to pay PMI.

Opportunity Cost

When you decide to purchase a home, instead of rent, you’ll have to make a rather large down payment on the home. Therefore, you have to consider the lost investment income from the down payment funds.  Below is a table that shows the lost investment income on a down payment of $40,000 for different investment return assumptions:

$40,000 4% $1,600
$40,000 6% $2,400
$40,000 8% $3,200
$40,000 10% $4,000


In order to minimize the opportunity cost associated with your down payment, you can:

  • Purchase a less expensive home (so that a lower down payment is required)
  • Put down the minimum down payment possible (while avoiding Private Mortgage Insurance)

Calculation: Opportunity Cost

We will assume a 20% down payment on each home (in order to avoid PMI) and use 6% as our “investment return lost” each year:

House Down Payment Opp. Cost
Van Down By The River $5,000 $300
Small House (Arizona) $25,000 $1,500
Big House (Arizona) $50,000 $3,000
Beach House (Florida) $60,000 $3,600
Small Apartment (Manhattan) $120,000 $7,200
Average House (Los Angeles) $180,000 $10,800



Variables that determine the cost of heating and cooling your house include:

  • Square footage
  • Local energy costs
  • Local energy requirements
  • Quality of insulation
  • Thermostat type
  • Desired temperature inside home
  • Temperature of hot water heater
  • Home type
  • Ceiling height

Square Footage

Your heating and cooling bill is directly related to the square footage of your house. For example, if you have a 1500 square foot house and your heating bill is $100 in one month, and then you doubled your house’s square footage, your heating bill would also double. (Some heating bills have fixed costs, such as a $5.00 delivery cost, so your heating bill may not exactly double, but the actual energy usage on your heating bill would double.)

Local energy costs

The energy costs in your area can have a big effect on your energy bill.  We hate to keep beating up on the Northeast… but natural gas prices in Connecticut are 50% more than in Illinois.  Below is a table showing the average natural gas price per thousand cubic feet by state.

State Natural Gas Price
Hawaii $40.08
Florida $19.55
Arizona $17.04
Maine $16.79
New Hampshire $16.18
Georgia $14.62
Vermont $14.56
Rhode Island $14.24
Alabama $14.13
Massachusetts $13.02
South Carolina $12.65
Delaware $12.62
Connecticut $12.50
Oregon $12.43
Maryland $12.03
District of Columbia $11.98
Nevada $11.82
Washington $11.80
Virginia $11.64
Missouri $11.60
Arkansas $11.58
North Carolina $11.57
California $11.39
New York $11.20
Pennsylvania $11.04
Louisiana $10.91
Kentucky $10.87
Texas $10.62
West Virginia $10.48
Oklahoma $10.24
Kansas $10.17
Utah $9.72
Mississippi $9.70
Alaska $9.64
Tennessee $9.62
Ohio $9.51
Wyoming $9.33
Indiana $8.92
Nebraska $8.86
Michigan $8.81
Minnesota $8.79
New Mexico $8.63
Idaho $8.59
Wisconsin $8.54
Iowa $8.51
New Jersey $8.32
South Dakota $8.30
Colorado $8.27
Montana $8.26
North Dakota $8.15
Illinois $7.97

Source: U.S. Energy Information Administration

Below is a table that show the average electricity cost per Kilowatthour by state:

State Electricity Price
Hawaii $27.54
Alaska $21.02
Connecticut $19.95
New Hampshire $18.93
Rhode Island $18.89
Massachusetts $18.74
New York $18.28
Vermont $17.78
Maine $16.28
Michigan $15.77
Delaware $15.50
New Jersey $15.29
Maryland $15.19
Wisconsin $14.76
Pennsylvania $14.40
California $13.94
District of Columbia $13.50
Minnesota $13.24
Kansas $13.12
New Mexico $12.59
Alabama $12.56
Illinois $12.54
South Carolina $12.39
Ohio $12.28
Iowa $12.27
Indiana $12.24
South Dakota $12.18
Arizona $12.16
Nevada $12.06
Colorado $12.01
West Virginia $11.89
North Carolina $11.78
Wyoming $11.56
Montana $11.35
Virginia $11.25
Florida $11.20
Georgia $11.07
Oklahoma $11.03
Texas $11.00
Oregon $10.98
North Dakota $10.90
Kentucky $10.83
Nebraska $10.80
Utah $10.69
Mississippi $10.66
Tennessee $10.63
Missouri $10.40
Idaho $10.31
Arkansas $9.85
Washington $9.58
Louisiana $9.33

Source: U.S. Energy Information Administration

Local Energy Requirements

In the previous section, we saw that energy costs varied a lot by state.  However, perhaps an even bigger component of your energy bill is not the rate per energy unit, but the amount of energy that your home uses.  For instance, natural gas may be really expensive in Florida, but it doesn’t get very cold on the beaches in Florida, so homes don’t require much natural gas in the winter.

Rather than discuss energy consumption by state, we’re going to skip ahead to the answer that you really want to look at: energy bills by state.  This will be a combination of energy cost, which we looked at in the previous section, and energy consumption.

Source: U.S. Energy Information Administration

Once again, places in the Northeast end up at the top of the list.  This is probably due to high energy costs and high energy consumption (due to severe winters) in the Northeast.  Places like California, where there is warm weather and sunshine, end up at the bottom of the list.  Then there is a place like Colorado, which does have winters and requires a lot of natural gas to keep houses warm in the winter, and it ends up at the bottom of the list because of the low price of energy.

As you can see, climate plays an important role in determining energy costs. The U.S. Energy Information Administration also summarizes the average energy bill by climate type:

Quality of Insulation

According to, the average home has enough air leakage that it adds up to a 2 foot x  2 foot hole in the house.  That’s equivalent to leaving a small window open in your house all day!

Air leakage is one type of way in which our home leaks energy.  In all, here are ways in which your home might be leaking energy (and money):

  • Air Leakage
    • This can be present in doorways, windows, outlets, fixtures, ducts, and fireplaces.
  • Insulation Type
    • Different types of insulation can be installed in walls, attics and floors.  Professionals use a figure called the “R-Value” which measures the quality of your insulation.  A higher R-Value results in a higher quality of insulation which better keeps warmth (or cooling) inside your home. When your home was constructed, it may have used insulation with a lower R-Value value (to save money) or it might just be an old house that doesn’t have the benefits of newer types of insulation.

Improving insulation in your home can reduce your energy bills by 5%-30%.  If you live in a cold climate with high energy costs, such as New Jersey, then your energy bill could be $3000 annually. In this situation, improving your insulation could save you between $150 to $900 annually.

To improve your insulation, you first need to assess whether your home is insulated well.  This can be done through a self-assessment or through a professional assessment.  Many local energy companies offers free energy audits, so you might want to check with your local utility company to see if these are offered for free.

After the assessment, you can either hire a professional to make the identified energy improvements or try doing it yourself (just make sure you know what you’re doing or it could cost you more in the long-run).

Thermostat Type

According to

You can save as much as 10% a year on heating and cooling by simply turning your thermostat back 7°-10°F for 8 hours a day from its normal setting. The percentage of savings from setback is greater for buildings in milder climates than for those in more severe climates.

A programmable thermostat, or a smart thermostat, will adjust the temperature in your house while you are away or asleep.  Plus, it will adjust the temperature back to the normal temperature before you get home or wake up.

In addition, your local utility company might pay for the cost of a programmable thermostat, which means that the upfront cost of the thermostat may be zero.  Annually, a programmable thermostat can lower your heating and cooling bills by up to 10%. If you live in a cold climate with high energy costs, such as New Jersey, then your energy bill could be $3000 annually. Therefore, buying a programmable thermostat could save you $300 annually.

Desired Temperature Inside Your Home

Your heating or cooling bill will be based on the temperature you desire in your home.  For instance, you’ll pay more if you want it to be 72 degrees in your house in the winter instead of 65 degrees.  But how much more?

The amount of money you’ll save by adjusting your thermostat depends on the temperature outside and the desired temperature inside.

To explain this concept, let’s use an example:

  • Outside temperature: 32 degrees
  • Desired inside temperature (current): 72 degrees
  • Desired inside temperature (to save money): 68 degrees
  • Percent savings from adjusting temperature = (Current Temperature – New Temperature) / (Current Temperature – Outside Temperature) = (72-68)/(72-32) = 10%

Assuming a heating bill of $200 in the winter from keeping the thermostat at 72 degrees, you should expect to see a savings of $200 x 10% = $20 per winter month by adjusting the themostat down by 4 degrees.

A good rule of thumb is that you’ll save 2% to 3% on your energy bill for every degree that you turn down the thermostat in an extreme climate (where inside temperatures and outside temperatures differ by 40 degrees or more).

A more exact table of savings from one degree adjustments is shown below:

10 10.0%
20 5.0%
30 3.3%
40 2.5%
50 2.0%
60 1.7%
70 1.4%

Temperature of Water Heater

Believe it or not, your water heater could probably be set at a lower temperature.  Manufacturers usually set temperatures too high.  Here is an excerpt from about this subject:

Although some manufacturers set water heater thermostats at 140ºF, most households usually only require them to be set at 120ºF, which also slows mineral buildup and corrosion in your water heater and pipes. Water heated at 140ºF also poses a safety hazard—scalding.

Savings resulting from turning down your water heater temperature are based on two components: reduced standby losses (heat lost from water heater into surrounding basement area); and consumption (from water demand or use in your home). Set too high, or at 140ºF, your water heater can waste anywhere from $36 to $61 annually in standby heat losses and more than $400 in demand losses.

So you can save $460 annually from just adjusting down the temperature on your water heater.  In order to this, we would recommend trying to adjust your water heater’s temperature down as much as possible.  Experiment with different settings and try to have it at the lowest settings – while still getting hot water of course.

Home Type

Your home type is another factor in determining energy costs.  By home type, we are referring to whether you live in a single-family home, duplex, or apartment building.  If you live in a single-family home, you will be responsible for heating and cooling all four walls of your home.  On the other hand, if you live in an apartment building, you may benefit from the heating or cooling of all of the apartments around you.  This could dramatically lower your energy costs.

Ceiling Height

If your home has tall ceilings, this will increase the energy costs in your home.  The standard ceiling height is 8 foot, but many newer homes are being built with 10 foot homes.  If you increase the height of your ceiling, you’re increasing the amount of space that needs to be heated.  For example, a house with 10 foot ceilings will cost 25% more to heat than a home with 8 foot ceilings since there is 25% more effective area in the house to heat.


Let’s look at the main sources of electricity usage in the average home:

  • Cooking, refrigeration, and freezers
  • Televisions, DVRs, and other entertainment systems
  • Heating and Cooling
  • Laundry
  • Lighting

In the previous section, we already looked at the cost of heating and cooling homes, so we’re going to skip analyzing this source of electricity.

My initial thought is that the other main sources of electricity don’t vary as much based on your home.  You’re going to have similar sized cooking ranges, refrigerators, televisions, and washing machines in each type of home. Assuming that you turn off lights in rooms that you’re not using, then lighting costs among different sized homes will be similar.  Although a house with larger rooms may require more lights.  In addition, a larger backyard or front yard might require more lighting to keep lit at night.

However, if you look at data from the Residential Energy Consumption Survey, you can see that electricity use does vary a lot by home square footage:

It’s unclear if increased electrical usage in higher square footage homes is from heating and cooling costs, or other uses.

One logical determinant of electricity usage in a home is the number of household members.  When you have more people in the household, they will be taking more showers, cooking more meals, turning on more lights, etc.  We can refer to the Residential Energy Consumption Survey again to determine the electricity consumption by number of people in the house:

In short, the electricity consumption of your home will depend on its square footage and the number of people in the household.  There are other variables to consider, such as the type of light bulbs in your house and the energy efficiency of appliances, but for our analysis, we’ll consider that independent of your type of house.

Calculation: Utilities

We’ve used the average energy bill in each state, along with adjustments based on the house characteristics discussed above, to calculate the estimated utility bill for each home:

House Square Footage Utilities
Van Down By The River 50 $0
Small House (Arizona) 1,250 $125
Big House (Arizona) 2,500 $200
Beach House (Florida) 2,000 $167
Small Apartment (Manhattan) 600 $70
Average House (Los Angeles) 1,750 $120

Water Bill

The amount of water that your home uses is based on a few characteristics:

The cost of water is based on your state and/or local municipality. Using data from Circle of Blue, we found that the following areas had the highest water bills and usage:

  • California
  • Nevada
  • Georgia
  • Washington state

The lowest water usage and bills were in these states:

  • Wisconsin
  • Michigan
  • Colorado

Calculation: Water Bill

Using data on average water bills by state, along with our home characteristics, we calculated the water bills as follows:

House Water Bill
Van Down By The River $0
Small House (Arizona) $25
Big House (Arizona) $35
Beach House (Florida) $20
Small Apartment (Manhattan) $
Average House (Los Angeles) $60

Trash Service

The cost of trash service varies by area and need.   Trash services can cost anywhere between $0 to $100 per month.  The cost of trash service increases when you require a larger trash bin.  By owning a larger house, you are more likely to need a larger waste bin, which can increase the cost of home ownership.  In addition, the number of household members is also a contributing factor to the amount of trash produced.

A larger trash bin can cost an additional $12 to $70 more.  A survey of one trash service found the following rates:

 Garbage Bin Size   Cost Per Month 
 20 gallons $25
 32 gallons $38
 64 gallons $66
 96 gallons $95

For our analysis, if you have a small house, we will assume that you can handle a 20 gallon bin.  If you have a large house, we will assume a 32 gallon bin.  If you have a condo, we’ll assume that trash service is covered in the HOA fee.

Calculation: Trash Service

House Trash Bin Size Cost
Van Down By The River None $0
Small House (Arizona) 20 Gallons $25
Big House (Arizona) 32 Gallons $38
Beach House (Florida) 20 Gallons $25
Small Apartment (Manhattan) N/A $0
Average House (Los Angeles) 20 Gallons $25


The general rule of thumb is to budget 1% of your home value each year for the cost of maintaining your home.  We will use this rule of thumb for each type of house except for condos.

When you own part of a condo, generally the HOA is responsible for maintaining the outside of the building which is where most of the maintenance comes from.  Therefore, the biggest costs of maintenance should be covered by your HOA fee.  However, there are still costs of interior maintenance, such as interior walls, water heaters, plumbing, refrigerators, washers, dryers, flooring, or other inside materials.  For condos, we will budget 0.5% of the market value for maintenance projects each year.

In addition, because our home in Los Angeles and a lot of the market value is based on the land, and not in the house, we will only budget 0.67% per year for home maintenance.

Calculation: Maintenance

House Market Value Maintenance
Van Down By The River $5,000 $50
Small House (Arizona) $125,000 $1,250
Big House (Arizona) $250,000 $2,500
Beach House (Florida) $300,000 $3,000
Small Apartment (Manhattan) $600,000 $3,000
Average House (Los Angeles) $900,000 $6,000


When purchasing a home, you have to consider the commute that it creates:

  • Single Family Homes:
    • You can usually purchase a single family home for less money that is further away from the city center, but this will generally results in a longer commute.  This will results in paying more for gas, more for car maintenance, and also take time away from your life because you’re stuck in traffic.
  • Apartments or Condos:
    • If you buy an apartment or condo that is a walkable distance to your work, then you can cut down on commuting costs.  Alternatively, you can also take the subway or train if you living in a large enough city.

Calculation: Commuting

For each of our single family homes, we will assume that you own a car to commute to work.  Our car costs are based on our own analysis of The Cost of Owning a Car.

For our apartment in Manhattan, we’ll assume that you commute to work by Subway and don’t own a car.  Therefore, the apartment in Manhattan has lower commuting costs.

House Monthly Commuting Cost
Van Down By The River $0
Small House (Arizona) $300
Big House (Arizona) $300
Beach House (Florida) $300
Small Apartment (Manhattan) $120
Average House (Los Angeles) $300

Appliances, Furniture, and Yard Care Tools

When you purchase a home, you generally need to supply your own appliances (Refrigerator, Washer, and Dryer).  For each home, we’ll assume the appliances cost $3,000 in upfront costs.

In addition, you’ll need to fill your house with furniture.  And the bigger the house, the more furniture that your home will require.  In general, it costs about $5,000 to fill one room with furniture. If you’re frugal, you can certainly spend less per room. If you’re into luxuries, you can certainly spend more per room.

Finally, if you have a yard that you need to take care of, you’ll need to buy tools.  Lawnmowers, edge trimmers, shovels, rakes… the costs add up quickly.  For each single family home, we’ll assume that you need to purchase yard care tools at a cost of $500.  Plus, you’re going to be putting time in on the weekends yourself to take care of the yard.  (Or, you can pay someone to take care of the yard, but that’ll be even more expensive.)

Calculation: Appliances, Furniture, and Yard Care Tools

House Furniture, Appliances & Tools
Van Down By The River $0
Small House (Arizona) $23,500
Big House (Arizona) $43,500
Beach House (Florida) $33,500
Small Apartment (Manhattan) $13,000
Average House (Los Angeles) $28,500

Transaction Costs

When you purchase a home, you may have to pay the following transaction costs:

  • Fixed Fees
    • Loan Application Fee ($300)
    • Title Search or Title Insurance Fee ($500)
    • Lender’s Attorney ($250)
    • Appraisal ($250)
    • Inspection ($250)
    • Survey ($200)
    • Recording Fees ($100)
    • Transfer Taxes ($500)
    • Buyer’s Attorney ($1200)
  • Variable Fees
    • Loan Origination Fee (1% of purchase value)
    • Points (1% of purchase value)

Overall, this adds up to a fixed fee of $3,550 and a variable fee of 2% of purchase value.

These fees may differ by area, and some fees are negotiable.  However, these are the fees we will be using for our analysis and they should be approximately correct for our home purchases.

Calculation: Transaction Costs

House Market Value Transaction Costs
Van Down By The River $5,000 $300
Small House (Arizona) $125,000 $6,050
Big House (Arizona) $250,000 $8,550
Beach House (Florida) $300,000 $9,550
Small Apartment (Manhattan) $600,000 $15,550
Average House (Los Angeles) $900,000 $21,550


As you can see, there are a lot of costs to consider when buying a home. In general, to minimize the costs associated with your home, you’ll want to:

  • Buy a home that has a lower purchase price
  • Buy a home that is smaller
  • Buy a home in an area with low energy requirements
  • Buy a home close to work

Happy house hunting!

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