Office: 818-583-1121      Cell: 818-259-4270      Email: Nancy      DRE# 01305369

The True Cost of Housing


The cost of housing is one of many factors in determining lifestyle. This form will help you calculate the true cost of your present home. The calculations can be difficult or confusing.

Please consult with your family, legal and tax advisor for further guidance.

1 Determine Net Equity.
1.a Determine the current market value of the property.
Market value is the property's expected sales price based on SOLD properties, usually within the last 3-6 months, that are similar in size, condition and neighborhood. It should not be a refinanced amount, as banks who want a new loan tend to appraise at higher value than the property would sell for on the open market. 		$__________
1.b Total of all existing loans, liens, and/or encumbrances. $__________
1.c Enter the current net equity. Subtract 1.b from 1.a. $__________

2. Determine current monthly expenses.
2.a Mortgage payment (if any). $__________
2.b Property Taxes. $__________
2.c Insurance.
Include homeowners and excess liability. 		$__________
2.d Maintenance.
Include gardner, water, utilities, HOA fees. 		$__________
2.e Repairs.
Average last 5 years plus any anticipated major expense for next year (ie new roof, heating system etc). 		$__________
2.f Monthly cash outlay.
Add columns 2.a. through 2.e. 		$__________

3. Determine Lost Income.
3.a Determine the return of equity as a % of the value of the equity.
If you converted the equity in your home to cash and placed it in a conservative Investment, what is the "reasonable" rate of return in today's market? 		_______%
3.b Estimated Monthly Rate of Return.
Multiply the current net equity (1.c) by the rate of estimated return (3.a) and then divide by 12. 		$__________

4. Calculate the "REAL" cost of housing.
Add together 2.f and 3.b. 		$__________
5. What is the current monthly RENTAL value of your home?
In its CURRENT condition. 		$__________
6. Is the Rental value (5) more or less than the REAL value (4)? More or Less


Conclusion:

If the rental value is more than the "REAL", then the return is solid and reasonable. If it is less, then you are paying a PREMIUM for staying in the property. The amount of the PREMIUM could be converted into cash to use. The question then becomes: How much of a PREMIUM is reasonable or can you afford? Specifically, is it smart for you to keep on paying this PREMIUM, more often than not, for something that no longer reflects your needs? (eg. do you really need a two story dwelling or a half acre garden or five bedrooms and three bathrooms?) Would it be more beneficial to eliminate the work and expense of the upkeep, responsibility, liability etc and free up the funds to improve your quality of life - travel, visit friends or relatives, or move to a more Senior Friendly environment?
©1996 - Nancy Valentine,    DRE# 01305369.       Site developed and maintained by Avalon Communications, LLC