steadyeddy wrote:1) We haven't settled on an exact location, but are looking at homes built in the 1920's, 1950's, and 1980's depending on the neighborhood. If the price of each home is $300k, what percentage of the purchase price should I budget for each home for annual home maintenance?
In my opinion, you can't do it that way. Location is important. Different areas might charge different rates for labor or materials. An older home built in the 1920s might require "restoration" matching original trim work or might require updating old plumbing with copper. There is no way to know what to budget unless there is knowledge of exactly what to compare to.
steadyeddy wrote:2) Are property taxes somehow arbitrary? Where can I learn how these are calculated? Using Zillow's public record property tax information (stop me here if this is my problem) I'm seeing one home with a tax basis of $300k with $3k in property taxes, and another home two blocks away with a tax basis of $200k and $4k in property taxes. Same city, county, schools, etc. This is a mystery I would like to solve.
Property taxes are determined by location and the laws governing those locations. For instance, in California, property taxes are fixed due to Proposition 13 at 1% of Purchase price for the first year only. Then, each year thereafter can increase 1-2% compounding each year. For instance you buy a house for $300K, the property tax would be $3,000. The next year It could be 3,060. The next year it could be $3,120. The next year $3,240. But it doesn't end there. In California, there can be Bond issues. Each County or City can ask the voting population to approve Bond issues to pay for water service, park service, or any other public issue. There is no limit to Bond issues that can be approved by the voters. Some cities even will put your yearly Garbage Collection Bill on your taxes if you fail to pay it. Therefore, in California, 1% is where one would start. You'd have to know what the bond issues are for the area you want to live - again Location.
steadyeddy wrote:3) What are the "unknown unknowns" I might not know enough to ask about or include in our budget?
Does your 'Location" of house have a Septic System? Folks inspecting Septic Tanks only need to see if the water is running from the house to the septic tank (and maybe leach lines). Any Septic inspection can not determine if a tree in your front yard is soaking up the water and therefore testing your leach lines might not turn up anything negative until you cut down that tree.
Does your "Location" of house have Natural Gas or Gas Tank? Would you want to run a natural gas line to the house if there isn't one that might cost a few thousand dollars?
How strong is the Signal from the Telephone company? Some signals in rural areas are weak and therefore DSL can not work even though they may claim through commercials on TV that DSL is available in your area. You might be stuck with Cable service.
What type of neighbors might you have? Fences might not be allowed in certain areas, others allow fences. Fences can be important especially if neighbors have dogs, or you want dogs, or want more security. Fencing is not cheap. Some areas allow for chain link fencing - especially in rural areas whereas chain link allows for the wind to pass through the fence without worry of having it fall over even if posts are secured in concrete. Other areas require block wall or wrought iron or other expensive materials. Wood fences are nice, but all the wood fencing I've installed (i'm partial to redwood) requires a nice stain - not painted - because wood needs to breath. Therefore, using a good quality stain usually costs about $250 each time I stain all of the fence! So fencing can be be an unknown budget item.
Drainage. If looking for a house during a time when it doesn't rain might mean you can't determine potential problems with rain water. Know the topography of the land you're interested in. Houses in different eras might have used different techniques in building foundations OR the location of the house might be problematic if not positioned to have the water run away from the house.
steadyeddy wrote:4) Lastly, I'll throw you all a curveball. The motivation to purchase is primarily financial rather than a lifestyle decision--we don't really care if we own the space or rent it at this point in our lives. With interest rates so low, our rent payment is about a 40% premium to PITI (not total cost) on a similar townhouse. To me that seems like too much money to ignore, but am I breaking a boglehead cardinal rule by thinking about purchasing a house as merely a financial decision? More importantly, am I fooling myself for thinking that some of a 40% spread between rent and PITI might end end up in my pocket when it's all said and done?
Do not buy a house because of interest rates. You should buy a house because you want or need to be a home owner. What kind of hobbies do you have that would motivate you to continue to be home owner? Do you enjoy gardening? Do you have animals that need a yard? Do you work on cars and need a garage for your tools and car parts? Does the spouse have a crafting hobby, sewing hobby, that requires an additional room for space? These are reasons to buy a house - not because it potentially could save a few dollars. It might not.