Costs of Owning Two Houses
September 4, 2010
Owning two houses can be both a mental and a financial drain. With the slump in the housing market I know several families that bought a new house and have been unable to sell their old house.
If you already own a house and want to buy a new one, it’s tough not to own two houses, at least for a few weeks. Unless the timing works out perfectly or you move into temporary housing chances are you’ll be making two mortgage payments for a while.
Make sure you take all the costs of owning two houses into consideration, it’s not just the second mortgage that will end up costing you money. Here are some of the dual expenses you may run into:
Home Insurance – You definitely want to have both houses insured to protect your real estate investments. Of course this means higher home owners insurance bills but check with your insurance company to see if they offer vacant or unoccupied insurance.
Utility Bills – Owning two houses means paying two bills for electric, water, and maybe gas. If you have one home on the market you probably don’t want to have it really hot in the summer or really cold in the winter and risk turning off potential buyers that come for a showing. This means you can’t turn the thermostat really high or low to save money on utilities.
Landscaping – In the summer months you’ll have to either mow two lawns or hire someone to help you mow. If you want to keep your grass green for nice curb appeal that means paying to water two yards as well.
Property Taxes – Owning two houses means paying two sets of property taxes, no way around it. Of course, when you finally do sell they’ll be pro-rated for the time that you actually owned the home but your house payment will still include a portion of the annual property taxes for escrow the whole time you own the house.
Home Repairs – These pop up most often during the change in seasons. Your air conditioner could go out at the beginning of summer, your furnace/heat pump could quit during the first few really cold days of winter, or your sump pump might fail when the spring rains come. One option is to buy a sellers home warranty that converts over to a buyers home warranty once your house sells. That way if your AC goes out while your house is on the market you don’t have to shell out hundreds or thousands of dollars to fix it.
Home Owners Dues – Not everyone has to pay these but if your new and old houses are in neighborhoods with a home owners association you could be paying double.
Private Mortgage Insurance – If you haven’t sold your old house yet, chances are you might not have had 20% to put down and are paying private mortgage insurance (PMI). The less you put down on the new house the more you’ll pay in PMI. Paying it on one house is bad enough but if you have PMI on both houses that could really sting.
Hopefully I didn’t scare you away from making an offer on your dream house in this market. Just be sure, when you’re planning and budgeting for your new home, that you include the potential carrying costs of owning two houses.
All posts by Ben Edwards