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Price Is Not Equal To Cost





I have been reading Bigger Pockets Real Estate Investing book and a certain idea jumped out at me- Price is not equal to cost.  

Recently, Josh and I have been shopping to buy a new house and we just closed the deal!  We couldn’t be happier with our purchase.

As you know, we lived in an “attending house” for a little while in the south.  But, the house plus a large mortgage sized student loan bill plus living large made feel poor- like we were living paycheck to paycheck.  So, we downsized to a rental and paid off my student loans and 2 cars over 3 years. After we paid down our debts, we were ready to buy a house for our boys to grow up in.  So, we set our budget and started looking. 

Choosing Between Two Houses

We found two AMAZING houses.  

They were both at similar price points. 

The first, we lovingly call it “The Blue Mansion,” was a dreamy place- 4000 perfectly finished square feet sitting atop a mountain overlooking a large lake, with large windows featuring panoramic views of the adirondack mountains.  

Ohhh the views- it was the kind of place that makes your stomach drop with it’s beauty.  It was halfway to both of Josh and my workplaces but the schools were so-so and it was in the middle of the country.  A trip to the grocery store may take 20 minutes and it would be far away from our friends and family.  Also it had 5 grassy acres of lawn to maintain.

The second, “The Suburban Beauty,” was a family home with beautiful finishes and 3000 square feet perfectly anointed for a family with young kids like ours.  No pool (a huge plus for me), open concept, gourmet kitchen, a nice finished basement, a wonderful neighborhood and one of the best school districts in the area.  But, it didn’t have the views or the land of the Blue Mansion.

Honestly, I had a really hard time deciding between the two houses.  

But, this point drove it home, though I didn’t have the words for it then- price is not equal to cost.


Price vs. Cost

Price is what we pay upfront for an item.  Cost is the lifetime expense of owning an item.  

Even though both the houses were listed at around the same price, one would cost a whole lot more in the long run.  

I would have the furnish the Blue Mansion- that would be at least $20k.  Then, there’s pool maintenance, lawn maintenance (because who can mow 5 acres every week?), house cleaning (deep cleaning 4000 square feet while working as a doc isn’t going to happen), incidentals (so much stuff that can break down), taxes, increased driving expenses, and last but not least, possible private school.  

The Suburban beauty, on the other hand, was priced the same BUT. Kids would be safer without a pool, furnishing it would cost a lot less, the kids would not need private school, we wouldn’t need a landscaping company, we wouldn’t need to drive 20 minutes for groceries… gosh the choice seems pretty obvious when put this way doesn’t it?


But, I wanted to put this out because it was such a stark reminder to me of this fact- price does not equal cost. A lot of things are priced low but they end up costing us a lot more in the long run.


Can you think of an example of this in your life?


Disha


P. S. We went with the Suburban beauty and we’re in LOVE! It is even better than I imagined and the kids are having so much fun here. I’m so excited to watch them grow up in this home and community.

Standard Disclaimer:  Not meant as individualized financial or medical advice.            

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