Home ownership cost does not end at the acquisition closing cost. Many first time home buyers are surprised to find out there are costs that go beyond their expectation after acquisition.
Hidden costs are not necessarily costs omitted by the agent in the acquisition process. They might just be necessary cost post acquisition that the buyer has no knowledge of.
We have prepared this blog post to help you understand some hidden costs of home ownership and help you prepare for them.
What Are Hidden Costs?
Hidden costs are additional fees that are required to be spent by a homeowner after acquisition without prior knowledge. These costs are sometimes essential and cannot be avoided, they can be occasional or unpredictable costs.
Although these costs can be frustrating for homeowners, they are necessary to ensure continuous ownership of your property and keep it in good condition. Therefore, it is better to know about them and be prepared for it.
Types Of Hidden Costs
Property Taxes: These are tax imposed on different properties either residential or commercial properties, it is payable annually. Property tax is based on the market value of the property owned by individual or corporate owned property. It is a source of income for the government used to fund public entities.
The tax payable on home ownership is called ‘real estate tax’ because it is paid on real property. Home buyers should do the due diligence and research the property tax attached to the intended property for purchase.
Renovation Cost: Some properties might not necessarily require renovation, unless you would want to refurbish it to your preferred taste. Renovation costs are expenses incurred in the process of redesigning a home, it includes the cost of materials and workmanship.
Renovation is divided into three(3) categories, they are;
- Facelift; it requires little adjustment to the property.
- Pull Up And Replace; it requires replacement of major features of the property
- Full -Scale Renovation; this requires major restructuring of the property, it can involve floor redesign and expansion.
Electrical System Cost: this is the cost used in acquiring electrical equipment for power supply to the property. The electrical system is made up of various components that are used in transporting electrical energy to the power source of your property. Examples of electrical system include;
- Solar panel.
- hydropower energy.
- Fossil fuels such as oil, coal or gas.
- Nuclear power, etc.
Maintenance Costs: These are costs incurred to keep the property in good condition by regularly making necessary repairs. Maintenance costs include;
- Emergency maintenance costs such as bulb replacement cost, emergency repairs, etc.
- Routine maintenance costs such as pest control cost, cleaning cost, etc.
- Annual maintenance cost such as property insurance cost.
Utility Cost: These are expenses incurred or payment made to utility agencies for their service used for a particular period. They include costs of electricity, waste disposal, heating system and water.
Conclusion
Hidden costs sometimes occur at the most unexpected time especially the emergency cost, and this might affect your planned budget. However, it is important to know that this cost is ongoing for as long as you own the property.
What should you do?. First, know the type of hidden costs attached to the property you intend to buy. Set aside an emergency fund for hidden costs that might be for emergency use.
It is better to be prepared for this than risk losing a property that took you time and effort to acquire.