I have come up with an estimate for the cost of each unit. This cost would be to own and it would include full ownership of your unit and completely equal shared ownership of all the land and amenities on the property.
I have based the price on two factors:
1) Equal share of the land
2) Prorated share based on worth (square footage mostly but also features) of
each unit
The cost estimates are listed by total price of the property, since we don't know what the purchase price would be. The asking price is $1,000,000 and, at that range, the units are all a bit more than we can really afford. I'm hoping we could get the property for less. $950k is reasonable and $900k would be a gift. I can't imagine we'd get it for less than that.
To give you a sense, the seller says the "one bedroom units" (he is counting the water tower, the studio, and the guest house) rent for about $800/month each. The duplex units rent for $1100-1200/month each. And this is without use of the property. The tenants are not allowed to use the pool, plant the gardens (other than maybe a bit near them), use other parts of the grounds, use the storage facilities, or make decisions. And of course they don't own anything and have to leave when the owners say.
| Asking Price: | $1,000,000 | $950,000 | $925,000 | $900,000 | $875,000 | $850,000 |
|---|---|---|---|---|---|---|
| Main House | $270,000 | $256,500 | $249,750 | $243,000 | $236,250 | $229,500 |
| Studio | $130,000 | $123,500 | $120,250 | $117,000 | $113,750 | $110,500 |
| Guest | $135,000 | $128,250 | $124,875 | $121,500 | $118,125 | $114,750 |
| Water Tower | $140,000 | $133,000 | $129,500 | $126,000 | $122,500 | $119,000 |
| Duplex #1 | $162,500 | $154,375 | $150,313 | $146,250 | $142,188 | $138,125 |
| Duplex #2 | $162,500 | $154,375 | $150,313 | $146,250 | $142,188 | $138,125 |
| Total: | $1,000,000 | $950,000 | $925,000 | $900,000 | $875,000 | $850,000 |
The realtor estimates that closing costs (that's what we pay on the day escrow closes, or thereabouts) will total about $13,000. In calculating these numbers we're assuming a $1 million price tag. Of that $13k, perhaps $7500 will be points on the loan (if the mortgage comes with a point, that's 1%). A point is a one-time cost for the privilege of having a lower interest rate; they are common. The rest of the closing costs include transfer taxes, loan fees, title fees, and a bunch of tiny costs that add up.
During escrow we'll have to get appraisals and reports. The realtor estimates that the basic appraisal will cost $280 for the first house and about $100 for each additional unit.
We would need a well report which the realtor guesses will total about $500. This includes all the basics plus testing the water for a bunch of toxins.
We'll hire a lawyer to help us with the legal contract. I don't know what that will cost but I'm guessing $500 if we do the groundwork ourselves. Maybe $1000, but not more than that.
Many of these costs will be prorated by our own purchase prices (or purchase price minus down payment). Others we'll split evenly.
Estimate $16k for all the closing and purchase costs (I've added some wriggle room). If we divided it evenly, that would be $2700 per unit. But the main house costs will be higher so everyone else's will be lower. I still recommend you budget more for this, just in case. I'm assuming $3-5000 per unit, but with luck that will be a vast overestimation. Sometimes you can finance closing costs along with the rest.
Cost per unit: about $2500, maybe higher
Your monthly mortgage payment will depend on two factors: 1) How much of your purchase price you finance; 2) The interest rate. We'd probably go for the standard 30 year fixed loan (I so do not want a varible-rate loan, they will bite us in the ass in a few years). Chances are we could get 8% or less. 7.5% would be awesome, lower is unlikely.
Here are the amounts you'd pay at different interest rates. The costs are for $100k of financing. Scale up or down as needed.
| Monthly Payment per $100k of financing at various interest rates | |
|---|---|
|
7%
|
$665
|
|
7.5%
|
$699
|
|
8%
|
$734
|
|
8.5%
|
$769
|
|
9%
|
$805
|
A fantastic site is Hugh's Mortgage and Financial Calculators
Property Tax: Property tax in California is 1% of the total purchase price every year. On a million dollar property, that's $10,000. We would prorate this by our share of total purchase price (regardless of how much or how little you put down). So for every $100,000 you paid for your unit, you'd owe $1000/year in property tax. My advice: count this as part of your mortgage and pay into a fund for it monthly (some banks give you this option with your mortgage).
Sewer Tax: Guerneville charges $500 per year per unit.
Misc Taxes: The realtor estimates another $500 per year in little charges from the city and county.
Total Property Tax: $13,500/year.
Homeowner's Insurance: We don't know what this will cost. I'm assuming $50/month per unit and the realtor thinks this is in the ballpark.
Cost per $100k of your purchase price: About $150/month
All the units are in good condition and should not have any real repair costs. We won't know for sure until we get the appraiser's report. All the units have modern kitchens and bathrooms with wiring to match. They all have newish carpet, tile, or linoleum and don't need paint, unless you want to change the color.
As far as I know, there aren't any repair costs needed for the property either, except pest abatement (see below). Again, we won't know until we appraise everything.
Pest Abatement: There is some dry powder beetle damage in the greenhouse attached to the studio. The damage has not reached the studio itself (or any other living unit) though it will if not dealt with. The owner told me they planned to spray for it but had been putting it off. I said spraying could be a deal-breaker for us and we'd much rather have a credit for the work and do it ourselves. She seemed to think this was fine. The realtor says if we get a good deal on the purchase price the sellers may not give us any credits. In that case we'd share the cost of pest abatement (I consider this a community expense, not one for the studio owner alone). The realtor knows someone who does this with completely nontoxic means (microwaves are one possibility) and says that it should be way under $1000.
Flooring: All the units have carpet (see pages on individual units for
estimates of age). None of them have a new carpet smell and they're all in really
good condition. But they're standard synthetic carpet and they've been shampooed
recently (the duplex units only so far) with some perfumed garbage that stinks
pretty bad. There may be some mold in some carpets, but that's less than I thought
it might be. Daliya says shampooing with a special nontoxic product called Mystical
will take out the perfume smell.
The carpets are all tacked down and not too hard
to pull up. Then you need to use a crowbar to get up the tacking (if you don't
want carpet at all). This is tedious work but not difficult. The floors are
basic wood, probably older plywood. Daliya estimates MCS-safe flooring would
cost maybe $3000 for the 750 sf or so of carpet replacement in each duplex.
More depending on the type of flooring. We might be able to get discounts.
Misc: Add costs for things like refinishing the 3rd floor of the water tower, turning the duplex attic into usable storage space (the insulation needs to be covered), turning windows into doors, adding patios, decorating, etc. And of course your moving costs.
Cost per unit: Zero to several thousand, depending on how much you choose to do and what you can do yourself.
Gardening: The sellers are a couple in their 60's or so. The wife does
some gardening of her own but mostly they hire help. Currently, they pay a gardener
(who's been working for them for years) $8/hour to work 6 hours a day, 5 days
a week (30 hours a week). I don't think he works hard all day. The grounds are
immaculate and kept in a state that is just unreasonable to keep up without
tons of money. I do not believe we'd have to put in that much work.
We found out it takes 2 hours to mow the property.
I don't know how often they do it, but once a week is reasonable (they irrigate
the lawns so the grass grows faster). It takes another 2 hours to trim all the
hedges. Frankly, I hate formal hedges and would suggest slowly replacing most
of them with hedges that need little pruning and contribute something (hazelnuts
for example).
There is a lot of hardscape on the property which
only needs sweeping and the occasional weed pulling. Much of the landscaping
is made up of trees, lawns, and other plantings that take little work.
I would want to hire this gardener for a few hours
in the beginning to teach us about the plants and tell us what we need to do.
I'm a good gardener but I don't know this particular garden. We could continue
to hire him (I suggest higher hourly pay, because he would be working during
all the time we have him and because $8/hr is an insult to a professional) for
a few hours a month if we wanted. I'd certainly encourage this for things like
annual tree pruning and maybe pond maintenance too.
My guess is that every week there would be about
20 hours of work to do. Mowing: 2 hours, clipping: 2 hours, sweeping: 4 hours,
weeding: 4 hours, replacement plants, seedlings, greenhouse, etc: 4 hours, misc:
4 hours. Then add in extra for the vegetable garden, harvesting, etc. The timing
will vary by season but remember in California, a garden is a year-round job.
With 6-10 people, this shouldn't be much work at all. Those of us who love gardening
will do more work (I could easily do 4 hours a week just by myself, and probably
more) and those who don't really care can just be responsible for sweeping around
their units and part of the common areas. Mikel doesn't mind mowing (we own
a cordless electric mulching mower) and doing the compost. Or we could hire
someone to mow and sweep.
Ponds: I haven't a clue. But I can't imagine it averages out to more than 1-2 hours a week (it's probably much less), including feeding the fish. The food can't possibly cost very much.
Pool/spa: We'd have some startup costs to convert to a nontoxic sanitation
system (I'm assuming no one wants to keep the chlorine system). I don't know
what pool maintenance costs but if you hire someone to check the chemical balance
and add chlorine once a week, it is generally $40-50/month (if they have other
clients in the area). We can easily buy ourselves the chemical kit and test
it ourselves and pay someone a couple times a year to do professional cleanings,
check our systems, whatever. Unless one of us has a clue how to do it and is
willing to take on the task and train the rest of us.
The pool is heated with solar panels on the roof
of the main house so we can heat the pool year round without any costs beyond
the small amount of electricity used for the pump.
We'd have to decide if we wanted any extras like
a pool cover or a mini-fence around the pool to keep visiting children safe.
Outdoor Kitchen: You use it, you clean up. We should take turns doing regular basic cleanings. That would probably work out to one hour per person every 1-2 months if we use it a lot.
Livestock Area: If we have livestock, they require work, but not that much. Chickens are about 15 minutes twice a day to feed, water, and check on them. Add an hour or two a month to check the enclosures and make repairs. I've checked these numbers out with homesteading lists. I don't know what's involved in caring for goats (I don't know if they sellers intend to leave the goats behind). This would be the job of whoever wants the animals and benefits from them.
Common Electrical: I'm not sure how we'll figure it all out but there will be small expenses for outdoor lighting, pool heating pump, outdoor kitchen, water pump, etc. I assume it will be very low.
Misc: Undoubtedly there will be misc expenses, but I can't think of anything major at the moment. Feel free to suggest some.
I propose that in the likely case that we get some income from renting parking space for trailers and etc that we use that money to pay for common expenses like gardening, pool, etc. If we need more money to do what we agree to do, we would split it evenly by unit (since we own the land evenly). If we get more income than we need for common uses, we would split it evenly.
For more information, contact Cyndi Norwitz at cnorman@best.com - Page last modified 11/5/01