What I Underestimated (and Overestimated) Buying My First Properties

There is a pattern in what I got wrong, and I only see it looking back: I planned hardest for the costs I could see coming, and under-planned for the boring and the human ones. In detail:

The boring cost I barely modeled: escrow

Before closing on my starter home, homeowners insurance and property taxes were barely on my radar. They were escrowed, meaning the lender collects them monthly alongside the mortgage payment, and mine ran about $500 a month. Five hundred dollars. Every month. On a first home. I had modeled the loan payment carefully and treated taxes and insurance as fine print.

If you are budgeting for a first property, price the full PITI, principal, interest, taxes, and insurance, from day one. The T and the I are not fine print. They can be a third of the payment.

The human cost I underestimated: hosting

Renting out the basement on Airbnb looked like easy income on paper. The reality was far more time, effort, and stress than I expected. Good guests who did their own thing were fairly frequent. But a bad guest could upend an entire week.

My favorite example: a guest reported my toilet was broken. I was on the phone with plumbers, trying to schedule an emergency fix, before discovering the actual problem: their dog had saturated the bathroom rug with urine, and that was the smell they were complaining about. No spreadsheet has a row for that. Short-term renting is a part-time customer service job, and you should price your own hours and stress into it.

What I overestimated: the costs I planned for

Here is the strange comfort. The costs I budgeted hardest for, landscaping the front and back and the routine repairs, came in fine. The boiler and the basement remodel did not, and that story is in what went wrong after I bought the duplex.

I would pore over the budget and burn evenings estimating, and sometimes the caution simply was not necessary. I am not sorry I had the reserves.

But if fear of a five-figure surprise is what is keeping you from a first property, know that in my experience most of the planned-for projects behaved, and the two that did not, the boiler and the basement, were survivable because the reserves existed. It was the unglamorous monthly lines and the people-stuff that surprised me most.

Keep going

The rest of the series so far: thirteen months in a van and the first duplex numbers I ever ran. The full year-one ledger is in my duplex, year one.

My own experience, not advice. Your taxes, insurance, and guests will differ.

Frequently asked questions

What is an escrow payment?

An escrow payment is defined as the portion of a monthly mortgage payment a servicer collects to pay property taxes and homeowners insurance when they come due, held separately from principal and interest.

The lines that came in high are one half of the story. The other half, the boiler, the basement and the first guest, is in what went wrong after I bought the duplex.