When I first looked at this house, I did the math to see whether I could afford to buy it, and that I could budget the remodel based on my income, and whether I would at least break even on the project.
All the numbers looked good, but I have since realized that overlooked at least one calculation: I didn’t think about the opportunity cost of simply going to the house.
Before you invest in a property, you should think about the time you will spend simply going to the property. If you are going to live there, or if it’s just down the block, the the travel time is nil. But if the property is on the other side of the sate, or even worse in another state, you really need to factor in the travel time as well as any other issues which will affect when and how you can work on the property.
For example, I live 5 hours away from Clendenin. I knew this before I bought the house, but what I didn’t really grasp was how just going to the house would cost me ten hours. That’s ten hours I am not busy with my day job, so it’s not just time but also money. (Also, a round trip takes two tanks of gas at a cost of close to $85.)
This is what is known as an opportunity cost: “the loss of potential gain from other alternatives when one alternative is chosen”.
And for me, it’s worse than just ten hours lost. I have dogs but no one to watch them, so if I want to go to Clendenin I either have to board them, take them with me, or keep the trips very short.
The property is simply not clean or safe enough to bring them, so if I want to go to Clendenin I either have to pay for boarding or leave them at home. And since I don’t want to leave them alone for more than 12 hours, this essentially forces me to stay only a couple hours in Clendenin before returning home.
That is two hours of work for 12 hours time spent. (Also, a round trip takes two tanks of gas at a cost of more than $80.)
In effect, working on the Clendenin house comes with an opportunity cost which is both high in terms of time and money.
If I had realized this going in, I would have probably passed on this property. But it’s too late for that, so instead it has forced me to rejigger my plans. I am now going to try to get the one unit in the duplex in a livable condition, and then I will bring the dogs with me when I stay there on weekends. I will alternate between spending a couple hours working inside and a couple hours outside.
In a way, this could help me in the long run. I had been thinking about moving in at some point, and the extended stays will help me find out if the property is comfortable enough for that to be possible.