My son is six. Last month he asked to come with me to Florida to see our investment properties. He wanted the place his dad flies to every month to be a real place he had stood in, instead of just the reason I am gone.
He walked the whole property. Then we went to the beach and he was six again.
While he was walking it, I was doing what I always do on a site walk. Not looking at the price. Looking at what that building will charge me every month for the next ten years whether anyone lives in it or not.
That is the part I could not show him. You can point at a building and say this is ours. You cannot point at the carry.
The Reality: buying is a number you negotiate once. Carrying is a number the building sets, and it never comes back to the table.
Here is the part that catches people who did everything else right. The mortgage is the number everyone stress tests, and the mortgage is the only number in the whole stack that holds still.
Insurance moves. Taxes move. Utilities move with the weather and with whatever the utility asks for and gets.
Underneath all of it, every system in that building is running down a clock you did not start.
So here is the test. It takes about an hour with a folder of bills, and you can run it this week on a building you own or on the house you live in.
Start with the bills line. Pull twelve months and list every charge the thing generates whether or not anybody is using it. Principal and interest. Property tax. Insurance. Every utility you pay rather than the resident. Water and sewer. Trash. Any association fee or assessment. Lawn and snow. Pest. Management, if somebody else is doing it.
Total each month. Then throw out the average and find the worst single month, because the average month is a statistic and the worst month is a Tuesday that actually happened to you.
Now do it once more, harder. Take the worst month of each individual line and stack those. Those peaks do not usually land together. Sometimes they do.
A July with the tax installment, the insurance renewal, and the cooling running flat out is not a hypothetical. It is a normal bad month.
That stacked number is your ceiling. Write it down.
Second line, and this is the one people skip. The clock.
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List every major system and what it costs to replace today. Roof. Heating and cooling. Water heater. Service panel and the wiring behind it. The water line in and the sewer line out. Windows. Boiler, if there is one. Paving and site drainage.
Next to each one, put the years it has left. Not its age. Its remaining life, which is a different number.
If you do not know, start from the standard service lives and adjust down for what you can see. A water heater gives you ten to twelve years. Rooftop heating and cooling, fifteen to twenty. A roof membrane, twenty to twenty five. A boiler will run twenty five to thirty if somebody maintained it, and far less if nobody did.
Then adjust for where it lives. A twelve year old roof in Wisconsin has taken a different beating than a twelve year old roof in Florida. Freeze and thaw, sun, and water are what age a building. The calendar just keeps score. And anything installed badly started its clock short.
For each system, divide the replacement cost by the years remaining, then divide by twelve. That is what that system costs you per month right now, today, whether or not you are setting the money aside.
Add them up. That is your reserve number, and it is not optional. It is a bill you are already paying, on a schedule you do not control, to a vendor you have not met yet.
Watch what that sum does. The systems with the longest lives carry the biggest replacement numbers, so they feel far away, and they are the ones that break households. A roof at twenty years feels like never right up until year eighteen.
Ceiling plus reserve. That is your carry.
Now the household question, and it is the only one that decides anything. If your income stopped for six months, could you pay that carry six times without selling the thing and without borrowing against something else you own? Six times the carry, in cash you can reach this week. Not equity. Not a line of credit somebody else can close.
If you have to look at the number twice before you answer, the answer is no.
Then run it three more times, changing one variable per pass. Insurance renews up. One system fails five years early, which is what systems do. One month of your income disappears.
If any single one of those puts you into selling, you are not carrying the thing. You are riding it and calling that ownership.
And if the number comes back too high, the fix is not to buy cheaper paint. It is to know the order. I would let paint slide if I only had money for plumbing. The money goes to the system that fails hardest, not the one people can see.
Plan for tomorrow, live like today is your last. Both halves of that only work if you know the number.
Which is why I took the afternoon on the beach and did not feel one bit bad about it. You have to reward yourself or the hard work was for nothing. I could take the afternoon because I already knew what that building costs to keep.
Anyone can buy a thing. Keeping it is a monthly habit with a number attached.
He needed a building with edges he could hold in his head. You need a cost with edges. Underwrite the worst month instead of the purchase price, and that one change will decide more about what you still own in ten years than anything you negotiate at closing.
—Jon
P.S. What is the worst month you have ever had on something you own? Reply with the number.