I heard a story about a 20-something who inherited a few hundred thousand bucks. Instead of investing it or buying a house or setting it aside, he bought a Lamborghini. It cost him every dollar he had. He didn’t care because he had his dream car. Yeah, I know, how can someone be so dumb with a windfall? Happens all the time. That’s not the entire tragedy. What our newly minted Lambo owner failed to realize is that owning a Lambo is far more expensive than a Toyota or Honda or Chevy.
For example, an oil change for a Lambo will run you $1,000 to $2,000. New tires? Thousands. Pretty much everything a Lambo needs to keep it going costs way more than regular cars. Needless to say, our 20-something couldn’t afford to actually own the Lambo.
The same is true with mansions and estates. The purchase price is just the beginning. If you’re scraping every last dollar to buy your dream multi-million dollar mansion or estate, you should rethink your strategy unless you will take on the full-time job of caring for it. The last thing you want is a Grey Gardens on your hands.
There are three significant categories of costs to maintaining mansions. They are:
- Utilities, upgrades, repairs and maintenance costs, and
- Property taxes
1. Staffing and employees for mega-mansions and estates
Staff is more optional than utilities and repairs. Although that depends on the size of the property and building(s). At some point, you must employ people to care for it. Staffing can also quickly become far more expensive. Estate managers, drivers, chefs, cleaners, landscapers etc. are not cheap; they add up fast. You can be spending millions per year in no time.
For a guy like me with a regular house in the burbs, staffing is totally unnecessary. We pay for some landscaping help to do a big annual clean up. We have cleaners come in once a month to do the bathrooms. We pay for a Christmas light service. We also pay for plumbing / electricians when needed. Most people do. That’s it. Our repairs and maintenance and utility costs are much higher and even then, aren’t that bad.
For a mega mansion or estate owner, staffing can quickly escalate to a mind-boggling $3 million or more per year. Imagine having to earn $3 million just to run your house (and that doesn’t include the other costs).
FindCelebrityJobs.com published a great list of the different positions mega-mansions employ to run the estate. Here it is:
1 Chief of Staff ($250,000)
2 Personal assistants ($120,000 each)
3 Chefs ($125,000 each)
1 Governess ($125,000)
2 Nannies ($75,000 each)
1 Executive Housekeeper ($85,000)
5 Housekeepers ($60,000 each)
2 Drivers ($65,000 each)
10 security personnel ($100,000 each)
1 Maintenance man ($60,000)
1 Engineer ($95,000)
2 Gardeners ($60,000 each)
1 Drink mixologist ($60,000)
1 Personal trainer ($75,000)
1 Massage therapist ($75,000)
1 Private tutor ($120,000)
TOTAL: Over $3 million.
Obviously, not every estate owner will need to hire all of those positions. Some may hire more. You can see how some celebrities and business owners can quickly go broke by getting too spendthrifty hiring people to make their life easier.
If you watch Downton Abbey, you get a sense of what grand homes require in order to maintain them.
2. Utilities, repairs and maintenance
I cringe thinking about having to spend $7K on a new furnace or $1,500 on a new water heater or $1,000 for a new toilet and installation. These are normal expenses for a regular house. Fortunately, they aren’t every year but there are enough sizeable costs that it seems something expensive needs fixing or replacing every year. We have a list of required improvements that we’ll chip away at each year.
Our house is regular house in the burbs.
When you own a 20,000 mega-mansion, you can only imagine how much more it costs to keep it going. The heating bill alone is 5x our house. Toss in an inground pool, bigger garage, guest house and heating can quickly escalate to 7x or more what we pay. That’s just heating.
There’s electricity, smart home upgrades (which is an expense I didn’t consider until researching this article) and repairs. If it’s a large property, the grounds upkeep can easily venture into the six figures annually. We paid a landscaping company $4,500 to do a massive clean up for the entire yard. We had just moved in and it was neglected for a few years. We have less than a 1/4 acre. I can’t imagine what landscaping costs for a 5 acre spread.
How much does it cost to keep a mansion going?
We can point to 50 Cent and his experience owning a massive 52-room New Jersey mansion (formerly Mike Tyson’s mansion). 50 Cent was paying $70,000 per month just to “keep the lights on” (includes property taxes). It took him years and several price cuts to sell it all the while shelling out $70K per month to keep it going. Initially, he listed it for $18.9 million. He ended up selling it for $2.9 million. Eventually, it would make sense for him to just give it away because of how much it cost him each month.
While 50 Cent’s mansion is extreme, it doesn’t take long for a mansions costs to exceed $10,000 per month. Here’s a great breakdown by realtor and real estate investor Donald Tepper:
- Taxes: Varies by state but the more expensive the house, the higher the taxes. Donald says it’s $1.10 per $100 assessed value in Virginia which means a multi-million dollar house can have a tax bill of $30,000 or more pretty quickly.
- Utilities: $2,000 per month.
- Maintenance: Rule of thumb – 1% to 1.5% of the home’s value. That’s $50,000 per year for a $5 million home (minimum).
- Gardening, landscaping and yard maintenance: Think mowing, pruning, gardening, snow removal, etc. Easily $1,500 per month.
Add it all up and you’re sitting close to $10K per month pretty fast. Of course the above figures are fluid; will vary with each house. If you buy a 13,000 sq. ft. 100-year old mansion, expect these costs to be considerably more.
3. Property Taxes
Property taxes are the silent killer for may home owners, including millionaires who spend millions on their house(s). It varies a great deal by state.
- New Jersey has the highest at 2.2%. That means your annual property tax is 2.2% of the home’s assessed value. A $10 million home will have a tax bill of $220,000. Yikes. This explains in part why 50 Cent’s mansion was costing him so much each month.
- The lowest state is Hawaii at .37%. Property taxes on a $10 million home in Hawaii would be $37,000. Talk about a massive spread.
- The average property tax rate in the USA is 1.1% which totals taxes each year for a $10 million house in the amount of $110,000. Not chump change.
If you get to choose which state you live in, you should take the property tax rates into consideration.
Breakdown Example: How much does it cost each year to properly run a $50 million, 20,000 mega-mansion sitting on five acres?
Let’s assume the mega-mansion is spectacular. Its assessed value is $50 million which is not uncommon for massive estates these days. Here’s the annual breakdown:
- Staffing: $3 million
- Utilities and maintenance: Let’s say 1.5% of total value: $750,000 plus $100,000 in annual utilities totalling $850,000.
- Taxes: Using the US average of 1.1%, annual property taxes would be $550,000.
Total cost to run a mega-mansion estate: $4,400,000 per year.
Of course the staffing cost is extreme and could easily be reduced, no matter how grand the property. It’s also possible that employing all that staff would reduce the maintenance cost figure above because the staff would handle it.
Regardless, as you can see, the cost own a mega-mansion is far more than the purchase price.