What Is the Real Cost of a $200 Million Home?

In October 2019, Casa Encantada, the Bel-Air home of financier Gary Winnick—a 40,000-square-foot 1930s property situated above the Bel-Air Country Club—was listed for sale at $225 million. The residence has twice earned the title of the most expensive home publicly listed in the United States.

Have you ever wondered what it would be like to live in a $200 million house? It's certainly expensive. The sale price is one thing, but there are many more costs to consider.

Key Takeaways:

  • The mortgage is the most costly part of owning a $200 million home, but there are many more expenses such as insurance, taxes, and upkeep.
  • The monthly mortgage on such a property could be over $900,000 per month with over $115 million going toward interest over the life of the loan.
  • Taxes, insurance, and the cost of wages to pay maintenance workers and cleaners could mean an additional $14 million dollars a year in expenses.

Casa Encantada was built in the 1930s by the architect James E. Dolen who favored traditional Georgian architecture integrated with Art Deco and Moderne styles. According to the Los Angeles Times, the mansion was completed in 1937 at a cost of $35 million in today's money. Conrad Hilton, the hotelier, bought the estate in 1950 for $225,000, and when he died in 1979, Rupert Murdoch, the media mogul, paid $12.4 million for the home, which, at the time, was the highest price paid for a home in the United States.

Here's a look at some of the numbers that would go into the purchase of a $200 billion home today.

Understanding the Real Cost of a $200 Million Home

The mortgage is the most costly part of owning a $200 million home, but there are many more expenses such as insurance, taxes, and upkeep.

The Mortgage

Perhaps some of the world's wealthiest wouldn't need to finance a record-breaking home purchase, but what if they did? Let's say that you put a 20% down payment on a $200 million home. If you get an interest rate of 4% on a 30-year fixed rate mortgage, what would the monthly payments look like? After the initial down payment of $20 millions, your payments would be $914,480 per month, according to Zillow's mortage calculator. That's about 12 times the national average annual salary! This mammoth mortgage also results in over $116 million going toward interest over the duration of the mortgage.

The Insurance

Although the average homeowner in the United States pays $1,162 per year, according to the insurance leader Progressive, a $200 million home in Bel-Air will require a much heftier insurance policy. It's a bit tricky to say exactly how much it would cost. Home insurance costs are assessed on a number of factors, and not just those related to the replacement value of the home itself. Part of the insurance costs are based on the value of the contents of the home, the amount of the insurance deductible, and what type of coverage you want (for example, flood, fire, or earthquake insurance).

Many insurance companies would be unwilling to insure a home like Casa Encantada since it's a huge risk for one company to take on. Some specialized insurance companies deal with high-value or celebrity homes, but it certainly would not be as straight-forward as purchasing insurance for a run-of-the-mill neighborhood. The insurance premiums would definitely cost a lot more as well!

The Taxes

The property tax rate in Bel-Air is around 0.75%, according to Smartasset.com. At this rate, on a home assessed at 200 million dollars, the property taxes would be about $1,500,000 per year. This is a substantial sum to tack onto your other annual costs such as mortgage, insurance, and maintenance. There have actually been instances in the past where luxury homeowners have had to sell their homes because they could no longer afford to pay the property taxes once times got tough.

The Upkeep

The upkeep required for a $200 million home is overwhelming. The minimum suggested amount to set aside for home maintenance costs is 1% of the purchase price of your home. On a home that cost $200 million, that's a mere 2 million dollars! If you consider that the house has 25,000 square feet of floor space, there is a lot of space that needs to be maintained. You would also need an army of paid staff to manage the cleaning, building repairs, maintenance of swimming pools, and the grounds.

Special Considerations for Luxury Estates

Considering the estimated annual costs of owning a $200 million, you could be looking at paying about $14 million dollars per year just for mortgage payments, taxes, insurance, and upkeep. It may seem like you're living the life, but owning such a home is far more than just the down payment.

Having the cash to buy the home is just the beginning. Even once the home is paid off, you're still going to be paying insurance, property taxes, and home maintenance fees—and with a home of this size and value, that's not just pocket change. There is also the furnishings that you will need to fill all that empty space. If these numbers haven't yet scared you off, the Hamptons residence of Beyoncé and Jay-Z is for sale at a price of $16 million, according to HGTV—a much more moderate price.