Sunday, December 5, 2010

Home maintenance needs to be included in our budgets

It never fails. Every year I get a few estimate requests where the homeowners can’t afford to do the work on their home. If the work is an emergency and they can’t afford to hire us then they usually start searching for a cheaper contractor. As a homeowner and someone who is adjusting to life in this new economy I can understand why folks don’t have the money set aside for these unexpected problems. In fact, most first time homeowners are having a hard time coming up with a down payment let alone extra money for the inevitable repairs that will be necessary within the first few years of buying their home. Let’s face it, most first time homeowners are not buying luxury homes in pristine condition so there is going to be plenty to spend their money on in short order. After paying the mortgage, car payments and living expenses, there is seldom anything left to set aside for vacation, eating out and especially HOME REPAIRS. A home is the single biggest investment most people will ever make and if it not maintained regularly it loses value quickly. Nothing demonstrates this quicker than when someone tries to sell their run-down home and they receive low-ball offers or no offers at all. This will be a painful lesson for most.

What I propose is that monies be set aside every month to cover maintenance costs. Many experts suggest we set aside at least 1% of the home’s sale price annually to cover repairs. Some even suggest 2-3% as a more accurate number. This may seem like a lot and some years it will be but when your roof needs replacing the $10,000 bill will show you what I mean. You could start saving 1/12 of your annual repair budget every month and having it put in a special bank account or even deducted from your pay check. This sounds logical but what happens if you just bought a home and the boiler goes? The $167 you just set aside in month one will not cover the $7,000 plumbing bill for a new boiler. It might make sense to make a larger initial deposit (2-3% of sale price) into the account to get the ball rolling with subsequent monthly contributions to keep it growing.

Most of us buy cars using credit and we think of our cars as costing $349/month and not $20,000. This concept can be applied to home repairs. For example, the average roof will last about 25 years so if it costs $10,000 then that’s $400 a year for 25 years or $34/month. If you move in and your roof has 5 years left then that cost becomes $2000/year or $167/month. When you start adding up the boiler, roof, exterior painting, landscaping, windows, and all the annual cleanings it starts to add up quickly.

If you honestly planned to spend the rest of your life in this home then the 2-3% might be a reasonable number but if you only plan to spend a certain number of years then you might want to have a professional help you generate a spreadsheet for all the major maintenance items around your home with associated ballpark prices and how many years before each item will need to be done. That way you will know much to set aside each month. The truth is, if the house is in bad shape and you only plan to spend 3-5 years there you may need to come up with much more than 2-3% per year. Adding a little extra safety margin would be wise especially since things come up.

If you have emergencies you will have to come up with the money one way or another by borrowing from your IRA, credit card, cash or relatives. The bottom line is that it is less painful when you plan for it so setting aside a little each month is a great way to lessen the pain or sticker shock. You will either have to spend the money when you go to sell or take a loss because the home is in bad shape (or both). So I always look at it this way….why not spend the money while you are living there and enjoy the home’s function and beauty instead of spending it right before you sell it?

92 comments:

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  28. Great post, I appreciate you and I would like to read your next post. Thanks for sharing this useful information.
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  29. This is very true. If we can budget in even the little repairs, our homes will last much longer. I've been looking in to home performance remodeling for myself and a friend of mine in Minneapolis so that we can redo all the things we messed up on the first time we built our houses.

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  30. I believe, If we be careful about our home and maintain it. our home will be more longer. but maximum time we don't do it or we have no idea on budgets. Dear author, you have explained nicely and I am feeling the importance of home maintain.

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  34. Trying to live under budget can be really hard especially when you are remodeling your home. The best idea is to make sure that you have the proper amount of money saved before you begin the big project. I think that setting a budget is a great idea. It is a great way to make sure that you do not go into debt.

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  35. Thanks for helping me to better understand this concept. I would have to agree that home remodeling projects need to be put in the budget. I really want to do some things on my house, but if I don't budget for them I don't think I'll be able to afford it. http://www.trancheenergy.com/remodeling.html

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  36. This is a fantastic point that is not taught enough. There will always be home repairs necessary. It's important to keep a budget for all of these repairs. I am always finding projects in my home that require remodeling. http://www.sinclairbuilding.com.au/servicesguarantees

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  37. Some of my friends have made the mistake of going through with home remodeling and not taking into account what maintenance costs may come into play later. It usually works out well for a little while after the remodel, but maintaining their new things adds up over time. You just have to make sure that it is something you can afford in the long run.
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  38. Andre, I've had many friend's do that as well. They want these amazing houses with all the coolest things in them, but don't look at it from down the road in their lives. Many times they've ended up paying more than three times as much to maintain it as they did to build it. I'm hoping to be more careful when I remodel my home.
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  39. Home maintenance is so important and something we definitely need to consider while budgeting! I am thinking about remolding my home this summer and doing some renovations. This will add some expenses to our budget but we will make do!
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  40. I want to make a lot of changes to my home in the coming months. More specifically, I want to get my kitchen remodeled with new appliances and everything. Hopefully I can hire a kitchen remodeling in San Luis Obispo County. http://www.jackhandleyconstruction.com/services

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  41. In terms of home maintenance, the most important thing to do first is to know the concept and design for the house which includes also the parts of it because in this way, a proper step by step plan can be done before doing the remodeling.

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  43. I definitely agree with this. I need to be better at planning for home maintenance. I always seem to struggle with that. I need to make sure I have enough in my budget for things that may come up. http://www.hrcincorporated.com

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  45. I am planning to remodel my home in the spring. I am going to install all new appliances, flooring, and fixtures. Funds will be a little tight after its done, but I will make sure to include maintenance costs in my budget.

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  46. I agree that home maintenance needs to be in our budget along with all the other things. I have a budget that has a column that is designated for maintenance. Whenever I have a problem or renovation I want to do with my home, I take the money out of that column.

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