Creating a home maintenance budget is frightening if you anticipate buying a home. Most people get carried away with having a new home without considering the maintenance. You may fantasize about getting the keys and moving into a place you can call your own if you have been planning toward it for some time.
Although positive changes come with a lot of responsibility, maintaining, and repairing your home may be expensive. Before signing a contract for your new home, it’s important to consider the fees and costs that come with it.
Homeownership comes with more costs than the mortgage, utilities, and taxes. Unfortunately, many parts of your house have a limited lifespan. You need to prepare for breaks and replacements because, unlike a renter, you cannot call the property owner to manage repairs.
However, how do you decide how much money to spend on home repairs? An excellent place to start is with the 1% rule of thumb. To do this, 1% of the home’s purchase price must be set aside for maintenance and replacement costs.
That maxim might not apply to everyone, though. How much you need to set aside for repairs also depends on other factors, including the age and condition of the house.
How to Start your Home Maintenance Budget
Start by creating a list of all the home maintenance tasks you might need in the future. Remember that it involves more than just significant projects like renewing your rugs or sealing your attic. Consider more specific activities like replacing light bulbs, patching little cracks in the walls, and other simple things you may forget.
Remember to include any home maintenance tasks you would like to complete, but they can be done after a while. This can entail changing the doorknobs, putting in hardwood flooring, or painting a wall a striking color.
Your list may seem long at first because you need to do a lot of little things to keep your home safe and comfortable. Nevertheless, don’t worry; you’re writing a list for a reason; you can plan financially and cross things off as you finish them.
How much to budget for Home Maintenance Annually or Monthly
Putting a list of items in your monthly budget for property maintenance is important so that you can regularly put money aside for it. How much money should you allocate?
Most people think that annual home maintenance costs range from 1% to 4% of the property’s value. Therefore, if your house is worth $400,000, your average maintenance cost will range from $4,000 to $16,000 per year or $334 to $1,333 per month.
Obviously, that covers a vast range. The easiest way to determine how much you would need to set aside is to consider the age and state of your home.
Imagine that when you purchase your home, it is quite new and well-maintained. In that situation, you might get away with paying only 1% of your property’s value on maintenance. But if your house is old and has many outdated systems, like an old heater and worn-out appliances, you should set aside 4% of the value of your property each year for repairs.
You should typically choose the midpoint of that range and expect your yearly maintenance costs to be 2% to 3% of the home value if it is neither extremely old nor new. In addition, you can choose a number based on the size or state of your home. 3% might be a better option for a larger house with lots of land or space in the compound.
Measure the cost of your house maintenance
Remember that the 1% to 4% rule of thumb is used when you first buy a home and need to know how much it will cost to keep up. Nevertheless, during the first few years, if you live in a house, you should keep a thorough record of maintenance costs. Depending on your home’s experience, you may project your future maintenance costs.
Let’s take the situation where you decide to budget $7,000 for maintenance in the first year of owning your house. You will need to revise your budget if, after two years, it turns out that annual maintenance is more expensive, at around $9,000.
What to do if a costly repair is not in your home repair budget
The best thing to do is to plan, protect yourself with house insurance, and set aside money for repairs. But you still have choices if you’re living in your house, and it needs a lot of repairs you can’t afford.
You should first look at the problem and decide whether you can fix it yourself or call a home maintenance services agency. You shouldn’t try to do things like roof repairs or electrical wiring on your own, but you will save money on some tasks by doing your own research online and carrying out the work yourself.
Even if you can’t fix something yourself, you should look for replacement parts and see if it would be cheaper to buy rather than have a professional do it.
Do not disregard house repairs
Your home maintenance budget can cover the cost of minor repairs, which are the trivial things that are more signs of wear and tear than serious problems. However, serious repairs can suddenly become necessary when you own a house, so it’s crucial to have money set aside in an emergency fund.
Additionally, allocate funds for repairs each month in your budget, and if none is necessary that month, add that money to your emergency savings to build it up. Being as ready as possible is always good because a home might experience issues you didn’t expect.
It may seem hard to make a budget for home maintenance, but if you look at it and make changes every year, it will get easier to do. Making a home maintenance budget can stop money from going out the door when repairs or replacements are needed.
I’m Liran Koren. I’m a real estate pro and co-founder of Luxury Property Care. I believe that through common work we can create a healthy ecosystem, that serves investors, landlords and even tenants altogether.