How much money should you budget for home maintenance and repairs? Here are the two rules of thumb that help guide this calculation, as well as a list of home-related factors you should consider as you decide how much you need to save.
The 1 Percent Rule
One popular rule of thumb says that one percent of the purchase price of your home should be set aside each year for ongoing maintenance. For example, if your home cost $300,000, you should budget $3,000 per year for maintenance.
That doesn’t mean you’ll literally spend $3,000 every year. It just means that on average, over a span of a long time period (10 years or more), you’ll spend around $3,000 annually, according to this rule of thumb. Some years you’ll spend far more; a roof replacement, for instance, will cost $4,000 - $8,000. Other years, you’ll spend far less.
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Of course, this popular rule of thumb isn’t totally valid. Your market timing doesn’t impact your maintenance budget. If you happened to buy your home at the peak of the housing bubble, your maintenance costs won’t skyrocket. Similarly, if you picked up your home at a steep discount at the bottom of the housing market, your maintenance budget shouldn’t be affected.
The underlying price of your home and its repair costs, in other words, are “independent variables.” They correlate only insofar as they’re both impacted by the cost of labor and materials in your particular geographic area.
The Square Foot Rule
Another rule of thumb says that you should budget $1 per square foot per year for maintenance and repair costs. If you own a 2,000 square foot home, for example, budget $2,000 a year for maintenance and repairs (again, over a long-term annualized average).
This rule of thumb makes slightly more sense than the “1 percent of purchase price” rule. The more square feet you’re managing, the more you’ll need to spend.
One drawback to this rule, though, is that it doesn’t account for labor and material costs in your area. In certain parts of the nation, contractors are significantly more expensive.
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What Factors Should You Consider?
Rules of thumb aside, what factors make the biggest impact in the cost of your maintenance and repairs?
Age – The age of the property will play a huge role. New construction (a home built within the last 5 – 10 years) will need very little maintenance. Homes 10-20 years old will need slightly more. Once a home turns 20-30, though, there’s a good chance that major components, such as the roof, hot water heater, and some piping, may need to be replaced.
Weather – Homes in areas affected by freezing temperatures, ice and snow are subject to more strain than homes in areas unaffected by cold weather. Similarly, homes in areas where termites, high winds, heavy rains and other extreme weather conditions or pest infestations will experience more wear-and-tear.
Condition – Some homes are more than 100+ years old, but are in pristine condition, thanks previous generations exercising careful maintenance. Other homes, however, have been neglected and shoddily repaired over the years. The older the home, the more impact a previous owner’s care (or lack thereof) will impact the home’s maintenance needs.
Location – Homes located at the bottom of a hill (where water drains and collects), in a flood plain, or in other areas that create environmental stresses will also impact the amount of care and maintenance it needs.
Single-Family vs. Attached – A single-family home needs a larger maintenance budget, since you need to replace your own roof, siding and gutters and maintain a yard. A condo or townhome won’t need as hefty of a maintenance budget, since the exterior is cared for by your HOA.
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How Much Should You Budget for Home Maintenance?
Given all these variables, I hope you can understand why there’s no good “rule of thumb” that governs how much you should set aside for home maintenance and repairs. The weather, age, condition, location and type of property that you own will all play a huge factor in determining the amount of money you need to save.
That said, if you have no clue how much you should set aside, here’s a good way to guess:
First, take the average of the one percent rule and the square foot rule. If one percent of your purchase price equals $3,000, and the square foot rule equals $2,000, then your average is $2,500.
Then add an additional 10 percent for each factor (weather, condition, age, location, type) that adversely affects your home. If you have an older home, in a flood plain, in an area that experiences freezing temperatures, add 30 percent to $2,500. That’s an extra $750 a year.
That means that you should save about $3,250 each year, or $270.83 per month, for home maintenance.
Again, this is just a generalized rule. It’s hard to predict how much your home will cost to maintain. The best you can do is make an educated guess based on your home’s unique factors.
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