Author Topic: Cost of home maintenance - 3 to 5 % of home value?????  (Read 5784 times)

MMMdude

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Cost of home maintenance - 3 to 5 % of home value?????
« on: November 12, 2014, 06:52:23 PM »
I know there have been threads on this topic before, however in researching this topic I came across this article from MoneySense which is a highly regarded financial magazine in Canada.  It suggests to set aside 3 to 5% of home value for annual maintenance.  I think this is absurd and I have budgeted 1.5% for myself going forward (and that includes replacement of furniture/appliances) and my experience in owning my current home has been that this 1.5% number is about right (I have been  in same house 12 years now).

It actually is quite detailed and goes through each possible item needing to be fixed in a house.  I find that the estimates are very high - for example shingle replacement it states at between 5K and 15K ( I paid just abit over 5K when I did mine a couple years ago).  Also it lists things that may never be needed such as waterproofing house and driveway replacement.

What are your thoughts?

http://www.moneysense.ca/property/the-ultimate-home-maintenance-guide

plainjane

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #1 on: November 12, 2014, 07:20:21 PM »
I think it's a good place to start thinking about things for people who only think mortgage and taxes.  Of course the cost of housing is so variable across the country, and the cost of maintaining my century home is going to be very different from a new build.  (For example, shingles will depend on the complexity of your roof line as well as the square footage and how much patching the underlying roof needs.)

I'd say a 5% year would be on the upper end, but we did have one (8 years in this house).  I'd say right now we assume roughly 1.5% as well.  But that is because the "value" of the house judging by sales on the street went up by 50%.

Mr. Frugalwoods

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #2 on: November 12, 2014, 07:24:05 PM »
I depends on your housing market and the age of the house.

If you buy a 100 year old home in Cleveland for $50,000... then yeah, over time your maintenance costs will easily average 3-5% per year.

If you buy a gut reno in Cambridge, MA for $1,100,000... you should be pretty safe in assuming your ongoing maintenance will be less than 1%.

dios.del.sol

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #3 on: November 12, 2014, 07:24:55 PM »
I'm interested in the answers too. For what it's worth I geeked out with my custom rent vs buy calculator last year and I ran a sensitivity analysis on it. After assumptions on house price appreciation and growth rates on an alternate investment, maintenance costs were the third most important variable. So, to add to the problem, not only are web suggestions wild, they're very important in evaluating the investment value of the purchase.

MMMdude

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #4 on: November 12, 2014, 07:58:46 PM »
I depends on your housing market and the age of the house.

If you buy a 100 year old home in Cleveland for $50,000... then yeah, over time your maintenance costs will easily average 3-5% per year.

If you buy a gut reno in Cambridge, MA for $1,100,000... you should be pretty safe in assuming your ongoing maintenance will be less than 1%.

Absolutely concur which makes the article even more baffling.  The author's house in Toronto is 500K which is actually cheaper than average home.  The higher the price, I would think the lower the % should be but even using the author's numbers she  comes up with 25K per year.  If I ever expected my house to cost me more than 5K per year in maintenance I am going to ditch it for a condo or something smaller.  25K per year is more than what many MMMer's are planning to spend during an entire year!

sol

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #5 on: November 12, 2014, 08:13:50 PM »
Those percentages mades a lot more sense when they were first proposed, when a typical American family home cost approximately one year's average salary. 

These days, with housing prices vastly outpacing wage growth and inflation, maybe not so much.

I could maybe see spending 5%/year on your home, but I wouldn't call it maintenance.  Half of your home's value is replaced every decade?  Unlikely, unless your remodeling kitchens and bathrooms, upgrading the insulation, flooring, roofing, wiring, windows, siding, and landscaping.  All that stuff costs money eventually, but not all at the same time.

MountainBeard

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #6 on: November 12, 2014, 10:01:41 PM »
Agreed that it seems high for normal maintenance on a lot of the house prices in many areas. We bought a fixer upper a few years ago and have budgeted about 3% of the current value (5% of purchase price) for projects over the next 5 or so years.  I'll be real happy when were finished though, as project costs are about the same as the mortgage payment each month.

clevelandc

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #7 on: November 12, 2014, 10:09:03 PM »
I depends on your housing market and the age of the house.

If you buy a 100 year old home in Cleveland for $50,000... then yeah, over time your maintenance costs will easily average 3-5% per year.

If you buy a gut reno in Cambridge, MA for $1,100,000... you should be pretty safe in assuming your ongoing maintenance will be less than 1%.

I just moved to Cleveland in August and bought a 90 year old home. Give me a few years and I'll let you know if your numbers are correct.

Trimatty471

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #8 on: November 14, 2014, 08:08:14 PM »
My homeowner inspector advised me to budget 1% the cost of ownership.  Within that number I included the utility maintenance plan, alarm fees, lawn care, salt, and any potential repairs needed. 


Terrestrial

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #9 on: November 15, 2014, 06:28:36 AM »
My thoughts are that it depends on a couple of things. 

1. A general percentage may work okay for an 'average' house but a lot of home repair/maintenance/improvement items are hard costs and not dependent on the specifics of the house or how much it is worth.  All houses will need say a water heater to be replaced every so often and maybe it costs 1k....it's not dependent on the price of the house, a 20k house will still need a 1k water heater replacement just like a $1M house will, and the corresponding 'percentage' obviously varies accordingly.  3-5% may be right for the lower end of the housing value range but I think it's high for say a 500k house (25k/year just for maintenance???).  I'd believe the hard costs she arrives at near the end of 5-10k per year is reasonable.

2.  If you are talking real out of pocket costs (i.e. not including own labor 'costs') it obviously depends heavily on how much you are doing yourself.  I probably spend significantly less than the average for my neighborhood because I do a ton of my own home improvement/repairs.  For the guy down the street that may call a plumber every time his sink clogs, he probably spends significantly more than the average and that obviously affects the percentage spent.

3. Age and context of house matter.  A new-ish house on a small lot with minimal landscaping is probably going to need a lot less maintenance and upkeep on it than an old 1800's farm house on vast acreage, even if both houses are worth 250k. 

4. Location also matters. Here in the southwest we don't have a lot of maintenance items that others might, like issues relating to freezing pipes, rain or snow infiltration causing leaks or mold, or even any money spent on having to get our driveway plowed in winter, etc. 

For context I live in a ~350k house with a pool in a very mild climate (no snow/minimal rain), do much of my own repairs, and I'd say averaged out per year I spend maybe 4-5k per year on maintenance/repairs including the larger periodic items (but does not include remodel/upgrades).  So I'm probably around 1.5%. 

horsepoor

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #10 on: November 15, 2014, 08:59:21 AM »
A percentage makes no sense due to the whims of the market.  We paid $180K for our house at the depths of the housing crash and now Zillow says it's worth $300K.  Our maintenance expenses have not changed, but a $180K house purchased today would be cheaper to maintain than this house, because it would probably be much smaller.  Seems like it would make more sense to have the rule of thumb more connected to house size than to market value.

Of course costs decline if you DIY most of the maintenance.  We have some deferred maintenance to address since our place was a foreclosure, but I'd venture that it will average out around $3K/year, even including some major things like replacing the driveway and the back deck.

FrugalSpendthrift

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Re: Cost of home maintenance - 3 to 5 % of home value?????
« Reply #11 on: November 15, 2014, 10:42:15 AM »
I spent more than 3% this year, but that included upgrading my air conditioning system which wasn't exactly a necessity.