Author Topic: Realistic house mainenance costs?  (Read 3276 times)

shelfins

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Realistic house mainenance costs?
« on: April 21, 2015, 12:08:06 PM »
My fiance and I are considering buying a house in the next year, so I've been trying to run the numbers on whether it's better to rent or buy, and, if it's better to buy, how much house we can realistically afford while still keeping our housing costs at 10-15% of our combined income. While I've been able to get pretty good estimates of monthly mortgage payments, property taxes, utilities, and homeowner's insurance at different price points, I'm completely stumped when it comes to maintenance. From what I've read online, you should expect to spend 1-4% of a home's value annually on maintenance and renovation costs. 1) This is a GIGANTIC range, and is the difference between buying being a better option on the low end vs. renting being a better option on the high end, and 2) It doesn't make any sense to me that maintenance costs would be particularly closely linked to home value. We live in a fairly expensive real estate market (the DC suburbs), so a house would cost vastly more here than an identical house in, say, Omaha or Detroit, but the maintenance costs wouldn't be that much more.

Does anyone know of a more realistic way to go about estimating maintenance costs, or can give me feedback based on their home ownership experiences? We try to be frugal, and would do things like look for good deals on appliances on Craigslist, and could probably handle simple maintenance issues like, say, fixing a leaky faucet, on our own, but we're not the kind of hardcore Mustachians who will be replacing our own roof or anything like that.

waltworks

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Re: Realistic house mainenance costs?
« Reply #1 on: April 21, 2015, 12:39:41 PM »
Well, the problem is that what counts as "maintenance" varies a lot, and structures vary a ton in age/quality. So there's not an easy and precise answer (hence the gigantic range you noted).

I will say that, over time, you are not going to get below about 1% of the home value unless you live somewhere crazy expensive in a tiny house (and remember, prices for construction/repair vary a lot by region too). Your roof, appliances, flooring, paint, etc all have limited lifespans and you'll have to do them all if you live there long enough.

If you wanted to, you could sit down and go through all the stuff in your home that depreciates (all finishes, all mechanical, roof, landscaping, etc) and figure out what you think a realistic cost will end up at. Or you could just guess at around 1% for a house in an expensive area.

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backyardfeast

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Re: Realistic house mainenance costs?
« Reply #2 on: April 21, 2015, 12:55:19 PM »
+1.  In our experience as first-time homebuyers, we didn't factor in maintenance costs, and it's been a bit of a shock.  But the 1% minimum rule seems to be bearing out for us.

One of the reasons we jumped on this house was that it was only 10 yrs old at the time.  In our fairly high COL area, where our fairly modest house cost $400K, we were looking at some major fixer-uppers, and this one blew the competition away because it looked like the work needed was mostly cosmetic; everything was structurally sound.

Despite that, though, we soon realized that 10 yrs is about the lifespan for a lot of things.  We've spent 5 years replacing appliances, put in a wood stove and worked on the property (and painted, and replaced cosmetic things like light fixtures, faucets, etc), and had to do some work on our septic system. Then everything was 15 yrs old, so next was the hot water heater, and now we need a new roof, deck, kitchen countertops, and flooring.

Some of these things weren'/aren'tt NEEDS, and we've defintely been prioritizing.  Lots of things don't cost $400/month.  But some things cost $5000-10000, which means that money needs to be saved up in that home maintenance fund.  And, of course, emergencies do come up too.

As waltworks said, some of this is just to keep in mind as you look at what you can afford in your price range; newer or renovated homes have more flexible needs, and 1% should work.  But a fixer-upper can be a huge money pit.

As for the varied costs, while it's true that some things like appliances might be priced similarly across the country, installation and servicing costs are definitely going to be higher in the higher COL area.  Keep in mind that our 1% budget is entirely based on the fact that DH is a carpenter and comfortable with plumbing and electrics.  He does ALL regular maintenance, most repairs, all installation, and also knows how to do the research and use industry contacts to find the best deals.  If that weren't the case, our budget would need to be a lot bigger.

Homeownership is wonderful in many ways, and I have few regrets.  But  it ain't cheap! :)

GeorgiaCPA

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Re: Realistic house mainenance costs?
« Reply #3 on: April 21, 2015, 02:06:50 PM »
You could just use Mr. Money Mustache's annual budget as example.  Buy the house and replace everything so it is all brand new.  You will therefore need no allocation for maintenance costs.  Prepare to move before you incur any significant deferred maintenance costs, and include any costs to renovate as a separate business transaction outside of your normal budget.  That way you record a gain on your maintenance costs.

That may not help you out as you are not FIRE'd yet, so use the 1% rule of thumb noted above.

jooles

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Re: Realistic house mainenance costs?
« Reply #4 on: April 22, 2015, 02:21:13 PM »
An inexpensive house is usually the most expensive house to maintain. 

In today's market deals abound on real estate.  Those deals usually come with, at the very least, some seriously deferred maintenance.  When you hear "deferred maintenance" what it means is money, lots of money. 

Properties need to be maintained and repaired in order to stay functional. The cost of the maintenance is dependent on the age of the property and the consistency and quality of the maintenance done by the prior owners.

Here examples from my own real estate ownership -

130K condo 1000 square feet built in 1980.  Perfectly functional at purchase, but outdated.  $200 on new paint in order to clean it up, we painted everything white upon move in (was dirty and had cheap brown molding and interior doors).  That was good enough for the first year.  In year two we spend $2,500 for new floors throughout and new light fixtures.  All the labor was done by my husband.  Lived there for 3 years with less than $3,000 in maintenance, but we paid $300 per month homeowner's dues for maintaining the exterior of the building and the grounds.  So if you add that it's $13,800 for 3 years.  470K house on 1.5 acres, 3,000 square feet of living space built in 1970.   House looked beautiful, but was mostly "lipstick" applied to make it look good, we learned later.  This house was vacant for over 1 year prior to our move in.  Rural house on septic system.  Cost 8k to replace drainfield in year #1.  Prior owner was a flipper and never lived in the property so she didn't know the drainfield was bad.  1K to repair some water damage due to frozen pipes.  1K to add more insulation to the ceiling.  6K for a new roof, including adding roof vents, both of which we knew it needed when we purchased.  1K for exterior paint and scaffold rental so that we could paint it ourselves.  1K landscaping as it had none.  Lived there 3 years approx $18 ,000 in maintenance and repairs. 

125K house on .5 acre, 1200 square feet built in 1971.  Foreclosed property vacant for 3 years prior to our purchase.  3K roof, 2K new gravel road, 10K in new bathroom, new kitchen (done seriously on the cheap with freecycled items and inexpensive contractor), 3K for some new insulation and adding electricity to the detached garage and paint throughout, 1K fix a clog in the septic and pump it out.  Not all of those things had to be done, but they all added to the equity in the property.  $19,000 spent in 3 years.

ShoulderThingThatGoesUp

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Re: Realistic house mainenance costs?
« Reply #5 on: April 23, 2015, 05:13:59 AM »
An inexpensive house is usually the most expensive house to maintain. 

In today's market deals abound on real estate.  Those deals usually come with, at the very least, some seriously deferred maintenance.  When you hear "deferred maintenance" what it means is money, lots of money. 

Properties need to be maintained and repaired in order to stay functional. The cost of the maintenance is dependent on the age of the property and the consistency and quality of the maintenance done by the prior owners.

Here examples from my own real estate ownership -

130K condo 1000 square feet built in 1980.  Perfectly functional at purchase, but outdated.  $200 on new paint in order to clean it up, we painted everything white upon move in (was dirty and had cheap brown molding and interior doors).  That was good enough for the first year.  In year two we spend $2,500 for new floors throughout and new light fixtures.  All the labor was done by my husband.  Lived there for 3 years with less than $3,000 in maintenance, but we paid $300 per month homeowner's dues for maintaining the exterior of the building and the grounds.  So if you add that it's $13,800 for 3 years.  470K house on 1.5 acres, 3,000 square feet of living space built in 1970.   House looked beautiful, but was mostly "lipstick" applied to make it look good, we learned later.  This house was vacant for over 1 year prior to our move in.  Rural house on septic system.  Cost 8k to replace drainfield in year #1.  Prior owner was a flipper and never lived in the property so she didn't know the drainfield was bad.  1K to repair some water damage due to frozen pipes.  1K to add more insulation to the ceiling.  6K for a new roof, including adding roof vents, both of which we knew it needed when we purchased.  1K for exterior paint and scaffold rental so that we could paint it ourselves.  1K landscaping as it had none.  Lived there 3 years approx $18 ,000 in maintenance and repairs. 

125K house on .5 acre, 1200 square feet built in 1971.  Foreclosed property vacant for 3 years prior to our purchase.  3K roof, 2K new gravel road, 10K in new bathroom, new kitchen (done seriously on the cheap with freecycled items and inexpensive contractor), 3K for some new insulation and adding electricity to the detached garage and paint throughout, 1K fix a clog in the septic and pump it out.  Not all of those things had to be done, but they all added to the equity in the property.  $19,000 spent in 3 years.

I dropped damn near $20k on my 1914 house just about right when we moved in because the foundation was so leaky it was going to start hurting the house. It made the basement usable as storage, not stinky, and it means the house won't fall down. We're still ahead of buying a comparable house from after 2000. But maintenance is definitely bigger on an older property.

Still need to replace one of the front porch columns...

Manguy888

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Re: Realistic house mainenance costs?
« Reply #6 on: April 23, 2015, 05:32:09 AM »
I model 2% of the value of my house each year because my house is old and problematic (built in 1925). But 1-2% is probably a good range. It's important to know that this 1-2% is lumpy - you'll go years without spending much of anything, then get hit with a $5k bill to replace the gutters or something. Whether you have that 1-2% per year saved into a savings account, or waiting in a home equity line of credit, just make sure it's available for when the time comes.

Two years in a row with 0 spent on maintenance doesn't mean you're ahead of the game, it just means nothing bad has happened yet.

louloulou

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Re: Realistic house mainenance costs?
« Reply #7 on: April 23, 2015, 05:35:28 AM »
The age of the house will really reflect the maintenance costs. We used to live in a 130 year old house and it cost a fair bit. Think probably $20k over 3 years. Now, we live in a 3 year old house with no maintenance needs as yet. I imagine anything we do in this house over the next 5 years will be more of a want than a need.

ShoulderThingThatGoesUp

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Re: Realistic house mainenance costs?
« Reply #8 on: April 23, 2015, 05:44:38 AM »
I model 2% of the value of my house each year because my house is old and problematic (built in 1925). But 1-2% is probably a good range. It's important to know that this 1-2% is lumpy - you'll go years without spending much of anything, then get hit with a $5k bill to replace the gutters or something. Whether you have that 1-2% per year saved into a savings account, or waiting in a home equity line of credit, just make sure it's available for when the time comes.

Two years in a row with 0 spent on maintenance doesn't mean you're ahead of the game, it just means nothing bad has happened yet.

It means you haven't noticed the problem yet.

So far the worst problem I've had was an exterior structural wall that the bottom had rotted out of. Had to get a concrete wall poured to above grade to set the new, pressure-treated studs on with proper footings. And that house was from 1971, not even my 1914 house, which has brick exterior walls.

LiveLean

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Re: Realistic house mainenance costs?
« Reply #9 on: April 23, 2015, 07:55:53 AM »
Location matters, too.

Not long after we bought our home here in Florida in 1999, I went to Home Depot for some paint that was guaranteed for 20 years. The HD worker said, "You can cut that 20 years in half since the sun and elements put a beating on everything here in Florida."

I've learned that applies to just about anything here in the Sunshine State, not just paint. We've been in our house 16 years and have had to replace all appliances and both HVAC systems at least once. (The house was three years old when we moved in.)

There will always -- always -- be something going on with your house that needs repaired, replaced, or remodeled.

cripzychiken

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Re: Realistic house mainenance costs?
« Reply #10 on: April 23, 2015, 09:54:36 AM »
For me, there's 3 'buckets' of money that I have for home maintenance/upgrades.  Probably a little over-the top, but it helps me make sure that I split my limited funds between the important parts of my house (not just on the pretty things the wife wants).

The first is "cosmetic upgrades" - these are things that you know about when you buy the house.  Everything that you don't like but isn't a deal breaker - ugly carpet, outdate fictures, weird paint colors.  This amount will vary greatly with the house you pick.  Here is everything that I want to make me/wife feel better (cosmetic/paint, new flooring, landscaping, new fixtures, window coverings, update bathroom, new couch, etc).  I put 2 mortgage payments in this bucket (I have an old, very outdated house, I'm slowly updating each room when the bucket is full enough).

2nd is the "known issues and efficiency upgrades" - First there was the big known issues (bad roof, aging A/C system, old appliances).  I put a stack of 'seed money' to get started (was part of the 'purchase price' in my head).  After those issues were addressed  - or pre-paid for once they fail - the rest of the money goes towards a large mix of stuff, basically anything that will lower my bills.  Appliances, insulation, windows (long term goal), LED light bulbs, even my programmable thermostat came from this bucket.  Here gets 1 mortgage payment. 

The 3rd is the "maintenance" bucket.  This is the annual expense to keep the house in the exact condition it is in now.  1 mortgage payment to cover this.  Anything left over at the end of the year goes into the efficiency upgrades bucket (since that's where I pull from for long term replacement of stuff from wear - like the AC or appliances).  From this bucket I do stuff like leaking pipes, AC filters, toilet issues, wd40/grease for loud doors, bags for yard waste, gas for lawn mower, bug killers, etc.

All together that is 4 mortgage payments, which after running my numbers is ~3% or purchase price.  Note that for 'mortgage payment' I do the amount I pay the bank each month - which means taxes and insurance is also included.  So more money to each bucket for me means more upgrades sooner.  4 years in and the system seems to be working out well.