It’s the American Dream – owning your own home… you pay off debts, clean up your credit, maybe even tighten the belt and do without for a bit… and you save, save, save…. finally, with finances in order the dream starts to feel like a possibility. Shopping can be fun — the dream is coming in to focus… maybe a few sleepless nights during the negotiations… and then, there you are! A real-life, American Dream homeowner!!!
Time goes by and then one day it hits you. You’ve been living your life, having fun with friends and family, and in general, getting things done… as you look around your precious home you begin to see evidence of wear and tear. Perhaps a few issues have become pressing or need immediate attention… whoa… should you try to do it yourself? See how long you can put it off? Or call somebody? Sure, it needs to be done – but what else might you be missing?
Let’s rewind and imagine how we might have done better. What if we had set up a separate budget or account for maintenance – ideally for preventative maintenance! After all the financial hula hoops we do to actually purchase a house, nobody wants to be the bearer of bad news and say, “but wait, there’s more..” Nobody wants to tell us what we don’t want to hear… there will always be expenses. It can be intimidating to think about these various tasks, especially if you’re a new homeowner. It’s a long list — there’s no denying that!
The top two recommended methods are The 1% Rule (experts argue it should be as high as 3-4%). The second is the Square Foot Rule. A good Preventative Maintenance Program will help you manage your home maintenance tasks, as well as, helping to keep expenses in line.
The 1% Rule suggests that you should set aside 1% of your home’s purchase price for upkeep – here in Charlotte, NC where the median house price is nearly $350,000 – it would then be a good idea to keep at least $3500 on hand each year for repairs.
The Square Foot Rule may make more sense for many of you. Use $1 per square foot per year for maintenance and repair costs; therefore the more square footage you’re managing the more you should be prepared to spend.
Common sense suggests that these formulas may need some tweaking for older properties or fixer-uppers. These formulas may also have a bit of an expiration date on them – if you stay longer than average, 7 years, the economy may get ahead of your budget. The land is another consideration – these formulas assume an average lawn needing minimal care – obviously, acreage or farms may require more. The premise here is that on average, during your stay in the home it could cost, in our example, $3500 – so keep it in the bank and let it ride — if the roof needs to be replaced, one year’s worth certainly won’t keep you covered! Additional variables include but are not necessarily limited to Age (by age 20 -30 some major components will need to be replaced), Weather (freezing temps, termites, high winds, or other extreme conditions), Condition (not all properties are equal).
Still not sure, try taking the average of the 1% Rule and the Square Foot Rule. Always build up reserves, if you dodged a bullet this year build upon it for next year… prioritize and save for the future. Better yet, give me a call and I’ll gladly walk you through a Preventative Maintenance Program for your home and budget!