Budgeting is an important aspect of any household. There are several cost centers to budget for including supplies, capital investments, education, and the like. However, there is another element that most homeowners tend to be rather confused on how to budget for it and this is home maintenance and repairs.
Different households budget using different criteria depending on how they perceive and project their costs would be. Experts in this field have suggested two main rules of thumb that can help homeowners in their calculation. In addition, there are some factors that should be considered in the decision on how much to save for repairs.
The 1% Rule
This is one of the popular rules in determining the much a person should save for maintenance and repairs. It simply states that 1% of the purchase price or value of your home should be put aside on an annual basis to finance ongoing maintenance. This means if your home costs $500,000, your repair and maintenance budget savings should be $5,000 each year.
This doesn’t mean that you will be sending this much every year, but rather it is an average of what you are likely to spend in a period of say 10 years. In some of the years, you may find yourself spending more while in other years you will be spending less.
The validity of this rule has been challenged especially with respect to market timing. For instance, people buy properties either at the peak of the housing bubble or at a steep discount when the housing market is at rock bottom. This should have no relationship with the maintenance costs for whatsoever.
The Square Foot Rule
This has more to do with the square footage of your home. It postulates that to maintain and repair one square foot per year, it will cost you $1. This means a home of 2,500 square feet will cost $2,500 to repair annually.
Analysts are of the opinion that this makes much more sense than the 1% rule. However, the drawback to this rule is that it doesn’t factor in the material and labor costs in different areas. It only works with standard costings.
What Really Determines Repair and Maintenance Costs
Apart from the two rules of thumb above, there are factors that have the highest impact on the cost of repairs and maintenance. Among these factors are:
- Age – New constructions that is properties between 5 to 10 years old do not incur as much in maintenance compared to much older homes, 20 years and above.
- The weather – Areas that are prone to freezing temperatures and snow, subject properties to more strain than areas with slightly warmer temperatures. This is also true in homes that experience heavy rains, high winds, and other extreme conditions.
- Location – The positioning of homes in terms of topography determines aspects such as drainage. Properties in flood plains generally need a greater amount of care hence higher repair costs.
In addition to the above, the frequency of repairs and maintenance as well as the type of home such as single family or attached will determine the size of your maintenance budget. In conclusion, the best approach is to take the average of the two rules and an additional 10% for each of the factors listed above. Even with that, you will experience variations in repair costs over time. Getting a dedicated handyman Perth professional to help you fix emergency repairs and long term maintenance needs can drastically lower your cost over time.