Is 1% of home value ok for home maintenance?

[ncbill]

I believe 1.5% is closer to the real cost...that's what I get dividing my annual HOA fee by the value of my home...and that covers all outside maintenance with the exception of capital projects like a new roof...we recently had a special assessment of ~$100/month spread over a few years for that.

Now, if you are doing all the outside work yourself (e.g. all mowing, landscaping, gutter cleaning, painting) then sure, you can get by with 1% or maybe even less.

Still, that won't last forever...my in-laws have lived in their modest ranch house for nearly 60 years and now that they're in their 80s aren't crazy enough to get up on a ladder to clean gutters...the only reason they can keep up with mowing the grass is that they already had a small tractor for their large backyard garden...but even that garden isn't so large anymore.

 

[Fermion]

I am thinking you guys have not looked at the recent price of materials.

Maybe paint is still cheap but anything lumber related has gone up 100% or more in the past year.

So if you need major work done, it will be quite a bit more now than it has been in the past.

 

[ArmchairMillionaire23]

Just trying to nail down my estimate for home maintenance. We just bought our new house last Aug. Nothing fancy, just a house. Paid $700k. 1/3 acre lot in a typical subdivision. I have $8k a year in for home maintenance and upgrades. Seems that should cover a lot of stuff over 35 years ($280k over 35 years). Does this seem ok for a guesstimate?

It all depends on the home. Very hard to estimate. We bought our home 10 years ago for $42,000. 1% of that would only be $420 a year. In 2020 alone we spent $12,000 on replacing the roof and sewer lines. As a famous Hawaiian on this site says, "YMMV".

 

[OldShooter]

I believe 1.5% is closer to the real cost...that's what I get dividing my annual HOA fee by the value of my home ...

Why not divide your house number by your maintenance cost to get a percentage? Or maybe divide the distance to the nearest bus stop by your maintenance cost? Not really picking on you specifically, @ncbill, but there are several calculations like this already in the thread. IMO quite misguided.

You can get all kinds of numbers by using random numerators, but that doesn't make any of them relevant to the OP's goal of estimating his future costs.

One of my favorite quotations is from H.L. Mencken: “For every complex problem, there is a solution that is simple, neat and wrong.” I think the posts in this thread would point to the conclusion that estimating maintenance costs as a percentage of house value is one of those solutions.

 

[38Chevy454]

It depends on how much of the work do you plan on doing yourself and how much will you pay someone else to do.

Also, a percentage of home value is meaningless as the exact same house can be $700k in one location and $175k in a different location but the maintenance cost will be about the same even though there's a 4x difference in cost.

Agree with this. I do most all of my home maintenance and repairs, so my cost is much lower than a person hiring it all out. Will also throw in age of the house is a factor. Older houses will need more than a recent build. Significantly older can also be a lot more expensive as when you do a repair it many times will involve upgrading at the same time.
General budget of 1% is a very rough ballpark figure, as most of the previous replies have said there are too many variables. But as a budget item where you may not have a basis, it is a reasonable amount to start with I guess.

 

[ncbill]

Why not divide your house number by your maintenance cost to get a percentage? Or maybe divide the distance to the nearest bus stop by your maintenance cost? Not really picking on you specifically, @ncbill, but there are several calculations like this already in the thread. IMO quite misguided.

You can get all kinds of numbers by using random numerators, but that doesn't make any of them relevant to the OP's goal of estimating his future costs.

Nothing random about it...HOA fees go primarily to outside maintenance, so they're tracking actual costs.

Units are essentially identical, so their value is roughly the same.

As I pointed out, it represents when you're having to pay for the work, not using free labor, which makes the actual costs seem lower, and which you can't count on doing indefinitely anyway.

 

[OldShooter]

Nothing random about it...HOA fees go primarily to outside maintenance, so they're tracking actual costs. ...

Oh yes. That’s it's hard data. No question. I said it wrong, that’s the numerator. Bud dividing it by dnominator house value, house number, distance to the bus, etc. doesn't produce a number that it of any value to the OP.

Sorry to annoy.

 

[Sunset]

...
As I pointed out, it represents when you're having to pay for the work, not using free labor, which makes the actual costs seem lower, and which you can't count on doing indefinitely anyway.

I just had this experience, I replace the glass (IGU) in my house window myself. It cost me $65.

I had to do the same to my rental due to a rock throwing criminal, the cost if I did it myself would be $160 (bigger window), but I had to have a company do it and they charged ~$400 for the glass installed.

Believe me I phoned around, and a big issue was it was a 60 yr old house, so not a modern window.

 

[SecondCor521]

@ncbill et al., I suppose it varies based on local practice, but I would expect HOA fees for a condo/townhouse situation would be for "maintenance", "repair", and (occasional) "upgrades".

OP specifically mentioned maintenance and upgrades; it's not clear if repairs are a separate line item in his budget or not.

My house categories are: HOA dues, "Household" (a nebulous category, for sure), Improvement, Insurance, Landscaping, Maintenance, Property Tax, and Repair.

 

[Bamaman]

Our house is 4 months old. I will do the basic stuff, but usually outsource electrical, plumbing and HVAC. I'll leave it @ $8k a year but split it up between maintenance and upgrades. I'm sure the first 5-10 years we won't need much maintenance but will want to upgrade stuff. Then that will transition over to more maintenance and less upgrades.

Since your home is new, your short term expenses should be very minimal.
Electrical--seldom does a home need electrical repairs of any kind unless you're doing an addition or adding a pool.
Plumbing--Accrue $100 a year and you'd be covered.
HVAC--Depending on how many units you have, I'd accrue $500 for replacement each per year and $150 for maintenance per unit per year.
Roof--You could put back 6% of the replacement value per year. Often replacements are storm related and covered on insurance.

My heat pump is a 1996 model, and the compressor just locked up. I was quoted $5300 & $7400 on 3 ton replacements. The actual components only cost about $2400. HVAC contractors are trying to make an excessive profit on me. I'm going to install a new generation inverter heat pump myself for about $3,000. All of the sheet metal and wiring is already installed on the old heat pump.

I actually enjoy painting--when it's my own house. None of my 2 homes has any appreciable amount of outdoor painting to do.

 

[Gumby]

Here you go:
https://www.imdb.com/title/tt0091541/

But you probably have already seen it, or lived through it

Interestingly, there are houses in my town that are over twice as old (ie. > 330 years old). Yes, the town was founded in 1639 (by my church).

 

[davebarnes]

You will never wake up one morning and say: "I have way too much money in my house maintenance budget".
And, if you do, then that is why you are retiring early.

 

[GTFan]

My heat pump is a 1996 model, and the compressor just locked up. I was quoted $5300 & $7400 on 3 ton replacements. The actual components only cost about $2400. HVAC contractors are trying to make an excessive profit on me. I'm going to install a new generation inverter heat pump myself for about $3,000. All of the sheet metal and wiring is already installed on the old heat pump.

I also have a mid-90s heat pump and know the days are numbered. But my understanding (from my father-in-law who used to teach HVAC) is that I'd have to do a full replacement including air handler, evap, line set etc. for my 12 SEER unit because of the new system requirements. It's not just replacing the outside condenser/compressor, it's a full system swap and way more work than one person can handle.

I know they do this in one day and agree that the labor cost is way too high but don't see a way around the cost.

 

[Retired Expat]

Each house will be different, stucco, wood, have costs that brick doesn’t. Also when the fridge, washer, furnace etc dies are you the kind of person to replace with equal or budget models or will you upgrade to top of the line. I just bought a new fridge that cost more than my first car! If your house has lots of systems, humidifiers or built in irrigation, gutters, fuel oil furnace versus mini split heat pumps all makes a difference. And of course climate, sun exposure, (sand storms perhaps) can make a huge difference.

As a former property/construction manager was always interesting to see people’s reactions to the cost of upkeep or Utility bills once they moved into their dream home! Those 6 acres of manicured gardens take a small army each week to dead head, weed, till, water, treat and mow and rake. They ask how much to plant the garden but never what it costs to maintain!

 

[foxfirev5]

Sorry but there is no simple formula. As a former builder, you need to break it down. Roof, HVAC, plumbing and electrical. Anything structural or foundation related should already be known. Take the average life of each component and budget accordingly.

 

[W2R]

Five years ago I bought my Dream Home, built in 1965. The annual average maintenance expenditures (expressed as a percentage of purchase price) have been as follows.

0.82% maintenance (included new HVAC system)
0.55% lawn guy, could be counted as maintenance I suppose

Other expenses to think about are:

1.32% insurance (homeowners', flood, wind & hail)
0.79% property tax

Honestly the maintenance during these first five years was mostly replacing my HVAC system. It's the unusual big expenses like that which can mess up an average. Pretty soon I'll need a new roof and a new hot water heater. These will increase the average percentage spent on maintenance over the years, even more.

Actually I never even felt the need to worry about maintenance expenses when I bought this house, since it was not vastly larger or way older than the previous houses I have lived in.

Also, the housing inspector gave me good estimates on how long my HVAC, roof, and other items would last. So, I had a pretty good handle on projected maintenance expense already.

Since your house is brand new (I gather?) you shouldn't have any of those big hits such as new roof or new HVAC for a few years.

 

[Katsmeow]

I don't think you can rely on home value or a percentage. I've tracked my expenditures for years and it varies widely. I think really of 3 types of expenditures that are house/yard related:

1. Maintenance - Maintaining what you have. Does not include repairs or improvements. This is the easiest one to determine. Some things may be fixed in cost. For example, when we were on septic we had a septic maintenance contract. Just look at the house (and yard) and think about what you will have to do to maintain it. So I include yard mowing in this and salt/chemicals for the pool, cleaning supplies, periodic HVAC checkups, etc.

2. Repairs -- Repairs are difficult to estimate. Some years we just have a few hundred dollars. Be sure and include your hard in this. The last couple of years things like tree removal and sprinkler repair have been more than repairs to the actual house. You can somewhat estimate this by looking around the house and yard. With a new house presumably you expect fewer of these than with an older house. We bought a house that was a little over 30 years old. Right when we moved in we had to have a $3500 sewer repair. But we did a lot of remodeling and now most things that could break have been replaced so most of our repairs now related to the yard, sprinkler or the pool. However, even with a newer house you can still have the occasional toilet that stops working or something fails, etc.

3. Improvements -- Improvements can be literally nothing or a lot of money. We spent a lot of money on our improvement, about 35 to 40% of what we paid for the house. But, we knew that going on. But some people don't like to change things much and with newer house may not do any improvements at all. So just depends. One thing we did before starting our improvements was go around the house and just make a list of literally everything we would change to make the house ideal. Now many of these things we would never do as it just wasn't worth it. But it was nice to know what we would change. We ended up doing a lot of them. Some we may do later, some never.

Bear in mind 2 and 3 can to some extent combine. We had to replace a retaining wall soon after moving in. We knew it would be needed. So in a sense you can think of that is a repair. On the other hand, we replaced it with a much nicer retaining wall. Same thing with the HVAC and hot water heater. There was a very old conventional AC system with gas heater. We replaced it with a heat pump and then converted the gas water heater to an electric hybrid water heater. These weren't exactly repairs but they were just cosmetic improvements. And, we could have spent less if we replaced with some comparable to existing. So in a sense it was an improvement.

 

[gayl]

Maintenance = Gardener $140 per month
Repairs = stretching it to say $100 per year & pizza or sitting for the kids. Yep, parts only
Bought new 1979 and a lot of original walls never constructed + extra supports for a few lunches to construction workers

 

[RetiredAtThirty-eight]

It's not clear to me that maintenance costs should be highly correlated with home value. Most homes have one kitchen, a couple of toilets, one gray/black water system, one or two garage door openers, etc. All uncorrelated with value. Lawn maintenance would be more closely correlated with lawn and landscaped area. Roof maintenance with roof area, etc.

When you get into higher-end homes it does cost quite a bit more. For example, if your house has high-end appliances like a built-in fridge, you're probably not going to replace it with a standard $1200 fridge. It won't even fit. There's things like under-cabinet ice makers for the bar that need periodic replacement. And you're probably not going to replace a failing cedar shake or Spanish tile roof with asphalt shingles. Higher end homes tend to have bigger, more expensive windows which may not be in standard sizes. The electrical panel is going to be bigger and more complex, the plumbing will probably be copper and there will be more of it, the list goes on and on.

They might both be 3000-3500 square feet but it does cost more to maintain a higher end home compared to your typical residential subdivision home where they are all built to a tight price point.

 

[Music Lover]

When you get into higher-end homes it does cost quite a bit more. For example, if your house has high-end appliances like a built-in fridge, you're probably not going to replace it with a standard $1200 fridge. It won't even fit. There's things like under-cabinet ice makers for the bar that need periodic replacement. And you're probably not going to replace a failing cedar shake or Spanish tile roof with asphalt shingles. Higher end homes tend to have bigger, more expensive windows which may not be in standard sizes. The electrical panel is going to be bigger and more complex, the plumbing will probably be copper and there will be more of it, the list goes on and on.

They might both be 3000-3500 square feet but it does cost more to maintain a higher end home compared to your typical residential subdivision home where they are all built to a tight price point.

True, but higher end and more expensive are two different things. You can have a similar size "basic" $150,000 house in a LCOL are vs the exact same house in a HCOL area that sells for $700,000. In both cases maintenance costs could be similar.

 

[corn18]

My house is a $700k cookie cutter home in a LCOL area. It has regular (although high end) appliances and a lot of wood and tile, but nothing designer. As I stated up thread, I'll leave $8k / year in the budget and spend more on upgrades early on.

 

[ExFlyBoy5]

While it's not a bad idea to budget, being prepared for "the extras" is pretty important. Our house was built in 2007 and have owned it for a little over 2 years. While we "budget" a set amount each year...this winter has really busted that budget. Lots and LOTS of damaged trees from an ice storm. Those costs coupled with other maintenance issues would be close to 5% of the purchase price of the home. While it certainly didn't bankrupt us, it was a percentage that I wouldn't want to repeat year over year and if that happened for 3 or 4 years in a row...we would sell.

 

[FIREarly]

A person can always work out a rough estimate of yearly amortization, as the big ticket items are: roof, furnace, A/C, fridge, stove, dishwasher, driveway.

+washer/dryer

 

[JJpop]

Why do we always need a formula?
1 pct means nothing.
My 1300 sq ft house in California is about 900,000. Some 1300 sq ft homes 30 minutes from me are double that.
A similar house in wherever might be 200,000.
Sometimes you just have to do the research and the math.

 

[JackJester]

Hard to say if 1% is good for a newer house. Probably. I have been collecting detailed costs to maintain our 23 year old house for the last 5 years. I count any expenses at Lowes or Home Depot as “home maintenance.” And as we are getting very close to ER we have done all the big ticket items in the last 5 years …exterior painting, rotted balcony replacement, new roof, integrated generator system, new furnace, new soft water system, new hot tub. Over those 5 years home maintenance is our 2nd biggest ticket item at averaging 11% of our total expenses. The biggest expense is groceries/household goods at 14%.