How do you budget for home improvements?
May 25, 2011 12:05 PM Subscribe
Are there budgeting rules of thumb for home maintenance and improvements?
My father's house has a million-dollar location but because he has spent the bare minimum on maintenance over the last 35 years, it's now a tear-down. The lot would fetch maybe $300K.
Are there guidelines for budgeting for routine maintenance as well as improvements and updating, e.g., kitchen and bath remodels, updating materials etc.? We intend to stay in our house, barring unforeseen circumstances, for a long time and I would like to avoid the same situation. We're in a great location and have lived here for fourteen years. We've stayed on top of the usual stuff...replacing appliances, deck refinishing, exterior painting, etc. But I would like to budget for redecorating, updating landscaping, etc.
Thanks for your thoughts.
My father's house has a million-dollar location but because he has spent the bare minimum on maintenance over the last 35 years, it's now a tear-down. The lot would fetch maybe $300K.
Are there guidelines for budgeting for routine maintenance as well as improvements and updating, e.g., kitchen and bath remodels, updating materials etc.? We intend to stay in our house, barring unforeseen circumstances, for a long time and I would like to avoid the same situation. We're in a great location and have lived here for fourteen years. We've stayed on top of the usual stuff...replacing appliances, deck refinishing, exterior painting, etc. But I would like to budget for redecorating, updating landscaping, etc.
Thanks for your thoughts.
Hmn. I'm not sure that there are necessarily budget guidelines, as in, "spend $x per year to keep your house from being a dump" -- but there are guidelines on doing individual jobs. Here's a few, culled from the 8 houses I've lived in during my 30 years on this planet.
- Keeping your fixtures up to date helps keep your house up to date, not just your appliances. Shiny yellow brass is so 90's that it looks 80's.
- If you discover a problem, and this is especially true with water leaks, don't lipstick it or layer things on top of it trying to fix it. Tear down and rebuild correctly. If your roof needs to be replaced, replace the entire roof by peeling it down to good material (usually decking) and replacing the whole thing, don't just add another layer of shingles on and hope that it fixes the problem. The same is especially true with bathrooms/plumbing/electrical. Bring things up to code.
- In the same vein, every time you tear open something to fix it, you'll probably find two other problems that need to be addressed. Don't forget to budget for the possibility of these.
- If you don't know what needs to be fixed, you probably aren't qualified to hire someone to fix it. Research extensively before hiring someone and then watch them do the work. No handing over the key to a contractor or subcontractor and leaving for the day to go to work or the spa, yes, you do need a permit, and yes, you need to be there when the building inspector stamps it.
- Also in the same vein, you're not looking for the cheapest contractor, you're looking for the best value. The best value is the one that has the right balance of good/cheap/fast.
posted by SpecialK at 12:15 PM on May 25, 2011 [1 favorite]
- Keeping your fixtures up to date helps keep your house up to date, not just your appliances. Shiny yellow brass is so 90's that it looks 80's.
- If you discover a problem, and this is especially true with water leaks, don't lipstick it or layer things on top of it trying to fix it. Tear down and rebuild correctly. If your roof needs to be replaced, replace the entire roof by peeling it down to good material (usually decking) and replacing the whole thing, don't just add another layer of shingles on and hope that it fixes the problem. The same is especially true with bathrooms/plumbing/electrical. Bring things up to code.
- In the same vein, every time you tear open something to fix it, you'll probably find two other problems that need to be addressed. Don't forget to budget for the possibility of these.
- If you don't know what needs to be fixed, you probably aren't qualified to hire someone to fix it. Research extensively before hiring someone and then watch them do the work. No handing over the key to a contractor or subcontractor and leaving for the day to go to work or the spa, yes, you do need a permit, and yes, you need to be there when the building inspector stamps it.
- Also in the same vein, you're not looking for the cheapest contractor, you're looking for the best value. The best value is the one that has the right balance of good/cheap/fast.
posted by SpecialK at 12:15 PM on May 25, 2011 [1 favorite]
If you're trying to budget ahead for things like updating, then I would think a first step would be to figure out how much the work you'll want to do is likely to cost. For instance, two years ago, I got estimates on two medium-ish improvements we want to make to our house. We haven't been able to do either yet, but hope to in another year, and it's good to have at least a rough idea what the target is that we're aiming for.
I like DarlingBri's goal. Thinking back over my 20 years of home ownership, 10% of the mortgage feels about right--we'd end up with about $1500/year in the fund, which would cover most minor-to-middling repairs, keep our insurance deductible handy if we needed it, and would probably build up enough of a stash to make the inevitable furnace or roof much less of a crisis. As a rule of thumb, I like it. I'd increase the amount if I were thinking ahead to a major remodeling project or cosmetic upgrades.
A friend of mine, after she'd been in her house for close to 20 years, had it inspected by a good home inspector, like you would when you were buying a house. He found improvements she wouldn't have thought of (like, if I remember correctly, an area in the attic that hadn't been properly insulated even though the rest had) and also things like a minor problem with the chimney flashing that was easy to fix but that, unfixed, might have led to major invisible water damage. This struck me as a good idea, and, if we stay in this house awhile longer, is something I would think of doing.
I know that most of my answer doesn't directly address your question about budget, but the underlying question is also: how do you know what work needs to be done? That's been a learning process for me.
posted by not that girl at 1:25 PM on May 25, 2011
I like DarlingBri's goal. Thinking back over my 20 years of home ownership, 10% of the mortgage feels about right--we'd end up with about $1500/year in the fund, which would cover most minor-to-middling repairs, keep our insurance deductible handy if we needed it, and would probably build up enough of a stash to make the inevitable furnace or roof much less of a crisis. As a rule of thumb, I like it. I'd increase the amount if I were thinking ahead to a major remodeling project or cosmetic upgrades.
A friend of mine, after she'd been in her house for close to 20 years, had it inspected by a good home inspector, like you would when you were buying a house. He found improvements she wouldn't have thought of (like, if I remember correctly, an area in the attic that hadn't been properly insulated even though the rest had) and also things like a minor problem with the chimney flashing that was easy to fix but that, unfixed, might have led to major invisible water damage. This struck me as a good idea, and, if we stay in this house awhile longer, is something I would think of doing.
I know that most of my answer doesn't directly address your question about budget, but the underlying question is also: how do you know what work needs to be done? That's been a learning process for me.
posted by not that girl at 1:25 PM on May 25, 2011
I remember when we bought our house, our real estate agent said to budget about %1-%2 of the home's value per year for maintenance and upgrades. So for a $200K house, budget about $2K-$4K per year. Some years will be less, and some years will be more. This assumes you are starting out with a baseline of solid, well-maintained property, not a fixer-upper.
posted by fancyoats at 1:28 PM on May 25, 2011 [1 favorite]
posted by fancyoats at 1:28 PM on May 25, 2011 [1 favorite]
When will your roof need to be replaced? Septic system? Is your electrical system up to current standards? Does the house have vinyl siding? Here's a Home Inspection Checklist that you can use. Assess your house, then budget for predictable replacement/upgrade/repair. There will always be unexpected stuff, but if you have money set aside for the roof you should do in 2020, you can use some of it for the new pipe needed to connect to the new water system the city decides to implement.
Sorry t o hear about your Dad's house; sounds like you have your hands full.
posted by theora55 at 1:56 PM on May 25, 2011
Sorry t o hear about your Dad's house; sounds like you have your hands full.
posted by theora55 at 1:56 PM on May 25, 2011
I can understand this question from someone who's just bought a house, but you say you've lived there for 14 years. You should have a pretty good idea of how much you've spent so far. You ask about "redecorating, updating landscaping," but those expenses are pretty much up to you: from a few thousand to hundreds of thousands.
I don't mean to be dismissive; I'm just trying to say that after 14 years, you're probably the best expert on your house. Just think about big possible expenses that might come less frequently than 14 years, like roof replacement or brick repointing.
posted by Mr.Know-it-some at 2:02 PM on May 25, 2011
I don't mean to be dismissive; I'm just trying to say that after 14 years, you're probably the best expert on your house. Just think about big possible expenses that might come less frequently than 14 years, like roof replacement or brick repointing.
posted by Mr.Know-it-some at 2:02 PM on May 25, 2011
One place to look for estimates would be the budgets of apartment buildings. In Australia, at least, the body corporate has to have a detailed 15-year estimate of all repair and replacement costs. I've uploaded one I had access to here. You can work out the percentage cost for each item by assuming a value for the whole building of about 4.5 million dollars (I'm basing this on the value of the one apartment we looked at, multiplied by the total number of apartments in the building.)
From the "methodology" section of the report: They are not accounting for any interest that may be earned on the money set aside for this maintenance or repair work. Future replacement costs were calculated to increase each year at a rate of 5.2%, which is in accordance with building price indices. A contingency of 10% for annum was applied to anticipated costs. GST was not included. It was assumed that regular maintenance was kept up with.
The place is built to a good quality standard, but not luxurious. As the body corporate is only responsible for the external and shared areas of the building, this does not include interior painting or fixtures, or things like carpet, curtains, etc.
The short answer is that in this case, each owner was expected to contribute levies of $700 per quarter for maintenance, and $130 per quarter for replacement costs. This is on 2-bedroom apartments worth around $500,000.
posted by lollusc at 4:27 PM on May 25, 2011
From the "methodology" section of the report: They are not accounting for any interest that may be earned on the money set aside for this maintenance or repair work. Future replacement costs were calculated to increase each year at a rate of 5.2%, which is in accordance with building price indices. A contingency of 10% for annum was applied to anticipated costs. GST was not included. It was assumed that regular maintenance was kept up with.
The place is built to a good quality standard, but not luxurious. As the body corporate is only responsible for the external and shared areas of the building, this does not include interior painting or fixtures, or things like carpet, curtains, etc.
The short answer is that in this case, each owner was expected to contribute levies of $700 per quarter for maintenance, and $130 per quarter for replacement costs. This is on 2-bedroom apartments worth around $500,000.
posted by lollusc at 4:27 PM on May 25, 2011
Oh, and incidentally, if you are trying to calculate rules of thumb as a percentage of property value, you should exclude the land value from your calculation, as this makes comparisons in regions with different house prices wildly inaccurate. In my city, for example, the land value alone is around 75% of the value of a stand-alone property (i.e. a plot of vacant land would sell for 75% of the price of the sale of the next-door same-size plot that has a decent house on it). So my half-million dollar property within walking distance of the CBD of Australia's capital city may well be smaller and built to a lower standard than your $100,000 property in rural America. But we could expect that your repairs and my repairs might actually be similar in scope and cost.
posted by lollusc at 4:33 PM on May 25, 2011
posted by lollusc at 4:33 PM on May 25, 2011
Response by poster: Great ideas so far.
Mr. Know-it-some: You're right that I can look at what we've spent to date, and can anticipate some of the obvious expenses like roof replacement. What I'm trying to do is set up a way to fund a "house account" over time, so that we don't have to finance unexpected items.
For example, three of our neighbors have had to completely reside their houses due to faulty installation of the original siding (same builder as ours). We have no indication yet that ours has a problem, but I don't want to be up against it if we do.
Additionally, I'm wondering if there are guidelines for kitchen remodels, for instance. We live in a relatively affluent neighborhood so an Ikea kitchen might not hold value (no offense to Ikea.) does that make sense?
lollusc, the spreadsheets are very helpful. thanks!
posted by Gusaroo at 5:45 PM on May 25, 2011
Mr. Know-it-some: You're right that I can look at what we've spent to date, and can anticipate some of the obvious expenses like roof replacement. What I'm trying to do is set up a way to fund a "house account" over time, so that we don't have to finance unexpected items.
For example, three of our neighbors have had to completely reside their houses due to faulty installation of the original siding (same builder as ours). We have no indication yet that ours has a problem, but I don't want to be up against it if we do.
Additionally, I'm wondering if there are guidelines for kitchen remodels, for instance. We live in a relatively affluent neighborhood so an Ikea kitchen might not hold value (no offense to Ikea.) does that make sense?
lollusc, the spreadsheets are very helpful. thanks!
posted by Gusaroo at 5:45 PM on May 25, 2011
The best value is the one that has the right balance of good/cheap/fast.
You can never get all three at once:
1) good/expensive/fast
2) good/cheap/slow
3) blah/cheap/fast
posted by ovvl at 7:45 PM on May 25, 2011
You can never get all three at once:
1) good/expensive/fast
2) good/cheap/slow
3) blah/cheap/fast
posted by ovvl at 7:45 PM on May 25, 2011
+1 to the comment that once you open a wall, you'll always find more things to fix. My house is freaking Alice in Wonderland: I never know how deep the rabbit hole will go when I get curious or decide to "fix" something with my hammer.
Case in point a small water leak in my kitchen breakfast nook. I opened up the plaster in the corner, peered in, and ended up ripping out the entire nook, re-framing the rotted timbers, replacing the knob and tube wiring in there and then drywalling.
Considering I started this little (and it is a little project) in November and just finishing it now, the second rule of homeownership is: it will always take you longer than you anticipate and cost more than you estimate.
posted by tgrundke at 4:33 AM on May 26, 2011 [1 favorite]
Case in point a small water leak in my kitchen breakfast nook. I opened up the plaster in the corner, peered in, and ended up ripping out the entire nook, re-framing the rotted timbers, replacing the knob and tube wiring in there and then drywalling.
Considering I started this little (and it is a little project) in November and just finishing it now, the second rule of homeownership is: it will always take you longer than you anticipate and cost more than you estimate.
posted by tgrundke at 4:33 AM on May 26, 2011 [1 favorite]
This thread is closed to new comments.
We fail miserably at this goal but that is not relevant to your question.
posted by DarlingBri at 12:08 PM on May 25, 2011 [1 favorite]