Kim Bregman, an Active Rain blogger based out of Boca Raton Florida, wrote this great post on Home budgeting. It is an issue many of us struggle with and I wanted to share it with you. Her 1% and 3% rules are very good, and if you are planning to buy a home, they are worth considering...
While buying a home is a huge financial expenditure, homeowners need to keep in mind that the spending doesn't stop once the home is purchased. Whether you are moving into a new or old home, homeowners need to be aware of the ongoing maintenance that any home requires. Dan Steward
First, buyers should understand the 1% rule. This rule postulates that normal maintenance on a home is about 1% of the value of the home per year. For example, a $250,000 home would require $2,500 per year to maintain. This would be enough to replace the roof covering...and then, a few years later, to replace a failed hot water tank...and then a few years more until a new central air system is required.
Then there is the 3% rule. Some experts say that home buyers should plan on spending 3% of the value of the home in the first year of ownership. This is because new homeowners will most likely have to buy drapes, blinds, a washer and dryer, a stove, maybe even a new roof covering. Also, new homeowners often customize the environment to their taste, so they need to budget for repairs, replacements and maintenance.
In addition, most home components have fairly predictable life cycles. For example, the typical life cycle of kitchen appliances is 10 to 15years. One way to know the extent of the maintenance needed and the costs to repair and/or replace items is to have a home inspection conducted. Home inspectors are required to let the buyer know if a component is significantly deficient or if it is near the end of its life cycle (service life), and a reputable home inspection company may offer up-to-date repair-cost guides to help clients with their planning.
Home inspectors work with Realtors and buyers to help them understand the issues that are found in the home, regardless of age, offering the right perspective and objective information. Home buyers need to understand that it's normal for items in a home to wear out. This should be regarded as normal "wear and tear" and not necessarily a defect.
A good home inspection determines the current condition of the house, offering a report of all the systems and components in need of maintenance, service, repair or replacement.
A good home inspection provides objective information to help the buyer make an informed decision. Knowing what items need to be budgeted for repair or replacement will help home buyers plan or negotiate better and not be stuck with unexpected costs of hundreds, or even thousands of dollars in the long run. Also, fixing these items will make a marked improvement on the performance of a home and minimize issues that could affect its future integrity...and value.
Chris Smith CSSBB
Chay Realty Inc., Brokerage