Maintenance charges sneak up on homeowners who are not prepared. Rather than be left caught in the dark without the funds to cover any necessary maintenance around your home, it’s better to have an idea of what to expect in the future.
In this article, we’ll discuss the importance of home maintenance and go into detail on how the charges are made and how you can budget for your home.
When you buy a home, you want to make sure that it stays looking great for when you are in it. Unfortunately, maintaining your home can quickly become complicated when balancing those costs against your monthly expenses.
You’ve heard before that having a solid budget is a crucial aspect of homeownership, but it is equally as important in managing your maintenance charges as well. Putting away money each month to help save for more extensive projects on your home will help you to be able to get the work done that is needed and wanted.
Ultimately, being able to afford maintenance charges on your home will increase its curb appeal and help boost the overall value of your home.
Maintenance charges are homeownership costs that are often overlooked. Knowing the annual costs of maintaining your home is crucial when it comes to budgeting. Here are just a few of the reasons it is essential to understand the yearly maintenance charges of a house:
In calculating home maintenance charges, which we’ll get into shortly, you’ll find that it’s a good idea to put a certain percentage of your home’s value away into savings each year to cover it. Having this type of savings will allow you to afford more significant home projects as they arise.
While you might not think that your home will need big projects completed any time soon, you will quickly be surprised. Things around the house come up, like appliances running their course or your roof living out its lifetime. Either way, it’s better to have a rainy day fund saved up so you can tend to these projects as they come up.
Some of the maintenance charges you can anticipate around your home over time may include things like:
While the numbers are essential, it is also worth noting that maintenance can be broken into two different types; service work and project-based work. To calculate maintenance charges, you must be able to differentiate the two.
Service work covers the maintenance of things like toilet breaks or roof leaks.
Service work is charged out by the hour. So, you can anticipate maintenance charges that include a labor rate plus materials.
Labor rates will vary, so always ask the current labor rate when you talk to any company. You can expect to be charged one labor rate for handyman-type work and a slightly higher labor rate for licensed work. Licensed work requires a specialty qualification such as a plumber’s license or heating and air license to do.
You will also be charged for the materials used in the service work. These materials will have a markup, depending on what the materials are.
The other type of maintenance is project-based work, which includes things like turning a house or replacing a sewer line.
Project work is a little bit different. It’s a bit of a more significant project, and it takes a little bit longer than service work.
When it comes to pricing out project-based work, you’ll find that companies will have to kind of jump in and do the work first. The pricing is kind of unknown. The company might provide you with an estimate, an educated guess on how much it will cost to get it fixed.
But if you do get an exact price, it means that the company is taking the risk on, if you will, of that scope of work. Sometimes they make money doing it, and sometimes they lose money doing it. But the whole goal is over time; they’re able to even that out and manage that risk to where they can make a little bit of money doing project-based work.
While you can never fully anticipate the maintenance charges of your home to budget correctly, there are a few different stances you can take to help yourself be better prepared.
One of the most basic budgeting tools for maintenance charges follows the 1% rule. According to this budgeting tactic, you should set aside 1% of the purchasing cost of the home annually for maintenance charges.
For example, if you purchased your home for $350,000, according to the 1% rule, you should be setting aside $3,500 annually or just under $292 per month for maintenance charges.
Another budgeting tactic is the square foot rule, which tells you to budget $1 for every square foot of liveable space in your home for your annual maintenance costs.
For example, using the square foot rule, if your home is 1,700 square feet, you should budget $1,700 annually or $142 per month.
Lastly, another rule of thumb some homeowners follow for budgeting for maintenance charges is the 10% rule. According to this rule, you should be putting away 10% of your monthly home expenses towards maintenance.
First, break down your monthly expenses like this:
So, in following the 10% rule, you should be putting away $160 + $36 + $25 each month for a total of $221 monthly.
As you can see, there are a lot of factors that contribute to maintenance charges which is why there are a few different budgeting tools you can use to help you. In the end, what’s most important is that you are putting money away on a monthly or annual basis to help cover some of these costs later down the line.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.