# Maintenance Costs?



## GraemeC (Jun 2, 2016)

Hi All,

How do you work out what to budget for maintenance? I've seen the percentage approach, however, because so much of a homes value can be in the land (depending on the city - it certainly is for me), that doesn't quite pan out. A $650,000 house probably wont be $6,500 a year in maintenance. I also have better things to do with my money than leave $6,500 in an account "just in case" every year.

Also, I assume you do it differently if you have ongoing strata fees which cover some (most?) maintenance. How would it change if you're in a condo/townhouse?

Finally, if it's for a rental, do you change the numbers at all because it's tenants rather than yourself?

Thanks!


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## Prospector (Jul 25, 2014)

We have been in our house 4 years.

Year 1 - rebuild retaining wall and pool - $25,000
Year 2 - install hardwood floors in second storey - $5,500 (materials only, work is ongoing, slowly. Its lost its glimmer)
Year 3 - re-roof - $5,000
Year 4 - replace blown windows - main floor only $7,500, Replace AC - $1,200, Replace pool pump - $1,000

$6,500 doesn't seem so far off for our place which is valued at $525,000. Maybe for the extra $125K you get the maintenance-free model.


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## twa2w (Mar 5, 2016)

1% isn't too far off. However it can be rather lumpy and much of the maintenance expense doesn't come until the house is 15 to 25 years old.
Then you are looking at new roof, windows, flooring, doors, driveway. Maybe kitchen and bathroom upgrade. Revise landscaping because now it is overgrown. 
Sometimes you get caught unexpectedly with a leaky basement or a sinking driveway broken garage door.
Or you can keep deferring.... 
With a condo you are usually looking at interior only so kitchen bath flooring. Probably 1/4 to 1/2 % but again only every so many years.
If house is newer, or recently improved, you may have next to nothing for 10 - 20 or more years. If you sell before repairs/maintenance are needed you may get away without spending much.


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## LBCfan (Jan 13, 2011)

If you're buying, assume a larger percentage. The guy selling didn't spend any money (other than absolutely necessary) since he decided to sell.


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## hboy43 (May 10, 2009)

Hi:

Don't know my number but I am sure it is closer to 5% than 1%. As I do almost all my own work, this includes my time at $50/hr. 

I have a stunningly shitty house that I will for sure guaranteed lose money on.

Still, my situation says nil about the average. Check Stats Can numbers on building store spending etc. to get an estimate. I think the 1% number is low by at least a factor of 2.


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## Mortgage u/w (Feb 6, 2014)

If buying a $650k home and keeping $6500 aside is an issue, you may want to re-think buying the home.
You can gauge a budget more or less (% or $) but I would rather focus on building a savings cushion for all expenses. As others have mentioned, most expenses are unexpected and vary from one year to another. If you need to budget every expense to the penny, I suggest you consider renting instead. 

I would consider keeping a savings account with at least $20k which you can dip into whenever you need too. And that can cover house maintenance, emergency repairs, health necessities, short term income replacement, etc. Build it beyond $20k and then use the excess to invest as you deem appropriate. I would consider the same approach if I rented or opted for a condo.


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## Prospector (Jul 25, 2014)

Mortgage u/w said:


> If buying a $650k home and keeping $6500 aside is an issue, you may want to re-think buying the home.
> You can gauge a budget more or less (% or $) but I would rather focus on building a savings cushion for all expenses. As others have mentioned, most expenses are unexpected and vary from one year to another. If you need to budget every expense to the penny, I suggest you consider renting instead.
> 
> I would consider keeping a savings account with at least $20k which you can dip into whenever you need too. And that can cover house maintenance, emergency repairs, health necessities, short term income replacement, etc. Build it beyond $20k and then use the excess to invest as you deem appropriate. I would consider the same approach if I rented or opted for a condo.


Option B - recognize that $20K (+/-) of your TFSA is for emergencies and have $25K space available on a Line of Credit. Use the LoC for fast cash, and pay it back out of the TFSA. Replenish the TFSA in the following year.


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## nobleea (Oct 11, 2013)

We're building new. I have mapped out the expected lives of all components and pieces of the house, along with the costs. Created a 20yr cashflow model with that data, and then figured out how much I would have to set aside each month to meet all those future obligations. Assuming it's in an investment which keeps up with inflation, maybe a bit more. The number comes out to 0.6% per year of the house value (not lot). Some pieces will last longer, some shorter. I could run a monte carlo simulation with a range of expected lives for all components to get a most likely scenario, but given that many pieces will be on warranty for the first several years, I don't need to be worried about infantile failures.

You could do the same thing with an older house, just bumping up the expected replacement costs based on the current life of the components.

On our current house, which is 60 yrs old, it is hard to say what the actual house value is. I'm going to say 250K on a 485K property value. The lot for sure would get snapped up at 235K for redevelopment if the house didn't exist. 250K is also about what it would cost to rebuild that house from scratch as a new home. We've lived in the house 10 years. Done a lot of work, but only a small portion of it has been maintenance/repairs and the rest upgrades/renovations. I would say we were running just under 1% of house value per year. We didn't have any specific savings, just paid out of cashflow. It's only a couple thousand a year.


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## GraemeC (Jun 2, 2016)

Hi All,

Thanks for the comments - good information.

I should have been more clear - it's just about budgeting, not about "finding the money". I'm someone who simply likes to have the numbers down, and organized. I can afford the payments (with extra left over) on the house we're looking at, it's more about where the positive cash flow I've built in to the budget should go.

I also have a additional $15,000 "emergency" fund. I suppose my question was simply if, over and above that, I should devote an EXTRA ~$500 to a maintenance account (or really, just the emergency fund) each month.

I'll stick in 1% per year for a few years and see where I'm at, I think.

Appreciate everyones time.


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## 319905 (Mar 7, 2016)

When I budgeted, I budgeted for upcoming knowns so for the house that involved an analysis and planning for an upcoming expense. Now contingencies, that's different, a contingency being an unknown. I had a contingency fund for the year for all contingencies ... $5K worked out for me ... and if unused at the end of the year, nice, and I'd simply start the next year with the same amount, not increase it by some arbitrary percentage. But it was all just paper work, was interesting to note what contingencies came up ... e.g. wake up, leaking hot water tank, a day off to home depot, get a new one, install.

Thought: I can't imagine not being a bit handy around the house and having to say wait for a plumber to arrive and fix something. Three weeks ago it was a clogged drain. A horizontal stretch of kitchen drain running along the basement ceiling finally clogged after 23 years of being sloped slightly the wrong way. Cut out a 6' section, replaced no problem.


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## My Own Advisor (Sep 24, 2012)

Our place is worth about $600k. I figure we spend on average, about $6k-$10k maintaining our place per year. We keep $10k in an emergency fund for "what ifs" and try to grow that by $1k per year to cover inflationary costs.


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## 319905 (Mar 7, 2016)

My Own Advisor said:


> Our place is worth about $600k. I figure we spend on average, about $6k-$10k maintaining our place per year. We keep $10k in an emergency fund for "what ifs" and try to grow that by $1k per year to cover inflationary costs.


Out of curiosity, what are some of your maintenance items that require $6K-$10K per year ... our "operational" costs are about $12K (taxes, heat, etc.) if that's what you're including ...


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## My Own Advisor (Sep 24, 2012)

In the last 6 years....new expenditures - but planned:

-new roof
-new hot water tank
-new sump pump
-new water softener

I consider "operational costs" running the household:
-snow removal
-lawn care
-septic pumping

The list goes on....


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## nobleea (Oct 11, 2013)

My Own Advisor said:


> In the last 6 years....new expenditures - but planned:
> 
> -new roof
> -new hot water tank
> ...


If those are the main things you've had to maintain in the past 6 years at a cost of nearly 50K, something does not seem right. All those things together should cost around 10K.
Snow removal, septic pumping, etc I would consider as operational costs similar to cable bills or electricity. I do not include them in maintenance costs. Preventative maintenance things like staining decks/fences, cleaning out forced air ducts, etc I would include in maintenance.

There is likely a large variation in prices depending on your lot value and how handy you are. A house cost of 500K on 100K lot is going to cost the same amount to maintain as a 500K house on a 1.5mil lot. That's what the % of value estimation for maintenance costs should be based on the house value. Ask your insurance company what they think it costs to replace if you're unsure.


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