# Repair Fund?



## iherald (Apr 18, 2009)

I currently rent and am saving for a house. I'm not sure if I'll get one soon, but I'm saving for an eventual purchase.

I've fully funded 6 months of an emergency fund, and seem to have funded my initial expenses for puchasing a place (lawyer's fees, land transfer taxes, basic furniture, etc). Now I'm thinking about a repair fund. 

I think this will be a good idea, and it's easier to save for now while I have lower expenses. But, while there are lots of information on how much you should save in an emergency fund, there isn't much on how much one should save for a repair fund.

What would people suggest? I read somewhere you usually spend 1% of the value of your house each year keeping it up. I'm sure there are lots of folks here with lots of experience on keeping a house in good shape. Any thoughts would be fantastic!

Thanks!


----------



## FrugalTrader (Oct 13, 2008)

iherald said:


> I currently rent and am saving for a house. I'm not sure if I'll get one soon, but I'm saving for an eventual purchase.
> 
> I've fully funded 6 months of an emergency fund, and seem to have funded my initial expenses for puchasing a place (lawyer's fees, land transfer taxes, basic furniture, etc). Now I'm thinking about a repair fund.
> 
> ...



I think that having some cash put aside for the house is a good idea. However, as regards to the amount, it can vary and most can be planned. For example, standard roof shingles last about 15-25 years depending on the brand and the cost of replacement can be planned. Or a hot water boiler around here only lasts 6-10 years ($500-600). Otherwise, if something expensive happens, like flooding in your basement, then home insurance will most likely cover it.

I personally don't have a fund set aside specifically for home repairs. If something were to happen, I would simply use my cash stash if I needed to do repairs or pay the home insurance deductible.


----------



## canabiz (Apr 4, 2009)

Our house is 3 years old so we do not have a repair fund but we can tap our HELOC (prime + 1) for any emergency issues until insurance kicks in, if applicable.


----------



## CanadianCapitalist (Mar 31, 2009)

We don't have a separate repair fund but we tend to budget ahead for major expenses like replacing the roof, windows, furnace etc. Minor repairs are funded out of regular expenses.


----------



## mhd (Apr 7, 2009)

According to Gail Vaz Oxlade's site :

The rule of thumb for budgeting home maintenance costs is that you can expect to spend between three and five percent of the value of your home holding the sucker together. Older homes require more financial investment. Brand new homes require almost nothing initially, often lulling home-owners into a false sense of what things really cost

http://gailvazoxlade.com/blog/archives/category/home-buying

So for a $300K home, you'd set aside $9-15K/yr.


----------



## George (Apr 3, 2009)

mhd said:


> According to Gail Vaz Oxlade's site :
> 
> The rule of thumb for budgeting home maintenance costs is that you can expect to spend between three and five percent of the value of your home holding the sucker together. Older homes require more financial investment. Brand new homes require almost nothing initially, often lulling home-owners into a false sense of what things really cost
> 
> ...


Speaking from experience, that's an insanely high amount for repairs, unless you're talking about a home that's 50+ years old and due for major upgrades.

Since we bought our house, we've replaced or upgraded many of the major items. Here's what it cost us (everything below includes professional installation - the costs would be lower if you can DIY some items).

Hot water tank: $800
Sump pump: $400
Furnace (high efficiency, some new ductwork): $5000
Carpet cleaning: $200 each time
Shingle replacement (35yr shingles, ice&water shield, etc): $6000
Basement finishing: $13000
Garage door opener: $400
Garage door springs/drums: $300
Window sealed unit replacement (to fix broken seals & fog between panes): about $200 per window, depending on size
Bathroom upgrades (toilet, tub surround, countertop, fixtures): $4000
Closet organizers (California Closets): ~$700 per closet

All of the above was done in the first 6 years of owning the house, and the house was built in the early 1990s. Bear in mind that a lot of these things weren't mandatory "gotta fix it or else" items, but it give you an idea of how much things cost. For a typical detached house, I think $2000 per year is probably a good amount to set aside for a repair/maintenance fund, more if the house is older.


----------



## CanadianCapitalist (Mar 31, 2009)

George said:


> Speaking from experience, that's an insanely high amount for repairs, unless you're talking about a home that's 50+ years old and due for major upgrades.


I don't think we've spent anything close to 3 percent to 5 percent on maintenance. Our home was built in 1989 (two storey, detached) and the major expenses have been:

Roofing - $4,000
Windows - $9,000
New furnace - $2,800

There is a lot of miscellaneous expenses such as new faucets, furnace, A/C tune up etc. but I doubt they add up to anything more than 0.5% of the value of the home. 

Of course, if it is a really old house, it is a different story.


----------



## markievicz (Apr 11, 2009)

Bear in mind that if you're going from a rental, especially an apartment, to your own house there are a ton of things you'll need to buy the first year - lawnmower, gardening tools, patio furniture, barbecue, bigger/better vacuum cleaner, little repairs from the inspection report, possibly more furniture for a larger space and so on .... You'll be staggered how much you'll spend at Home Depot and Canadian Tire 

I own a 100 yr old but upgraded house and (beyond upgrades we wanted) about $1,200 or so per annum has done us the last couple of years. We do put $150/mo into a specific home maintenance account, as ING makes it easy. But who knows, it very much depends on the place you're buying. Maybe ask the neighbours?


----------



## iamphysio (Apr 4, 2009)

Would agree that 3-5% is over kill. I'd think more in line with 1-2%. We've learned to become very handy which has also helped us save a considerable amount. I would strongly recommend having an inspector go through the house you buy at some point (even if you can't have that written into the offer to purchase - real estate market is still pretty crazy). We found this invaluable (especially as house newbies) to get an idea of what needs to be done, could be done, and can wait a while really allowed us to budget for expenses we knew would be coming in 3-5 years.
Good luck to you. Sounds like you'll be well prepared - don't wait forever though.


----------



## Ben (Apr 3, 2009)

Most major repairs are more-or-less forseeable (like a new roof/furnace), and I would budget for these (squirrel away the money in advance). Minor repairs from the regular chequing account.

I can't see home maintenance costs ever averaging more than 1% per year (covering roofing, furnace, A/C, driveway re-paving, etc, and all minor repairs as well) for a house less than 30 years old, and I think 1% is actually conservative. 

In an older house, maybe it could be higher. It would take something like a crumbling foundation, or digging a new well/septic perhaps to throw the figure higher. Things like upgrading insulation/wiring/plumbing could also make the calculations interesting.


----------

