Purchasing your own house can be exciting yet overwhelming for some, especially for first-timers. There are many things to consider such as a mortgage, home insurance, property tax, utility bills, and even a home maintenance budget which is all so often neglected in the process.
An allocation of budget solely for the maintenance of your house is essential as it helps preserve your home in its initial state.
Generally, the annual maintenance cost will vary depending on the location, age, condition, type, and size of your property. Nonetheless, a few rules of thumb such as the 1% rule, and the square foot rule are useful guidance when it comes to budgeting for your maintenance costs.
Homeownership comes with big responsibilities, and unlike renting, you are basically responsible for any issue that may arise or has gone wrong with your house. Thus, you can no longer afford to disregard continual home maintenance costs. Furthermore, buying a house is a big investment and requires a large sum of money. So, all the more important for you to thoroughly understand what other expenses you will have to account for in owning a house. This can also help you determine whether if you can actually afford the house before signing the agreement.
“Many basic maintenance costs are often overlooked when calculating the cost of buying a home. It’s imperative that those looking to buy a home do their homework to avoid any surprising charges.”
Lucas Puente, Lead Economist at Thumbtack
Budgeting Tips for Home Maintenance
Generally, home maintenance costs will vary depending on several factors – location, age, condition, type, and size of the residential house. For instance, a 10 years old semi-detached house will have a higher cost of maintenance as compared to a newly built terrace house.
In addition, if your property is located in humid areas such as coastal areas, then it may require extra maintenance since the salty sea air will cause weathering and erosion of your building’s structure and components.
With this in mind, some of you might then wonder how much exactly should you budget for home repairs? Well, there are a few rules of thumb though not foolproof, but is able to serve as a guide so you would have some additional cash on hand for home maintenance when needed.
#1 The One Percent Rule (1% Rule)
Yeap, as some of you might know, the 1% rule is a strategy used in real estate investing to determine your capitalisation rate. In other words, it is used to determine whether the monthly rent earned from your investment property will exceed the said property’s monthly mortgage payment. Although applied for different calculations, the same principle applies when it comes to budgeting for your home maintenance costs.
The 1% rule is fairly simple and straightforward since just like its name, you are to set aside yearly, 1% of the purchase price of your house for any home maintenance. For example, if your house is worth $382,000, then you should have a budget of $3,820 for any maintenance that is required. Undoubtedly, this does not mean you will spend the exact amount every year. In certain years, you may be required to spend more for major repairs or replacement and in other years, you may be spending less depending on the number of defects found in your house.
Do take note that the 1% rule does not consider market peak times where you might have bought your house at a lower or higher price. For instance, the house was originally built with a cost of $450,000 but due to deflation, you bought it for just RM350,000. In such circumstances, you are supposed to set aside 1% of the original price ($450,000) to spend on annual upkeep.
On a side note, you might also want to set aside more if you have an older home especially if it has wood finishes or is located in a wetter climate. In cases like this, a good view of the annual home maintenance and repair budget would be between 1% to 4% of your house’s purchase price. As suggested by John Bodrozic, co-founder of HomeZada, the 1% rule is an appropriate range for houses that are less than five years old. However, for houses that are twenty-five years and above, then 4% is a good amount. As for houses that are between five to twenty-five years old, the budget will thus vary between 1% to 4% for home maintenance costs.
#2 The Square Foot Rule
The next budgeting tip is closely related to the size of your house. As its name suggests, the square foot rule requires you to set aside $1 for every square foot of your house. This means that if your house is 3,520 sq ft, then you should have an allocated budget of $3,520 for annual home maintenance.
This rule of thumb may be more logical for some since the determination of budget is based on the size or area that you have to manage and maintain instead of it being based on how much your house is valued. Nevertheless, the square foot rule also has its flaws since it does not take into consideration the current market price for the cost of materials and labour. So, the maintenance cost will vary depending on where you live, such as whether you are living in West or East Malaysia, rural or urban areas, etc.
Importance of Budgeting for Home Maintenance
You might ask, is it really necessary to set aside a portion of your savings for home maintenance? Well, life is full of surprises whereby your house components or appliances may break down at any moment. So, by saving up a small amount with each pay-check, you are able to thus, find maintenance work quite manageable. Plus, it also helps prevent unexpected expenses from derailing your financial health.
In regards to home maintenance, I do not just mean repairing or replacing a certain component only when it is faulty. Contrarily, I am referring to regular maintenance such as from the daily cleaning to the monthly servicing of appliances and yearly updating of the house. Hence, performing regular maintenance on your property is vital if you want it to be an asset rather than a liability.
#1 Regular maintenance helps retain your investment value
For most people, a house might be the largest investment they will ever make. Of course, the value of your home is interdependent with the market, but you can further increase its value through curb appeal. How to do this? Maintain and update your house regularly!
If the house looks well maintained, clean and comfy, your buyer might just be willing to pay 1% – 2% more.
Let’s say if you have decided to put up your home for sale or rent without maintaining any of your fixtures, appliances, and even furniture. You will very quickly realise that buyers and/or renters would want a discounted rate for all the maintenance issues found with your house, or they would want you to replace or repair it. Either way, you will not be earning as much money from the sale or rent as it could potentially be worth.
That is why a well-maintained and updated property with an attractive curb appeal is crucial if you are aiming to get the most out of your investment. You will be amazed at the price buyers or renters are willing to pay for such properties.
#2 Regular maintenance helps you to save costs
Yes, you read that right. Indeed, maintenance works require dedication, effort, and some money. Nonetheless, homeowners that conduct regular maintenance will end up saving more money in the long run as compared to homeowners that do not.
Every dollar you spend on preventive maintenance around the home, you would save approximately $100 in future repairs.
J.D. Roth (Your Money: The Missing Manual)
For instance, regular cleaning of air-conditioner filters does not even cost a penny, it just requires a little bit of hard work. However, if you leave it be, a larger problem will then arise whereby the air conditioner may overwork and fail due to the formation of ice on the coils – dirty filters will restrict the flow of cold air. By then, you have no choice but to forge up a hefty sum of money to either repair or replace it. The same philosophy applies to your home’s plumbing and fixtures whereas it is best to fix the problem when it is still “small”.
#3 Regular maintenance helps extend the life-span of your house and home appliances
Well-maintained homes are said to be able to withstand the test of time whereby it requires less frequent major repairs and upgrades. A great example is such as your roof. If you have the habit of annually inspecting your roof for leaks or broken tiles, then it will be easier and less costly to maintain since it may just need some minor maintenance. However, if you continue to neglect this step, then the area of leak will become more severe and may result in you having to replace the whole roof even though it has not reached the end of its design life.
The same goes for your home appliances like air-conditioners, refrigerators, washing machines, and so on that are necessary for your daily routine. Simple upkeeping on a regular basis such as cleaning of your refrigerator coils is able to help extend the lifespan of your home appliances and keep them in great condition for years to come. Besides, it will also give you peace of mind knowing that your house is well-run.
General Home Maintenance Guide for Homeowners
Below is a general checklist of some easy and inexpensive home maintenance that you can execute as early prevention so you would not have to spend tons on major repairs or replacements later on.
It is a basic guide whereby most of the items are simple enough for you to handle on your own. Do not overwhelm yourself by trying to do everything all at once, instead, schedule the maintenance tasks and commit to doing them. However, if you do not have the time or is not the handy type of person, then you can always either hire someone or a professional to do the work for you.
Monthly
- Clean your kitchen exhaust hood and filter. Regular cleaning is important since the grease might just be too stubborn to leave after a period of time. By then, you might have to replace it with a new filter.
- Clean your air-conditioner filter.
- Clean your washing machine filter.
- Clean your oven and stovetop. Use suitable cleaning agents according to the type of your stove, whether it is gas, electric, or induction.
- Keep your piping system clear. Toilet and sinks do not need regular maintenance but regularly cleaning your pipes with a drain cleaner can help prevent clogs.
- Inspect your fire alarm system. Clean your smoke detectors of any dust and debris. Conversely, the calibration and testing of the alarm sensors may require the help of professionals.
- Visually inspect your fire extinguishers. Check whether it is damaged in any way and that the safety seals on them are not broken. Ensure it is located in a visible location and is easily noticeable.
- Lawn maintenance. You may need to regularly mow and fertilise your lawn depending on your personal preference and the size of your lawn.
Semi-Annually
- Clean your refrigerator coils. Getting rid of the dust bunnies can help boost your refrigerator’s energy efficiency.
- Clean your gutters. Remove any leaves and debris to ensure the free flow of water.
- Deep clean your bathroom tiles. Remove any accumulated soap and mildew.
- Inspect your water tank. Check the structural integrity, cleanliness of its internal condition, and whether all fittings and accessories are in full working order.
- Inspect your bathrooms. Check for cracks in the grout of your bathroom tiles and also look out for molds.
- Have professionals to service your air-conditioner.
Annually
- Inspect your house structure. Check for any cracks, peeling paint, leaks, molds, pests infestation, etc. on both the interior and exterior, roof included.
- Inspect your plumbing system. Check for any leaks or excessive running of water, clogged, and damaged pipes.
- Test your home’s water pressure. Through our homes have a pressure-reducing valve, but it wears out over time whereby the spike in pressure can damage the plumbing.
- Test all your electrical outlets. Ensure they are working perfectly and are not overheating or shorting out.
- Have professionals to service your water heater. Regardless of where you live, the water that enters the heater will carry some amount of minerals, and if it is hard water, then the mineral content will be higher than the normal amount. Hence, you would have to descale your water heater to protect the heating elements.
Maintenance of Landed Property vs Strata Property
Based on my own opinion, being the homeowner of a landed property definitely has a bigger responsibility as compared to being the homeowner of a strata property such as a condominium and apartment. Despite this, it is never my intention to suggest that you should go for a strata property instead since both landed and strata homes have their own advantages.
Landed Property
For landed property, the maintenance work starting from the lawn to the exterior and the interior of the house is dependent solely on you as the homeowner. Yes, you may argue that you can always hire professionals to do the work for you. Nonetheless, you are still responsible to inspect the condition of your house, and then make the call to enquire or hire professionals to fix the issue.
Contrarily, landed property may be able to help you save some maintenance costs. This is because if you’re the handy type of person, you can always DIY the maintenance works instead of relying on someone else. Furthermore, your maintenance budget will also be spent according to the number of defects found in your house, unlike strata properties whereby you will be charged every month for the upkeeping works regardless of whether it is being carried out. In addition, landed homes allow you to have better management of your property in terms of cleanliness and also the life span of appliances since you would not have to share any common areas with your neighbours.
Strata Property
As for strata property, the burden on you for maintenance works is drastically reduced since you only need to maintain the interior of your own unit. Meanwhile, the exterior and infrastructure of your building, including the plumbing, landscaping, etc. are often handled for you. However, this does not mean you can escape from maintenance costs since you would be charged monthly for the sinking fund and maintenance fee by your building’s Joint Management Body (JMB). Besides, you would also have to budget for your home’s interior maintenance such as the servicing of air-conditioners, washing machines, and so on.
Strata titled property’s maintenance fee covers the everyday repairs and upkeep of the property such as gardening, repairing of common areas, security, cleanliness of the place, and etc. The amount of maintenance fee paid is based on a shared percentage, which depends on the type of your unit, the total floor size of the parcel, the shared facilities you have access to, and the shared access points.
Strata titled property’s sinking fund is a pot of funds kept for future expenditures like any major works or large-scale repairs. The fee is usually set at 10% of the total cost of the service fees.
Therefore, if you are living in an expensive complex with high maintenance fees, subsequently, your sinking fund will cost higher too. And remember, these fees are not fixed, meaning that the JMB can increase them after some time.
Final Words
When it comes to buying a property, it really boils down to your own personal preference and affordability.
No doubt, strata homes require a monthly maintenance fee which can help you live a maintenance-free lifestyle to a certain degree, but it should also be within your financial consideration. For some, the perks of having amenities outweigh the fees so they do not mind having to pay more for the monthly maintenance.
However, if you cannot afford the maintenance, then there is no shame in buying a smaller landed home or affordable home that is less costly to manage in the long run. Ultimately, the whole purpose of investing in a house is so that it can be an asset to you and not a liability. As the saying goes, never bite off more than you can chew!
Until then, take care.
