What are your home maintenance and repair costs?

[AZdoc68]

jz wrote:

If you are a homeowner,  how much do you pay for maintenance and repair of your home/ home value?   If you’d annualize your costs of painting, roof replacement, replace the driveway,  replace the water heater, replace the leaky windows, replace major appliances, cleaning after the squirrel falls through the chimney and wrecks the place, cost of fallen tree removal, costs of landscaping renewal, restraining the deck, replacing the water softener, repair animal damage to the gazebo.

I am not referring to upgrades, just basic maintenance and repair.   Now divide this annualized cost by the value of your home.  Don’t underestimate to salve your ego.

I ask this for educational purposes;  to educate the younger doctors interested in home ownership.

 

*** and if you decline to maintain and repair,  your home will get dated and creepy.   You  may be OK with living in a dated and creepy home, but you’ll have catch up due the decade you decide to sell.  Either maintain and repair,   or depreciate.

 

 

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I’d educate young doctors on the cost of home ownership this way:

The carrying cost of residential real estate averages about 3-3.5% of market value per year.  That’s on top of principal & interest and includes taxes, utilities, insurance, and maintenance/repair.

[FIREshrink]

2-4% is much higher than we spend, even including the fact we manage two acres. Maybe half that, or less.

[Tpeters2010]

I read article in Kiplinger magazine about 5 years ago while a resident. They said annual maintenance costs around 1-3% of home value per year, I believe. At that time I checked budget and, sure enough, we spent about 2% a year, $2500.

[Winkleweizen]

Vagabond MD wrote:

Winkleweizen wrote:

Only owned a year.   Built in 2004

500 for hvac

350 for fridge

780 for new pool pump and installation.

100 for gutter repair

600 for pest control.

1500 for lawn maintenance

1440 for pool maintenance (should prob do this on my own, but I’m lazy)

probably spent 200 to 300 on supplies to fix a gate and various other odds and ends around the house that I did myself.

5550/762k =0.72%

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No property tax? No insurance?

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I was just including maintenance/repair.   Insurance was about 3k.  Property 16k

[Winkleweizen]

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[Donnie]

Rex wrote:

sorry didnt see your actual attachment.  Those numbers wouldnt be accurate for my own situation but good for you for trying to put it into such a sheet.  Ive owned for about 8 years and if i sold today, i would have no gain.  Now im not against ownership but it isnt making me money.  Im not unhappy about that.  Im expecting it to be a return similar to a savings account in time.  Ive also been “unlucky” with repairs even though i bought a new home.  ive rented for most of my life and i will say there also just more things you do spend money on when you own that you just wouldnt do if you rented.

 

Im not sure why you would say market timing isnt a factor.  Your chart shows 5 years in a row of negative returns.  Also average annual return can be misleading.  If i have 100 dollars and lose 50% then im at 50 dollars.  If in the next year i have a 100% return then im back to 100 bucks but my average return would say 25%.  When one considers how many docs dont stick with their job (especially first), its a real factor.  As oppossed to money in the market where you can not sell or rebalance its harder with a house.  Now you might be able to get your second house at a discount assuming suppression all over the place in housing prices but then you need to add more costs.

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I agree that you shouldn't be expecting returns on your house that exceed the stock market, but home prices are historically less volatile.  Home prices were hammered during the last recession, so in that particular instance, market timing could play a factor.  If you were unlucky enough to buy at the absolute peak in 2005, you likely lost money over 10 years, which is the only 10 year period with a negative return.  There are specific reasons why the home price bubble occurred and specific reasons why it is unlikely in the future.  For example, purchase mortgage volume peaked in 2005 at $1.5T.  The highest annual volume post-recession is 33% less at $1T in 2016.

I agree average can be misleading, but it does tell you something about the distribution of returns.  At any rate, the IRR example only assumed price appreciation equal to inflation, which isn't a very heroic assumption.

[Donnie]

I am pretty sure I included everything: closing costs, real estate agent costs, insurance, property taxes, maintenance costs, and mortgage amortization.  There's not too much market timing if you plan to hold for ~10 years.

[CordMcNally]

The total cost for home ownership this year for us was about $18k including property taxes and home insurance on a property worth about $400k. About $10k was spent on "unnecessary" updating that we enjoy and feel like the price was worth it. I try to do all my own repairs and maintenance along with pest control so we spent about $1500 for repairs and maintenance around the house this year.  We've avoided any major repairs this year but know that it's only a matter of time.

[Donnie]

Rex wrote:

Yes homes are NOT investments. It’s actually uncommon for people with other jobs to make good money on a house purchase. The above discussion doesn’t even include taxes, interest, or agent commission on both buy and sell. Buying a house is like buying an iPhone, you buy bc you want to.

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What do you mean by "good money" and how do you come to this conclusion?  Average 10 year return is 4.1% since 1976.  Assuming 2.0% inflation equals home price appreciation over 10 years results in a 4.7% IRR.  Better than renting IMO.

[jz]

@Rex,   I'm in agreement that the cost of owning a home includes interest, property insurance, property taxes, AND REPAIR AND MAINTENANCE. 

I  am hoping to roughly quantify the R&M portion.   The other components are easier to quantify.  A meaningful number is the annualized cost/home value. As you mentioned, a DIY-owner will incur lower cost of ownership.  It can vary if the owner ignores the needs for several years. or defers the costs to the next owner.  I suspect a true annualized cost is 2-4%/home value.  Ex. a $1 million home could cost $20k-$40k in R&M annually.

[Neuro-doc]

Craigy wrote:

Seems like once a year there’s a big one, $4k or $5k or so.

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And then once every few years there's a REALLY big one, like our $20k roof last year. As someone said above, houses are money pits.

[VagabondMD]

Winkleweizen wrote:

Only owned a year.   Built in 2004

500 for hvac

350 for fridge

780 for new pool pump and installation.

100 for gutter repair

600 for pest control.

1500 for lawn maintenance

1440 for pool maintenance (should prob do this on my own, but I’m lazy)

probably spent 200 to 300 on supplies to fix a gate and various other odds and ends around the house that I did myself.

5550/762k =0.72%

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No property tax? No insurance?

[FIREshrink]

You gotta live somewhere.

[Winkleweizen]

Only owned a year.   Built in 2004

500 for hvac

350 for fridge

780 for new pool pump and installation.

100 for gutter repair

600 for pest control.

1500 for lawn maintenance

1440 for pool maintenance (should prob do this on my own, but I'm lazy)

probably spent 200 to 300 on supplies to fix a gate and various other odds and ends around the house that I did myself.

5550/762k =0.72%

[Zaphod]

Donnie wrote:

Whether you rent or buy, you are still paying the maintenance costs.  If you buy, maintenance costs are lumpy and somewhat unpredictable.  If you rent, maintenance costs are smoothed out in the form of your monthly rent check.

2% is probably a realistic estimate on average.  For me, it is never 2%, but either much higher (siding, roof, ac/heat, etc.) or much lower.  This year I doubt we will crack 0.5%.

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You do, but rent is also market based to an extent that maintenance isnt (though it is also). Theres an elasticity there that is fragile. Luckily the incentives for being a landlord allow rent to be pretty good.