Budget for Home Upgrades and Maintenance Reserve Fund?

[Random Poster]

I'm thinking of buying a home within the next year. Not sure of where, but that's a minor detail I suppose.

In any event, I have never owned a home before and am trying to determine our housing budget and what we can spend from our available cash amounts.

I've done some rough calculations and reading, and the one thing that is clear is that all houses come with expected and unexpected expenses.

To that end, and provided that we do not purchase a fixer-upper type house, would it be reasonable to budget and set aside:

$25,000 for immediate upgrades or changes to a house (things like new paint, changing locks, perhaps updates to the faucets and door hardware, new blinds, curtains, or the like); and

$50,000 for a maintenance reserve fund to cover things like a new HVAC, roof, foundation repair, appliance replacement, and the like?

If you think that these numbers are too high, that's fine, I suppose, but I'm really more interested in hearing if you all think that these numbers are too low, particularly for a first-time homeowner who has very limited DIY experience and initial capabilities.

To the extent that it matters, at the moment I'm thinking that our housing budget would not exceed $350,000, but if the absolutely perfect house came along, I could see us running the budget up to $400,000---but in any event, we aren't interested in anything with more than 3 bedrooms or bigger than 2,500 square feet (and, honestly, the smaller the place, the better, although I really would like a 3 car garage).

Thank you.

[adamthesmythe]

>To that end, and provided that we do not purchase a fixer-upper type house, would it be reasonable to budget and set aside:
>
>$25,000 for immediate upgrades or changes to a house (things like new paint, changing locks, perhaps updates to the faucets and door >hardware, new blinds, curtains, or the like); and

WAY too much for that stuff unless you hire very expensive workmen. There is nothing there that I wouldn't do myself for hundreds in supplies and tools. Since these are noncritical they are perfect as a learning experience.

> $50,000 for a maintenance reserve fund to cover things like a new HVAC, roof, foundation repair, appliance replacement, and the like?

You should know if you need a new roof or foundation work anytime soon once you get the inspection done. That will be taken care of as a credit or price reduction before you move in.

HVAC replacement is 10-20K almost everywhere. Appliances are several hundred to a thousand each and you never need to replace all at once.

Expensive things you haven't thought of: sewer, driveway, windows.

But overall I think you are way high. Owning a hundred-year old house, the most I ever spend in a year was about 25K and that was for improvements (concrete driveway, completely new AC).

When owning a house you need to understand the difference between things that must be repaired NOW, things that can wait awhile, and things that would be kind of nice.

[daheld]

To that end, and provided that we do not purchase a fixer-upper type house, would it be reasonable to budget and set aside:

$25,000 for immediate upgrades or changes to a house (things like new paint, changing locks, perhaps updates to the faucets and door hardware, new blinds, curtains, or the like); and

$50,000 for a maintenance reserve fund to cover things like a new HVAC, roof, foundation repair, appliance replacement, and the like?

You are way, way, way high. You can get an entire house professionally painted for a few grand. We had a locksmith either re-key or change out locks on every external door on our 2100SF home on a day's notice and it was something like $400. I would have normally done this myself but the seller lived next door and, well, it's a story for another day. You will not need to do every item you listed, but you could probably do all of them for $10,000.

As for your $50k home maintenance reserve fund, I guess that could make sense if you get an inspection and immediately know that all those systems are junk and need replaced. But I'd caution you to not buy that home in the first place.

Get a good home inspector. Get all the systems of the home inspected in addition to a structural inspection. Don't forget to get a sewer lateral inspection.

You don't need a separate home maintenance fund. That's what an emergency fund is for.

[Random Poster]

You should know if you need a new roof or foundation work anytime soon once you get the inspection done. That will be taken care of as a credit or price reduction before you move in.

HVAC replacement is 10-20K almost everywhere. Appliances are several hundred to a thousand each and you never need to replace all at once.

Expensive things you haven't thought of: sewer, driveway, windows.

As for your $50k home maintenance reserve fund, I guess that could make sense if you get an inspection and immediately know that all those systems are junk and need replaced. But I'd caution you to not buy that home in the first place.

I must not have been particularly clear:

The $50K maintenance reserve fund would be to address and pay for things that happen over the, say, first 10 or 15 years of owning a house. Not for immediate repairs which, as you note, should be identified and handled at the time of the purchase.

I just do not want to buy a house and be immediately cash poor, with limited funds on hand to update or maintain the house. Hence my $25K and $50K set-aside amounts, so that when an appliance breaks or the roof leaks, I don't feel stressed about finding the money to replace or fix it.

[Luke Duke]

I believe that you are setting more than enough aside.

[daheld]

You should know if you need a new roof or foundation work anytime soon once you get the inspection done. That will be taken care of as a credit or price reduction before you move in.

HVAC replacement is 10-20K almost everywhere. Appliances are several hundred to a thousand each and you never need to replace all at once.

Expensive things you haven't thought of: sewer, driveway, windows.

As for your $50k home maintenance reserve fund, I guess that could make sense if you get an inspection and immediately know that all those systems are junk and need replaced. But I'd caution you to not buy that home in the first place.

I must not have been particularly clear:

The $50K maintenance reserve fund would be to address and pay for things that happen over the, say, first 10 or 15 years of owning a house. Not for immediate repairs which, as you note, should be identified and handled at the time of the purchase.

I just do not want to buy a house and be immediately cash poor, with limited funds on hand to update or maintain the house. Hence my $25K and $50K set-aside amounts, so that when an appliance breaks or the roof leaks, I don't feel stressed about finding the money to replace or fix it.

I guess you have to do what makes you able to sleep at night, but I am saying those are pretty astronomically high numbers. You could replace a roof and HVAC system for $30,000. The likelihood of having to do both of those things at the same time seems low.

[researcher]

In any event, I have never owned a home before and am trying to determine our housing budget and what we can spend from our available cash amounts.
$25,000 for immediate upgrades or changes to a house
$50,000 for a maintenance reserve fund to cover things like a new HVAC, roof, foundation repair, appliance replacement, and the like?

If you think that these numbers are too high, that's fine, I suppose, but I'm really more interested in hearing if you all think that these numbers are too low, particularly for a first-time homeowner who has very limited DIY experience and initial capabilities.

It is completely impossible to answer these questions unless you have a specific house in mind.
- Are you looking at a 5 year old house or 150 year old house?
- Has the house been recently renovated or is it a fixer-upper?
- How old are the major systems (HVAC, roof, electrical, appliances, ect)?
- Is the exterior made of lower maintenance materials (brick, vinyl) or high maintenance (wood, stucco)?
- Are you in a HCOL or LCOL area?
- Is the house in a rural where it is hard to find contractors/workers?

This is just a partial list of questions. My point is...
- Why would you budget $25K for "immediate upgrades" if you are buying an expertly renovated move-in-ready home, for example?
- Why would you need a $50K maintenance reserve fund if all of the major systems in the house are brand new?
Unless you have a house picked out, your made up cash amounts are not grounded in any sort of reality.

[anon_investor]

Those numbers seem very high. I live in an old house that was rennovated a few years before I bought it, it was move in ready (the interior was newly repainted) so the only upfront costs were changing the locks (bought online/HD and install ourselves), installing a DIY alarm system, installing some blackout shades for bedroom (bought at HD and install ourselves); which all told was likely less than $1k (the alarm system being the bulk of the cost). So a lot of the things like roof, siding, HVAC, appliances etc. are relatively new and I do not feel the need to maintain a separate maintenance fund to pay for full replacement of things. But I already keep a large emergency fund (6+ months of full living expenses), so I figure I can always draw from that. That being said, in the few years I ahve lived in my house, my new HVAC did need some repairs, the parts were covered under warranty, but the labor was not. Still it was sub $1k to fix. I do keep a separate fund that I add a little each pay check (and a bit more from my bonus) to for future rennovation projects.

[Random Poster]

My point is...
- Why would you budget $25K for "immediate upgrades" if you are buying an expertly renovated move-in-ready home, for example?
- Why would you need a $50K maintenance reserve fund if all of the major systems in the house are brand new?
Unless you have a house picked out, your made up cash amounts are not grounded in any sort of reality.

Mostly just to feel that I could easily afford any unexpected expense that pops up as a result of buying the house.

I don't want to calculate that our house budget is, say, $450,000, then buy that expensive of a house, move in, have something go wrong, and not have the cash on hand to deal with the issue.

I thought it would be better to calculate that our house budget is, say, $325,000, then buy that expensive of a house, move in, have something go wrong, and have the cash on hand to deal with the issue and, ideally, less stress because of it.

It appears that my $25K and $50K set-aside amounts might be too high, so perhaps I either need to reduce those numbers to something more realistic or just keep them as-is and deal with the consequence of having less money available to buy a house with.

[researcher]

It appears that my $25K and $50K set-aside amounts might be too high, so perhaps I either need to reduce those numbers to something more realistic or just keep them as-is and deal with the consequence of having less money available to buy a house with.

Again, the set-aside amounts are entirely dependent on what type of home you end up considering.
If it is a fixer-upper, you could need $100K or more over the first few years.
If you purchase a complete remodel, you may only need a few thousand.
It all depends on the condition of the house.

[lthenderson]

There is no way someone can reasonably answer your questions without knowing a lot more details on what kind of house, size of house, market location, etc. A roofing job with 3-tab asphalt shingles where I live might cost $1k total. A clay tile job on a large house in the beverly hills area might cost $150k.

[denovo]

There is no way someone can reasonably answer your questions without knowing a lot more details on what kind of house, size of house, market location, etc. A roofing job with 3-tab asphalt shingles where I live might cost $1k total. A clay tile job on a large house in the beverly hills area might cost $150k.

Roofs don't cost 150k in Beverly Hills. Also, I doubt the shingles on a roof (just the materials) would be less than 2.5k for even a decent sized house.

[Nate79]

You need a healthy emergency fund to cover all sorts of potential emergencies such as a major home repair, out of pocket health insurance costs, or a job loss. Any maybe you want to cover a job loss and a major emergency home repair at the same time. As well any expense that you know will come in the future you can plan for a sinking fund to set aside that money. But I wouldn't save 10 years of home repair expenses and let it sit in cash. That's way too much. For long term expenses 5+ years in future you could invest the money in a taxable account.

[mw1739]

My house is about 20 years old and I’ve lived here for 7 of those years. We probably did spend $20-$30,000 when we moved in replacing all the carpet in the house and painting the interior and exterior, but aside from that, I don’t think we’ve ever spent more than $1,000 a year in actual repairs. Taking advantage of the quarantine to get a little work done around the house ($2-$3,000) and we will probably replace the dishwasher this year ($1,000). Maybe we’ve just been fortunate, but I wouldn’t ever keep $50,000 in cash waiting for something to need fixed.

[dandinsac]

I spent about $20,000 when we first bought our house to add blinds and upgrade the outdoor landscaping. Also spent about $50,000 to remove two walls and redo the kitchen. In my opinion, buying the right house that you don’t later want to resell is the most important. $20-30,000 real estate transaction costs don’t help your net worth. Good luck!

[dandinsac]

I spent about $20,000 when we first bought our house to add blinds and upgrade the outdoor landscaping. Also spent about $50,000 to remove two walls and redo the kitchen. In my opinion, buying the right house that you don’t later want to resell is the most important. $20-30,000 real estate transaction costs don’t help your net worth. Good luck!

[Jags4186]

When you buy a house you should know what work you are going to do immediately. In our case, we bought window treatments ($4k), pulled up wall to wall carpet, sanded and refinished hardwood floors ($6k), and replaced our roof ($8k).

I would not keep $50,000 “on the side” for home repairs. Rule of thumb is 1-2% of the price of the home per year in maintenance. We split it down the middle and said 1.5%. Our house cost $469k, 1.5% of that is about $7000 so we budget $600/mo for home maintenance. One month I bought a new refrigerator for $1k. Another month I spent nothing. Another month I spent $1500 on a new hot water tank.

I figure that that that number is probably right on long term. If I were buying a house all over again I’d probably pay much more attention to how old certain systems are. We have a lot of systems in our house that are 12 years old. That means a lot of things are going to break around the same time — I fear having to replace an A/C compressor, furnace, windows, etc. all at once.

[lthenderson]

There is no way someone can reasonably answer your questions without knowing a lot more details on what kind of house, size of house, market location, etc. A roofing job with 3-tab asphalt shingles where I live might cost $1k total. A clay tile job on a large house in the beverly hills area might cost $150k.

Roofs don't cost 150k in Beverly Hills. Also, I doubt the shingles on a roof (just the materials) would be less than 2.5k for even a decent sized house.

Well just doing a google search, I can find 3 tab shingles for $0.35 per square foot and clay tiles for $25.00 per square foot. That is 71 times more expensive and that doesn't factor in square footage. If I were to shingle my 1800 sq ft roof I could pay $630 for 3 tab shingles (less than $1k) or $45k for clay tiles. I don't think it unreasonable to assume a house 3, 4 or 5 times larger than mine might cost $150k for clay tiles, especially when one included labor, especially if you were to factor in say Silicone Valley versus where I live in extremely rural Midwest.

[Sandtrap]

I'm thinking of buying a home within the next year. Not sure of where, but that's a minor detail I suppose.

In any event, I have never owned a home before and am trying to determine our housing budget and what we can spend from our available cash amounts.

I've done some rough calculations and reading, and the one thing that is clear is that all houses come with expected and unexpected expenses.

To that end, and provided that we do not purchase a fixer-upper type house, would it be reasonable to budget and set aside:

$25,000 for immediate upgrades or changes to a house (things like new paint, changing locks, perhaps updates to the faucets and door hardware, new blinds, curtains, or the like); and

$50,000 for a maintenance reserve fund to cover things like a new HVAC, roof, foundation repair, appliance replacement, and the like?

If you think that these numbers are too high, that's fine, I suppose, but I'm really more interested in hearing if you all think that these numbers are too low, particularly for a first-time homeowner who has very limited DIY experience and initial capabilities.

To the extent that it matters, at the moment I'm thinking that our housing budget would not exceed $350,000, but if the absolutely perfect house came along, I could see us running the budget up to $400,000---but in any event, we aren't interested in anything with more than 3 bedrooms or bigger than 2,500 square feet (and, honestly, the smaller the place, the better, although I really would like a 3 car garage).

Thank you.

Depends on the home you buy.

For a "money pit" those dollar amounts might work out perfect over the first 5-10 years.
Especially with no DIY experience.

However, homes have a built in demand for DIY experience. You will indeed rise to the occasion because hiring out for everything gets expensive. Besides, DIY is fun and nowadays' there's YouTube.

IMHO: buy the home. Hang on to those cash reserves you mention. Over time you'll find out what you don't need and then invest those extra funds. Now, is just to early to predict anything. It will happen in the doing.

j

[fishmonger]

Good rule of thumb I've lived by is 1% of purchase price a year towards real maintenance/improvements for a house in good condition that addressed anything major upon purchase.

So for a $300k house, roughly $3k per year. Not talking about regular, necessary maintenance like landscaping, snow removal, having your furnace cleaned, etc. But major systems maintenance/replacement. You may go years without spending hardly any of that, then you have to replace your roof for $15k

[iamlucky13]

There is no way someone can reasonably answer your questions without knowing a lot more details on what kind of house, size of house, market location, etc. A roofing job with 3-tab asphalt shingles where I live might cost $1k total. A clay tile job on a large house in the beverly hills area might cost $150k.

Roofs don't cost 150k in Beverly Hills. Also, I doubt the shingles on a roof (just the materials) would be less than 2.5k for even a decent sized house.

When I helped my brother re-roof his house, he said he was paying less than $20 per bundle for architectural shingles. Granted, oil prices were low at that time, and I think he quoted a few lumber yards instead of just driving over to Home Depot and paying their price. Anyways, that would have worked out to around $1000 for the size of his house, plus maybe $400 or so for disposal, and a few hundred dollars in felt, nails, and replacement sheathing for a couple spots that were rotting because the original roof had been installed by "professionals" who didn't have a clue how to shingle a valley.

Other houses in his neighborhood were all getting re-roofed at around the same time, and several of them chatted about costs with him. I gathered that most of them were paying in the ballpark of $10,000 to have someone else do it, in a relatively low cost of living city.

[tooluser]

For ongoing maintenance, the 1% of value per year sounds about right to me (decent neighborhood in Los Angeles for ~20 years). You will need to accumulate some of that money over several years for the big expenses like roof and sewer, siding redo or new windows. Get an estimate of the age of things from your home inspector when you buy the house. At least then you can plan ahead. I knew moving in that I would need to buy a new furnace and AC, but I lasted 9 years before having to do so; the money was ready to go.

For the initial outlay upon moving in, $25k sounds low to me unless you are buying a move-in ready house or don't need to make it "like new" when you move in. I didn't spend even close to that much, but from what I have seen, most people spend much more - new yard and driveway, full interior and exterior painting, remodel a room or three, new flooring for the whole house, even adding a story. All to make it perfect and up-to-date when they move in. Very nice for a family! I'm single so I didn't have to please anyone but myself; clean and serviceable with a good floorplan has worked well.

[Nate79]

I once made a spreadsheet with all maintenance items and costs for our house, where the item was in its life, and the expected replacement cost. Amazingly it did work out to be about 1-1.5% of the purchase price of the house per year.

[phxjcc]

The 1.5% per year is fine.

BUUUUUUUUTTTTT.....you need to understand that you may be buying a freshly painted and landscaped house full of deferred maintenance.

So, you buy a nice 400k home.
That hasn't had any mechanical or structural work done to it.
Since it was built.
In 1961.

Let's see, 60 years x1% x 400k.

And yes, I have seen this.
Neat as a pin, spotless, but Harold and Edna saved their money and now their kids are selling it.
So, in addition to doing the "updating" thing, roof, plumbing, HVAC, irrigation, sewer, mainline, termite remediation, pull new electrical home runs to kitchen and baths, new panel, new wallboard and mud, new windows and doors, new garage door, new laundry room, move water heater, fix minor leak under slab, remove 4x post that was mysteriously cut by Harold,jr and replace, remove closet and small wall and put in structural beam to get that open floor plan look, new facia boards and flashing, etc, etc.

As said up thread, there is no way of knowing without knowing details of the individual house.

Down the street, a couple bought an estate sale special for 435, as-is. I actually thought it was 75K too much.
Not trashed, just 100% original a/o 1961.
Needed all of the above, and more--like demo and rebuild pool and decking--with small access for a little bobcat.
3000 sq ft of new concrete.
They had to crane the new trees over the roof.
They have put 325 into it.
Not a tear down, but down to the studs everywhere with some minor reconfigurations in he layout.
1400 sq ft for a frame of reference.
1/4 acre lot.

So, out of pocket, they are probably 400. (90% LTV)
House is worth 650-700, so they are happy.