It started out like any other work day. I finished reading my daily devotional and started getting my lunch and other necessities packed in preparation for a long day. Like clockwork, my thoughts became dominated by everything on my to-do list, including project deadlines.
I began rushing as I realized that in order to get to work on time, I had to miraculously fit an hour commute into 45 minutes. I placed everything into the car and was ready to go when it happened. I pressed the button for the garage door and heard a loud noise that sounded like something large was crashing down in the house. I looked up and saw that the garage door was quickly morphing into a shape that I didn’t know was even possible. It turned out that the lifting cable on the right side of the garage door popped, which caused the right side of the door to stay on the ground while the left side was being pulled up, leaving me with a mangled door. After a few minutes of trying to decipher what happened, I realized that my car was trapped in the garage and getting to work on time was no longer a possibility. Several days and over $2,000 later, we had a new garage door and an understanding of the importance of maintaining and lubricating moving parts of anything large and automated.
Even when faced with unexpected repairs, like my “garage door dilemma,” being financially prepared for homeownership increases your ability to fully enjoy the benefits of owning a home. One advantage of homeownership is the ability to build equity for yourself instead of for a landlord who will tack on an extra 2%[1] annually in rent payments. Additionally, since you are likely to stay in your home for a 10-year period,[2] if the value of your home increases 4% annually (the 20-year (1999-2019) U.S. growth rate[3]), you can expect an extra $80,000 in equity on a home worth $200,000 when purchased. A home can be viewed as a type of savings plan when you consider avoided rent hikes and home price appreciation. There are also many intangible but priceless benefits like pride of ownership or simply having ownership of a space that you can customize to meet your needs.
Confident Home Buyer Tool Kit Tips:
A good rule of thumb is to expect to spend 1‒4%, of the value of your home, in repairs and maintenance annually. This equates to a budget of $2000‒$8000 per year for a $200,000 house.
Get better prepared for homeownership by outlining your annual maintenance and repair budget in the Savings for Homeownership section of Step 3 in the Confident Home Buyer Tool Kit. Membership is free!
So how much should you put aside for the “other” homeownership expenses? According to the HomeAdvisor State of Home Spending report,[4] homeowners spent an average of $1521 on home maintenance and emergency spending in 2018. This doesn’t include the additional $7,560 on home improvement spending for items such as roof repairs or room
remodels. A good rule of thumb is to expect to spend 1‒4%, of the value of your home, in repairs and maintenance annually. This equates to a budget of $2000‒$8000 per year for a $200,000 house. Considering that 4 in 10 homebuyers will experience an unexpected repair within the first year after closing[5], be sure the budget is available for your first year of ownership.
One way to potentially minimize repairs, especially within your first few years of ownership, is to carefully select your home. Be sure to hire a reputable inspector to increase chances of identifying costly repairs. If your inspector finds damage that will be costly, you have several options which include asking the seller to make the repairs, getting the damages fixed yourself if the owner gives you a break on the price of the home, or finding a different property.
Preparing financially for homeownership will influence whether you can fully enjoy the many benefits of homeownership. Setting aside a fixed amount annually, just for repairs and maintenance, is highly recommended. Get better prepared for homeownership by outlining your annual maintenance and repair budget in the Savings for Homeownership section of Step 3 in the Confident Home Buyer Tool Kit.
Denise Johnson, MBA, REALTOR®, is often referred to as a "Data Nerd" by family and friends and has a gift for seeing the important facts of a situation. She aims to fit all the pieces of the jigsaw puzzle together into a complete picture, making it easier for herself or anyone she counsels to make sound and rapid decisions.
After 10+ years of working for multiple Fortune 500 and 1000 companies across Logistics, Finance and Marketing, Denise made the leap into the Real Estate Industry hoping to help others achieve their homeownership desires. She can remember purchasing her first home at the age of 23, and it being both a time of joy and stress because she didn't fully understand the process and the implications of owning a home. Since then, she has owned and sold multiple personal properties, including selling an investment home that turned from a Rehab to a New Construction project in 2020. She has a desire to share all that she has learned and continues to learn with future customers to tip the scales towards a joyous homeownership and home-selling experience.
When she is not busy finding solutions in business, she loves large get-togethers with friends and family, international travel adventures with her hubby, and growing her passion for gardening and cooking healthy recipes.
[1] Zillow.com. Rent Increase: A Guide to Raising Rent. March 3, 2020. Link to Article [2] Copyright ©2020 “2020 Home Buyers and Sellers Generational Trends Report.” NATIONAL ASSOCIATION OF REALTORS®. All rights reserved. Reprinted with permission. March, 2020. Link to Article [3] St Louis Fed. Link to Website
[5] Nerd Wallet.com. HomeAdvisor State of Home Spending. Link To Website
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