The 2% Solution for Home Maintenance

Have you ever driven by a home or apartment building that is in serious disrepair? Do you wonder how it got to this state? Surely the owner didn't mean for one of their most valuable assets to depreciate its current condition?

One of the things new home or investment property owners aren't educated in is their properties require maintenance investment on a regular basis to maintain their value. Without continuous care the property will start to deteriorate and functionality can be loss. There comes a point when things get so bad that they are almost at the point of no return. No return in both the literal and figurative sense.

An ordinary person understands maintaining their car regularly, but, perhaps because it is stationary, don't sometimes get that a home needs continuous care as well. Another reason, might be that, unlike cars, deterioration can appear to be happening much slower.

The other reason is budgetary. Either the budget for maintenance was never considered during the purchase decision or unfortunate circumstances might have intervened.

For the former I suggest the KISS (Keep it Simple, Stupid) method of creating a separate bank account an depositing 2% of the property's current value, saving it for future expenses. For a $600,000 home, this would equate to $1,000 per month. This fund can then be used to repair or improve the property. You can adjust the 2% based on the age, condition, and other factors, such as whether there are offsetting repairs done by an HOA or regularly scheduled services, but 2% is a great place to start. If you find that the funds you've saved has grown beyond maintenance needs, use some for a vacation or other treat.

There are more complex and complete analysis that can be done to be more exact. In fact I developed a web application (https://www.epicstructures.com) that does just that! This can be very useful in property management or for those owner that want to budget more tightly.

When buying property of any type, besides maybe raw land, it is important to include the costs of upkeep in your budget. Your real estate agent or property manager is a good source of information, as is any past history you can obtain for a specific property.