The number
One percent suits a newer house in a mild climate, and 2 percent or more suits a house past thirty years old or one in a harsh climate. On a $350,000 home that means $3,500 to $7,000 a year, or roughly $300 to $600 a month. The spending will not be even. Several quiet years are followed by a $12,000 year, which is why the money needs an account of its own. Keep it apart from the emergency fund, which exists for job loss and real surprises. A fourteen-year-old water heater that fails is not a surprise.
Lifespans and prices
- An asphalt shingle roof lasts 20 to 30 years and costs $8,000 to $20,000 or more to replace.
- A furnace lasts 15 to 20 years and a central air conditioner or heat pump 10 to 15, and a new system runs $5,000 to $12,000.
- A tank water heater lasts 8 to 12 years and costs $1,200 to $2,500 installed.
- Major appliances last 10 to 15 years at $600 to $2,000 apiece.
- Exterior paint lasts 5 to 10 years and costs several thousand dollars.
Build a simple table from your inspection report listing each item, its installation year, its expected replacement year and the cost. Anything due within five years sets your saving rate, which is the cost divided by the months remaining.
Cheap work that prevents expensive work
Water causes most of the costly damage. Clean the gutters every spring and fall, and make sure downspouts empty several feet from the foundation. Change the furnace filter every one to three months and have the heating and cooling system serviced once a year. Flush the water heater annually, clean the dryer vent annually to prevent fires, and renew caulk around tubs, showers and exterior trim when it cracks. Test the sump pump before the wet season. Learn where the main water shutoff is before you need it at two in the morning.
Hiring it out
Get three written quotes for any job above about $1,000, and verify the contractor's license and insurance with the state board. A deposit of 10 to 30 percent is normal, and payment in full before the work begins is not. Replace failing equipment on your schedule when you can. A furnace that dies in January is replaced with whatever is in stock, at emergency prices.
Note Condominium owners should read the association's reserve study. The dues cover the roof and exterior, but an underfunded reserve turns into a special assessment, which can run to thousands of dollars per unit.
