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Owning a home is a little like raising a child. Some days, all you need is a band-aid to fix a skinned knee. On other days, you're looking at a $5,000 orthodontia bill. The key to managing your home maintenance and improvement projects is understanding the difference between them and planning for both.
Regular Maintenance Keeps Repair Bills Down
Routine maintenance keeps your home in good shape and helps you avoid expensive emergencies. The cost of maintenance varies depending on things like home location, size, and amenities (pool, air conditioning, central vacuum system). Plan on budgeting between 1 percent and 3 percent of your home's purchase price to cover annual maintenance costs. While this may seem like a lot of money, it's peanuts compared to what you could pay for a major repair. For example, routine maintenance on a heating system can cost between $150 and $300 a year; a major repair can cost over $1,500.
Like to do maintenance projects yourself? Find do-it-yourself information on a whole list of projects at Michigan State University Extension Home Maintenance and Repair.
Major Improvements Can Increase Home's Value
Capital improvements, like a new roof, windows, appliances, decking, a hot tub or room addition, can increase the value of your home, add to its lifespan, and make it more comfortable. They also usually put a major dent in your savings account and make you miss the days when you had privacy, peace and quiet, and sawdust-free lungs. Don't be discouraged -- just be prepared.
According to the Federal Consumer Information Center, the most popular improvements with the best return on investment are landscaping, adding or remodeling a bath, upgrading or remodeling the kitchen, adding a room, and adding or enclosing the garage. Statistics show that you can realize a rate of return between 60 percent and 100 percent on these types of improvements.
When planning, keep in mind the value of your home and other similar homes in your neighborhood. Building a $150,000 state-of-the-art kitchen in a $400,000 home may not be the best move since neither your neighborhood nor your home will attract people who can afford this kind of upgrade when you sell.
Also keep in mind that some improvements, while increasing the value of your home, may also create ongoing costs. For example, adding a new room may increase insurance premiums and property taxes as well as electricity bills. Your realtor can also help you understand the financial impact of a home improvement.
What to Know When You Hire a Pro to Do the Job
Even homeowners who are handy with a hammer usually hire professionals to do major improvements like a kitchen remodel or room addition. If that's the route you choose, follow these tips:
- Get at least three bids for the work.
- Make sure each bid is for exactly the same job so that you can compare apples to apples.
- Ask every bidder to factor in the cost of permits and licenses.
- Request references from everyone you interview and do call previous clients to chat about how satisfied they were with the work and the workers.
- Specify in the contract that you will pay for the job in stages. (It's customary to pay one third when the contract is signed so that the contractor can buy supplies. The number and timing of other payments depend on the size of the job and should be specified in the contract.)
- The final payment should not be made until all work is successfully completed, inspected and approved.
Whether you're doing a major renovation or just applying a "band-aid" to the roof, the effort will keep your home looking good and functioning the way it's supposed to. And in the long run, it'll either save you some money or make you some - a nice reward for any responsible homeowner.