A while back, a huge tree fell on the house we were renting. The house was damaged so badly it was unsafe to live in, and we had to move out. It took two years for the insurance company to pull through with an offer to fix the damage. The owner eventually sold the house for a huge loss.
If we had owned the house rather than rented, it would have ruined us financially.
One thing to consider before buying a house is the ongoing, never-ending repairs and maintenance that every house requires. When you buy a house, you own its problems, too.
Only $900 a month — we can afford that!
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Before you sign on the dotted line, consider whether you can afford to throw an additional $300 a month at repairs and maintenance. How about $750 more? That $900 payment can quickly turn into $1,200, and all of a sudden you are in a completely different world. And $1,650 a month? That’s a different galaxy.
Although it’s impossible to predict the future, it’s very possible to plan for it. Some experts recommend adding between 1 and 3 percent of the cost of your house for maintenance. So a $300,000 house would need between $250 and $750 a month in ongoing repairs, on average.
Insurance and government programs will cover only so much for so long. Eventually, you’ll be on the hook.
Everything in, on and around your house will eventually need to be repaired or replaced. It’s not a surprise, it’s not bad luck — it’s a fact. Gone are the days of calling your landlord when the water heater stops working.
The appliances, plumbing, air conditioning unit, windows, paint, roof, gutters, yard, driveway, fencing, deck and fake chimney are all your responsibility when you own a home. (Yeah, you’ll love a $1,000 “fake chimney repair bill.”)
There are other factors to consider, such as the home’s age, size, location and quality of construction. Dumb luck is also a factor — trees do fall.
Derek and Carrie Olsen are monthly money columnists for Ink challenging you to take a closer look at your finances. Visit their new website, howdoimoney.com, for more money resources.