Plan for the Care and Upkeep of Your New Home
Your home will be one of your biggest investments – whether you live in a freehold single family home or a condominium – so it pays to budget for the maintenance you’ll need to preserve this investment. Maintenance fees for a condo versus the costs associated with the ongoing care and upkeep of freehold ownership are actually fairly equivalent when you compare homes of approximately the same size, location and price.
Choosing between condo and freehold is really a matter of lifestyle preference, rather than a financial choice. Condos have a more hands-off approach to building maintenance, while freehold owners typically arrange for their own suppliers or do the jobs themselves.
Condo maintenance fees are your share of the costs required to properly run and maintain where you live. Generally speaking, these fees pertain to any utilities that are not individually metered and billed, along with items such as exterior window cleaning, snow removal, gardening, common area cleaning, etc. Fees are calculated based on the size of your unit, so fees for a two-bedroom suite will be higher than for a studio. Fees are recalibrated yearly, up or down, to account for the building’s annual operating budget. A condominium building with more amenities will also have higher maintenance fees due to the additional upkeep required.
A certain part of condo fees are set aside as a ‘contingency fund’. These include elements required eventually, such as a new roof. Condo fees can also incorporate a category known as ‘special assessments’. These are one-time fees levied for unexpected repairs not covered by the contingency fund. They generally only occur in older condos, where the operating budget has not kept pace with required maintenance or in the case of an emergency, such as a flood. Once the bill is paid off, monthly fees will drop accordingly.
When it comes to owning freehold, setting money aside monthly for inevitable future renovations is smart. While living in your home, you’ll want to keep up with replacing lost or damaged shingles or filling in masonry settlement cracks. Many maintenance issues can be predicted fairly accurately time-wise – i.e.: a roof likely has to be replaced after about 10 years. But, unexpected costs can arise if you forget to winterize your exterior backyard hose pipe, and you may find your basement flooding.
There are numerous ways to calculate how much you should save monthly for maintenance on a freehold home. You can make a good guess by calculating 1% of your purchase price and 1% of the total square footage of your home and taking the average. For example, if your home costs $300,000 and is 2,500 sq. ft., 1% of your purchase price is $3,000 and 1% of your square footage is 2,500. The average you’ll want to save annually is $2,750 or about $230 per month. If you live in an older home, you’ll want to put aside a little more for those big ticket items that will arise.
By understanding maintenance, and regularly setting money aside, you can rest easy knowing you’re covered.