Why you need a home main­te­nance fund

Lesotho Times - - Property -

THERE is much more to home­own­er­ship than pay­ing a monthly bond re­pay­ment. This is ac­cord­ing to Adrian Goslett, Re­gional Direc­tor and CEO of RE/MAX of South­ern Africa, who says main­tain­ing the prop­erty is an in­tri­cate el­e­ment of be­ing a home­owner.

“Be­com­ing a home­owner has a num­ber of ad­van­tages, such as the po­ten­tial of own­ing an as­set that will in­crease in value over the long term. Other ben­e­fits in­clude be­ing able to make changes to the home and de­cide what it looks like with­out hav­ing to con­sult with some­body else,” says Goslett.

“How­ever, with the ad­van­tages comes the re­spon­si­bil­ity of main­tain­ing the prop­erty to en­sure that it reaches its full in­vest­ment po­ten­tial.”

He says af­ford­ing a prop­erty is not just about meet­ing the monthly bond re­quire­ments, but also be­ing in a fi­nan­cial po­si­tion to be able to put some money away for when the un­ex­pected hap­pens.

He says while the ma­jor­ity of ma­jor is­sues and dam­ages that could oc­cur from a fire, flood­ing, nat­u­ral dis­as­ters or the like are cov­ered by home in­sur­ance, the gen­eral up­keep and main­te­nance of the prop­erty is not.

“Poli­cies will dif­fer from one in­sur­ance com­pany to the next in terms of what dam­age or dis­as­ter they will cover and what they won’t. How­ever, home­own­ers can be as­sured that in­sur­ance poli­cies won’t cover gen­eral home main­te­nance or dam­age that is a re­sult of ne­glect or poor main­te­nance,” says Goslett.

“The up­keep of the prop­erty will be for the home­owner’s own ac­count. For ex­am­ple, a roof that has been dam­aged by a fire will gen­er­ally be cov­ered by in­sur­ance, whereas an old roof in need of re­pair won’t. Re­plac­ing or re­pair­ing a roof could be a huge fi­nan­cial bur­den if the home­owner has not pre­pared and set aside money in some kind of a con­tin­gency fund.”

Ac­cord­ing to Goslett, it is vi­tal for home­own­ers to have an e mer­gency fund to avoid in­cur­ring ad­di­tional debt to pay for home main­te­nance and un­fore­seen costly re­pairs.

“Ide­ally home­own­ers should aim to set aside at least 1% of the value of their home an­nu­ally to cover main­te­nance, bear­ing in mind the value of the prop­erty will in­crease,” he says.

“This trans­lates into an­nual sav­ings of around R10 000 per R1 mil­lion of the home’s value. In the in­stance where the money has not been used dur­ing the year, it should be kept and added to the next year’s sav­ings to en­sure that the home­owner is cov­ered in the event of a ma­jor ex­pense.” Although 1% of the home’s value should be the min­i­mum, how much a home­owner can set aside will largely de­pend on their fi­nan­cial sit­u­a­tion, tak­ing into ac­count their in­come, ex­penses and sav­ings goal. “Ad­di­tional fac­tors to con­sider in­clude the home’s con­di­tion and age - newly­built homes will ini­tially re­quire very lit­tle main­te­nance com­pared to older prop­er­ties. It is best for home­own­ers to have a bal­anced ap­proach to their fi­nan­cial pri­or­i­ties, with con­sid­er­a­tion given to re­duc­ing debt lev­els, sav­ing to cover ex­penses in the event of job loss and re­tire­ment,” says Goslett. He says each cir­cum­stance will be unique, so home­own­ers will need to work out what kind of sav­ings plan will work in their sit­u­a­tion. It is a mat­ter of in­tro­spec­tively as­sess­ing their fi­nan­cial po­si­tion and de­cid­ing what amount they can re­al­is­ti­cally set aside con­sis­tently - sus­tain­abil­ity is a vi­tal as­pect to build­ing sav­ings.

With fac­tors such as in­creased food prices, in­ter­est rate hikes and in­flated util­ity tar­iff fees plac­ing fi­nan­cial pres­sure on house­holds, cer­tain home­own­ers may only be able to build up their project fund slowly.

If this is the case, Goslett says home­own­ers should pri­ori­tise main­te­nance projects based on their ne­ces­sity and push purely cos­metic tasks down the list.

“Although not al­ways pos­si­ble, in cer­tain in­stances home­own­ers could di­vide large project into more man­age­able por­tions so that they won’t have to pay large sums of money all at once and have ad­di­tional time to build up sav­ings,” he says.

“If need be, rather fo­cus on one room at a time than the en­tire house all at once.”

The ideal way to start a sav­ings fund is by set­ting up an au­to­matic trans­fer from the home­owner’s cheque ac­count into their sav­ings ac­count.

“Re­search re­veals that con­sumers are more likely to for­get about money that is au­to­mat­i­cally set aside, and their sav­ings fund can start to grow with­out them even think­ing about it,” says Goslett.

“A con­tin­gency fund will as­sist home­own­ers to main­tain and im­prove their home, never hav­ing to worry about be­ing caught un­pre­pared.”

RE­SEARCH re­veals that con­sumers are more likely to for­get about money that is au­to­mat­i­cally set aside.

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