Business Week has put in print what many people have already suspected: some properties are money pits! They define “money pit” as any property you have to spend 2% of the value on repairs annually. So for a property worth $150,000, that’s $3000 in repairs.

Now keep in mind, sometimes big repairs have to happen, and that can blow the budget. That’s why I always insist that buyers get a home warranty, and recommend they renew it annually. A home warranty is like an insurance policy against things like broken furnaces and leaky water heaters. They only cost a few hundred dollars, but can save you a lot of money. If a covered item breaks, you call one number, the warranty company sends out a pre-screened company to make repairs, and you only pay a low deductable.

Personally, I think that 2% figure should be considered an average, and should not include planned maintenance and upgrades, such as painting, carpet, or big renovation projects. But if it seems like “there’s always something” that needs fixing, maybe it’s time to think of it as a “money pit.”

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Posted in General Real Estate by Bridget Magnus Comments Off