What to Budget for Maintenance: New Home vs. Older Home

You have probably heard the one percent rule: budget one percent of the home’s value each year for maintenance. On a $550,000 house that is $5,500 a year, which is a real number to plan around.

It is also a bad rule, and not for the reason people usually give. The problem is not the percentage. The problem is that it averages two situations that look nothing alike. A house built last year and a house built in 1978 do not have similar maintenance profiles, and treating them as if they do is how buyers get surprised.

Maintenance is lumpy, not smooth

Nobody spends $5,500 a year. They spend $400 for four years and then $14,000 in one weekend when the roof and the furnace go in the same season.

That is the actual shape of home maintenance, and it is why the annual average is only useful as a savings target. What you really want is a calendar of when each major system comes due, because that is what tells you whether the next five years are quiet or expensive.

The systems, and roughly when they come up

Rough service lives, which vary with quality and how well the thing was maintained:

• Composition shingle roof: 20 to 30 years. Our wet climate and the moss that comes with it are hard on roofs, and a north-facing slope under trees ages faster than the rest.
• Furnace: 15 to 25 years.
• Heat pump or air conditioner: 12 to 20 years.
• Tank water heater: 8 to 15 years. Tankless runs longer.
• Exterior paint: 7 to 12 years here, at the short end of the national range because of the rain.
• Windows: 20 to 30 years, and older aluminium frames often fail on the seals long before the frames do.
• Sewer lateral: the one that ruins budgets. Older Portland neighbourhoods have clay or cast iron laterals with tree roots in them, and replacement is a five-figure job.

None of these are Oregon-specific numbers, they are general service lives. Get quotes locally before you plan around any of them, because our labour market has its own pricing.

Now put a purchase date against that list

Buying a home built in the last few years

Every system is at the start of its life. The roof has 25 years left. The furnace has 20. The water heater has ten. The paint has a decade. Nothing on that list is due.

Your first several years are filters, gutters, landscaping, and the occasional small repair. Realistically a few hundred dollars a year plus your time. On top of that, the builder warranty covers workmanship for the first year and structural items for ten, which I broke down in the warranty post.

The catch is that all of those clocks are synchronised. Everything was installed the same month, so around year fifteen to twenty a new home starts having the same conversations an older one does, several of them at once. New construction does not remove the cost. It moves it out fifteen years, which is worth real money in present terms but is not the same as free.

Buying a home built in the 1990s

Roughly thirty years old, which is right in the replacement window for almost everything on the list. The roof is at or past its life. The furnace is due. The water heater has probably been replaced once and is due again. The paint needs doing.

Some of that may already have been handled, and a good inspection will tell you what. But if the seller has done nothing, you are looking at a stack of expenses in your first five years that can easily reach five figures. That is not a reason to avoid the house. It is a reason to price it in, and to negotiate on it.

Buying a Portland classic

The pre-1950 stock in the close-in neighbourhoods is genuinely lovely and has its own economics. Knob and tube wiring, cast iron or clay sewer laterals, single-pane windows, foundations that were never bolted, and lead paint under everything. Oregon’s seller disclosure form specifically asks whether a house was built before 1974 and whether it has been bolted to its foundation, which tells you the state considers that a material fact.

People buy these houses with their eyes open and love them for thirty years. Just do not budget for one the way you would budget for a house built in 2015.

How I would actually budget

Forget the percentage and build it from the house in front of you.

1. Get the age of each major system. The inspection report gives you most of it, and the data plate on the furnace and water heater gives you the rest.
2. Subtract the age from the service life to get years remaining.
3. Get a rough local replacement cost for each.
4. Divide each cost by its years remaining and add them up. That is your genuine annual set-aside for this house.

Do that on a new build and you will land at a small number. Do it on a thirty-year-old home with an original roof and you will land somewhere well north of one percent. The exercise takes twenty minutes and it is the most honest version of this calculation I know.

Then open a separate savings account and fund it monthly. The point is not the account, it is that a $9,000 roof feels like a catastrophe when it comes out of your emergency fund and feels like a Tuesday when it comes out of the roof fund.

The comparison this actually feeds

When people weigh a new build against a resale home, they compare sticker prices. The sticker is only the first payment. A $500,000 resale needing a roof, a furnace and paint inside five years is not competing with a $520,000 new build on equal terms.

Run it the other way too. If the resale home has already had the roof, the furnace and the windows done, its next fifteen years are quiet and the comparison changes again. That is exactly the sort of thing worth asking about before you write an offer, and it is the through-line of my new construction versus resale comparison.

I sell new homes, so treat my enthusiasm accordingly. But the maintenance arithmetic is the same whoever runs it, and I would rather hand you the method than the conclusion.

If you are comparing two specific houses and want help pricing out the difference, send me both. You can also see what is currently on the ground on the inventory board.