Posted by By Paul Branton, Director of Investor Services for Home Rental Services
Wheel of Fortune, Jeopardy, The Price is Right. These are just a few game shows that I really enjoy watching and playing. In particular, I appreciate games that involve a bit more strategy or knowledge than they do luck. Monopoly. Scrabble. Checkers. Connect Four… this one has become a family favorite and here is one of my most worthy opponents, my 5 year old son staring me down saying, “I’ll beat you this time!” (Yes, I am the guy that doesn’t give away a win to my kids.)
Well, who says games have to be reserved for when you’re off the clock? If you ask around, you’d probably find out I’ve been known to “play” a game or two as I go about my tasks here at HRS.
What Would This Cost?
One “game” I enjoy here at work is, “Hey Paul, what would this cost?”
This is sort of a variation of the Price is Right where I get asked how much something should cost and I do my best to be within a 10% margin of error. This happens about every other week and goes a little something like this: Hey Paul, what do ya think it would cost to ______? (Fill in the blank.)
Repair it or Replace it?
Another “game” we play that you might find to be a bit more useful is “Repair it or replace it?”
This one is a game of questions, a bit of researching and some industry knowledge. The researching involves finding out the age of the item in question. The industry knowledge is knowing what is considered a reasonable lifespan for that item.
For example: Is it worth an $1,800 repair on a 15-year-old furnace that can be replaced for $4,500?
Well, if you figure that $1,800 is 40% of the cost for the new unit and that the existing unit is around 60-75% into its expected lifespan, I’d take the “replace it” option.
It’s not an exact science, but I tend to believe if the cost percentage and the age percentage add up to 80 or greater, it’s time to replace. If it’s under 70, the “repair it” option is more entertaining and if it’s between 70 and 80… well, that just stinks as it really becomes a total judgement call.
To revise the example above, if the repair cost was $900 (20%) and the unit is 7 years old (35%), you are at a total of “55” and it now seems more reasonable to go with the repair. However, if the repair was more and/or the unit older, I think you’re going to start wondering if you shouldn’t just replace it. It seems logical, right?
Dishwashers… We play this game quite a bit with this particular appliance and sadly, it’s usually the “replace it” that wins. They’re a lower cost item to begin with at around $800-$1,000 and a life expectancy of about 10 years. With a minimum repair cost of around $150, you’re already at 15-18% so it would need to be less than 6 years old (60%) to even consider repair vs. replacement.
Expected Lifespans
Here is what a quick look at expected lifespans for items we replace most often:
- Dishwasher: 8-12 years
- Air Conditioner: 15-20 years
- Furnace: 20-25 years
- Carpeting: 6-8 years
- Interior Paint: 5-10 years
- Exterior Paint: 7-10 years
If you’ve owned a home (or a car) for any length of time, you’ve played the “repair it or replace it?” game. Do you agree with the under 70 and over 80 calculations? I bet you considered this equation or something similar without even realizing it to make past decisions. While it might not be the most fun game in the world, I do still enjoy the strategy, knowledge and perhaps a bit of luck that is involved when playing it.
Thanks for playing along with my blog post today! Feel free to reach out if you ever want to participate in the “Hey Paul, what would this cost?” game and I will happily reply.
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