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27.5 Years of Useful Life?

If you own an investment property, you know the rule.....The IRS says that the “useful life” of a home’s improvements is 27.5 years. This figure is used to calculate the value of depreciation mostly related to investment real estate, but its a number worth noting for other reasons. The average US homeowner lives in their home around half this timespan: As of 2018, the median duration of homeownership in the U.S. is 13 years. Median tenure has increased by 3 years since 2008 and as mortgage interest rates are higher, I bet that's rising.

These days, many people view properties 7 years and older as 'old and outdated'. Perhaps a result of all the home improvement shows? The perception is often even more extreme amongst the wealthy whose eyes are glued to the latest and greatest interiors in Architectural Digest and other media outlets. Mostly this is related to finishes, not systems. As a general rule, AC units typically last about 15-20 years, heating systems and windows. Roofs can last longer depending on type and location. Shingle siding lasts about 20 years and painted exteriors should be repainted within 10 years. All this may help explain why the IRS sees the length of a home's 'useful life' at 27.5 years, a timeline mostly related to depreciation.

The median age of a US home is about 39 much cosmetic and structural work is required over time depends largely on the quality of construction and the location of the home, specifically its exposure to harsher climates. At least 58 million US homes are older than 20 years of age. When buying or selling a home, a detailed evaluation of condition is invaluable. It's important not to focus on the "new and shiny" things. Often things that appear dated or at 'end of life' are not, and vise versa. We've all had appliances that break down after two years, right? On broker tour the other day, we were talking about a Maytag washing machine that was still in the house. Someone remembered having the exact model in her family home. Apparently, it's still working even though it isn't sexy or new.

So....the point is.....old doesn't necessarily mean broken but always do your due diligence!


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