Recently I've had several people ask how to determine which home repairs are best for saving money. The question is easy to answer on paper but is a little tricky in real life. We are going to assume the decision
is based soley on dollars not architecture or environment or other factors that are legitimate. The first way to asess a repair is payback period. The calculation is simply, if a repair or retrofit is a $1000 and saves a $100 a year then the payback is 10 years and the annual return is 10%. Lifecycle costing is a little more sophisticated method of measuring cost effectiveness. The theory is that when contemplating any action, one should compare the lifecycle cost of taking the action against not taking the action. For example a standard hvac system will use $1200 a year for the next 25 years costing $30,000 if no action is taken. A new system will cost $5000 and use only $600 a year or $15,000 over 25 years. The new system's initial cost of $5000 plus its fuel usage of $15,000 equals $20,000 so it would be prudent to replace the system. The ext step is the BCR or benefit/cost ratio. In the above example take the savings ($10,000) divided by the cost ($5,000) to arrive at a savings-to-investment ratio of 2. An sir of 2 means the retrofit will pay for itself twice during the life cycle. Just for clarification the numbers above are made up just to show the ideas, I know a fair amount of factors were left out of the example. I will get more specific about individual retrofits later.