To ensure the long-term success of your rental property investment, it's important to have a solid budget for maintenance expenses. By estimating and planning for ongoing expenses, you can avoid unexpected financial strain in the future and provide a positive experience for both you and your tenants. Here's a summary of key points to consider:
- Estimate maintenance costs: Allocate 8-10% of your annual yield for regular maintenance expenses and improvements. If you own an apartment, factor in Body Corporate Fees as well. Compile all costs into an annual budget, including property management fees, utility costs, garden/lawn maintenance, capital upgrades, rates, insurance, and mortgage repayments.
- New rental surge: While older properties may have expected wear and tear, new properties can also require unexpected repairs and maintenance. When purchasing a never-before-rented property, anticipate an initial surge of repair requests. Over time, these requests should settle down.
- Value happy tenants: Regular maintenance creates a secure and well-maintained property, leading to happier tenants. Responding promptly to their concerns and maintenance requests fosters strong relationships, and encourages better care of the property, timely rent payments, and potential lease extensions.
- Guidelines for maintenance budgeting: Consider the following rules of thumb when estimating maintenance costs:
- 50% Rule: Set aside half of your rental income each month for various property costs.
- 1% Rule: Budget approximately 1% of the property value per year for maintenance.
- Square footage rule: Allocate $1 per square foot annually for maintenance costs.
- Plan for major projects: Anticipate and budget for major projects like exterior paint, roof replacements, HVAC system upgrades, or driveway repairs. By planning these projects ahead, you can prevent unexpected problems and manage your expenses effectively.
- Know your repairs: Understand which repairs you can handle yourself and when to hire outside contractors. Balancing cost savings with timely repairs and minimizing disruptions for residents is crucial.
- Organize maintenance expenses: Over time, track and analyze the history of repairs and maintenance for your property. This information will help you anticipate future expenses and plan accordingly.
Remember to account for property size, age, design, and specific maintenance requirements when determining your budget. By maintaining well-kept properties, you can retain tenants, foster goodwill, and promote the growth of your investment.
For more advice specific to your property, talk to your property manager. They can create tailored recommendations for you to ensure you're forearmed and forewarned about any possible issues.