Even landlords that make money month after month from their rental properties’ can lose everything if they fail to prepare for planned and especially unplanned maintenance costs. Some property owners or managers do a great job maintaining their property and as result have never had a huge unforeseen maintenance issue. However, these landlords or property managers may fall into a false sense of security and believe that they do not need to put revenue aside in case a huge unforeseen maintenance expense does arise. At the same time it is hard to know exactly what amount of money one should be spending on upkeep or saving for unplanned maintenance. One quick and easy rule is to set aside at least 10% of your revenue towards maintenance. However, 10% is the bottom amount and may not be enough if you are hit with a costly unplanned maintenance repairs.
Monica Dillon, from Demand Media has several tips for landlords to help them estimate maintenance costs for their rental properties.
The first step for any landlord in understand what they might need to set aside in maintenance is to research and add up known monthly costs such as landscaping, cleaning, management fees, and unit cleaning. To determine how much you might need to set aside for advertising rental properties and preparing for new tenants (i.e. repainting and repairing units) estimate your occupant rate by dividing the numbers of months your units are leased for by 12 and then multiply by 100. In addition, research the amount of money big expenses such as a new roof or boiler may cost. If you plan on owning the property for a while you should begin to save for replacing these big items as it is likely you will need to replace them eventually. For a full list of tips from Monica Dillion see her post.
Remember, while putting money aside for maintenance might feel like you’re missing out on profit, in the long run it will save you from having to deeply cut into your profits or even borrow money if you’re faced with a unforeseen repair cost.
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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.