This is a great question, but the answer isn’t easy. While some believe that a fair estimate is around 1% of the property’s value per year, I don’t think that’s a formula you should rely on. The truth is getting an accurate estimate on maintaining a rental property is going to depend on the type of rental property you have, the location and the condition of the property.
For instance, maintenance on an apartment building may include extensive lawn care along with maintaining a pool, elevator maintenance, etc. These costs, obviously, wouldn’t apply to a single family home.
For the purposes of this article, let’s stick to single-family homes since these tend to be the most popular types of properties for real estate investors.
Where most of your maintenance expenses come from
Typically, at least in my experience, most of your expenses tied to maintaining a rental property will come from electric, HVAC, plumbing & roof repair.
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Handling maintenance requests not only costs you money but time as well. Do yourself a favor, and make sure these items are thoroughly inspected and properly repaired by professionals in each of those trades before renting the property. This will minimize the number of maintenance requests you have to deal with and save you a bundle on service calls.
Rental property maintenance costs depend on the property’s condition
The overall condition of the property will also determine the average amount you’ll pay in maintenance. The tough part when rehabbing rental properties is knowing when to stop rehabbing. This is why sticking to a budget is so important.
So, there’s that balance between making it “rentable” to the point where the property will attract good tenants, but you also don’t want to go overboard and end up broke with a brand new property.
At whatever point you decide to stop rehabbing, be sure to do a thorough walk-thru of the property, and look for little things that may pop up later such as the following:
- Doors/locks that don’t latch properly
- Kitchen appliances that don’t work
- No hot water
- Windows that don’t open/shut
- Low water pressure
- If there’s fencing, can animals get in or out?
- Broken/inoperable outlets, lightbulbs & ceiling fans
- Inoperable fireplace (if applicable)
Obviously, this list is not exhaustive, but you get the point. Rehab well, stick to a budget, and take your time doing a through walk-thru once rehabbing is complete, before you put the property up for rent. This will will minimize maintenance requests, and help you maintain a better relationship with your tenants.
Expenses at move out
As tenants move out, you’re going to incur some expenses in order to get the property ready for the next tenant. You may need to hire a carpet cleaner, general cleaning, paint touch up, etc. While some of these items may come out of the previous tenant’s security deposit, they are still expenses you want to factor into your maintenance costs.
Seasonal maintenance is another area landlords don’t often think about. In some cases, landlords handle lawn care and snow removal. I’ve got one property that has an irrigation system that I have to pay several hundred dollars to winterize/dewinterize every year.
Even if these items are paid by the tenant, there will be times when your property is vacant, and during those periods of vacancy, you’ll be stuck with the bill.
Any rental property will have to be maintained at some point. As a responsible real estate investor, you want to know how much maintenance costs on average you should plan for. With so many variables, it’s tough to give a general answer that can be applied to any situation.
My recommendation, especially when first starting out, is to set aside as much of your cash-flow as possible during the first year of owning your rental property. At the end of 12 months, go back and see what your average monthly expenses were. This way you can calculate an estimate monthly amount for maintenance based on data specific to your rental property.