Investment properties are a great way to grow your income, especially if you are in the very beginning stages of amassing wealth. Properties promise a higher cash flow and a steady income, and you don’t even need to be a real estate expert to succeed. However, as a landlord, you do need to maintain your investment properties if you want them to offer the most possible benefit — and that’s where many beginner investors get tripped up.
When it comes to maintenance, your first instincts can easily lead you astray. Here are a handful of property maintenance myths that you might believe, though they are hurting your ability to optimize your investments.
Tenants Should Be Responsible for Maintenance and Repairs
You break it, you buy it — isn’t that the rule? Well, not necessarily for property rental. Tenants can be held responsible for the damage they intentionally inflict, like punching a hole in a wall or allowing pets to ruin carpets. Tenants can also be penalized for failing to notify property managers about maintenance issues, like a water leak or a window broken in a storm, because these issues can become much worse if not immediately addressed.
However, in many areas, maintenance and repairs are the legal responsibility of landlords, especially when it comes to major issues like landscaping, roofing, and proper functioning of systems like HVAC, electrical, and plumbing. Even if the municipal code does not require you to manage maintenance and repairs, it’s often better if you do. Because tenants don’t own the rental property, they won’t treat the property with much respect — i.e. they won’t spend more money than they have to on maintenance and repairs, and the property will swiftly lose value. Thus, you should make a schedule and a budget for rental property maintenance if you hope to keep your property in good condition.
You Will Save Money If You DIY
Unfortunately, too many homeowners believe that DIY projects and repairs are the best way to save money — but often, the opposite is true. It’s easy for DIY novices to make mistakes, and these mistakes can have lasting impacts on the look and function of your property, and they will drive you to invest in additional materials, tools, and other resources, which wastes your money. Plus, tenants might be unhappy with you lingering around the rental property; it could make them feel unsafe and drive them to look for other places to live. Unless you have a wealth of knowledge and experience in DIY maintenance and repairs, it’s better to hire professionals to perform necessary tasks.
You Should Always Repair OR You Should Always Replace
When it comes to repairing versus replacing, there is no hard and fast rule. Sometimes, it is more economical and efficient to repair a broken element of your rental property; sometimes it is faster and smarter to simply replace. Because you won’t know which course of action is smarter until you understand what is wrong with a certain system, you should always hire experts to diagnose the problem before you make a decision. Then, you should take their advice — or at least get a second opinion to confirm their prognosis.
For example, if your tenant complains of a non-functioning air conditioner in the dead of summer, you should send an HVAC contractor in straightaway. If only a small component is preventing the relatively new AC from blowing cold air, you can probably slide by with an inexpensive repair. However, if your property’s AC is older than 10 years and has a major malfunction, you might want to start looking for home AC units to install, stat.
There Is One Right Way for Calculating Costs
Landlords love formulas because formulas make rental property management easy. As a new landlord, you might be tempted to search for THE formula for calculating maintenance costs, so you can set aside the right amount of money and avoid scrambling when your tenant reports that something has gone wrong. However, the truth is there is no THE formula; while most landlords have a preference for one formula over another, it is impossible to forecast your exact costs. Thus, you should consider the following popular methods for estimating maintenance costs and experiment to determine which one works for you:
- The 50 Percent Rule: Total operating costs (to include maintenance and repairs as well as taxes and insurance) = .5 x rental property income.
- The 1 Percent Rule: Maintenance will cost one percent of property value per year.
- The 5x Rule: Maintenance costs per year = 1.5 x monthly rental rate.
- The Square Foot Formula: Maintenance costs $1 per square foot of property.
When it comes to rental property maintenance, there is only one rule that holds true across the board: Anything that can go wrong will go wrong. Being a landlord is hard, even without the ever-present misinformation online and amongst real estate circles. Instead of trusting what you hear, do your research and experiment on your own properties to determine what makes the most sense for you. Then, you’ll make more money on your investments — and actually enjoy being a landlord.
This article has been contributed by Tiffani Wroe.