While the need to perform maintenance and repairs on rental property is inevitable, they do not have to be nightmares. So let’s clear up some of the most common rental property maintenance myths:
Myth #1: Do-it-Yourself Repairs Always Save Money
Being able to take care of your own repairs around the house comes in handy. It can be a great way to save a few bucks when managing a rental property. If you’re a skilled handyman and can handle small repairs, basic plumbing tasks or appliance fixes, then you should definitely do so.
But by the wisdom of Kenny Rogers, “You’ve got to know when to hold ‘em, Know when to fold ‘em.” Rumor has it that Kenneth wrote this song based on his experience watching his carpenter father selectively turn down jobs (ok, only part of that may be true…). But the counsel still stands; even the best DIY jack- or jill- of-all-trades knows when to leave repairs to the pros.
Even if you can handle the rental property repair job yourself, does not mean you should. How much is your time worth? It can make financial sense to let a dedicated professional handle the job, even if you have the time and energy to do it yourself. Even the most capable DIY landlords will find themselves in over their head if they try to handle every job.
If you cannot confidently complete the job quickly and correctly, you owe it to the tenant to find a qualified technician. One of the leading causes cited by tenants leaving a rental property when the lease is up, is because of bad experiences from poor maintenance. The money you might save doing it yourself is often just a delayed (and greater) loss. One of the biggest maintenance myths is that a property management company will cost you a pretty penny. Sometimes it’s just a convenience, but many times the cost of hiring a professional property manager makes the most long-term financial sense.
Myth #2: Tenants are responsible for maintenance & repairs
Maintenance and repairs are the physical and financial responsibility of the landlord. The landlord should be notified and handle the repair, working with the tenant for the funds or deducting from a security deposit. But when an appliance breaks down during the tenant’s stay, it’s typically the result of years of normal wear-and-tear. The landlord is responsible for the repair or replacement.
Even preventative and regular maintenance tasks that are left to residents may be better handled by the property manager. Just because your tenants are certainly capable of regularly replacing smoke detector batteries and furnace filters does not mean they will remember to do so in the midst of moving. If you are not replacing these items during a regularly scheduled inspection, provide new batteries and filters for your tenants at regular intervals.
Also, do not forget the outside. Trees grow, gutters accumulate debris, faucets and sprinkler systems leak, and bees build hives. Keep an eye out for small problems inside and out. You can identify potential future problems to either prevent or plan for.
Myth #3: Replacing vs repairing
One of the biggest maintenance myths is knowing when to replace or repair appliances. On one extreme, is the optimist who insists that anything can be repaired. On the other end of the spectrum, the argument can be made that it’s always going to be cheaper to replace than to repair.
Neither extreme is accurate – deciding between repairing or replacing a broken appliance depends on a number of factors. You should consider: the age and condition of the appliance or structure, the expected lifetime, previous fixes, and safety concerns. If an appliance is older than half of its expected lifespan, and the cost of the repair is over half the cost of replacing, then you should replace it.
Another reason to consider repairing instead of replacing is for tax purposes. The costs of rental property repairs are deductible that year. The cost of an “improvement” – which most replacements qualify as, will have to be depreciated over years (the property’s life expectancy).
As noted already, it is also very important to consider the impact, implications, and impression for your tenants. Consider the repercussions of repairing. Losing a good tenant because the repair took too long, took multiple repair calls, and broke again a month later. An ounce of prevention is worth a pound of cure… but a pound of cure trumps seventeen individual ounces of repair.
Myth #4: Estimating rental property maintenance costs
Have you heard of estimating how much money you’ll need to set aside for maintenance on a rental property? Listed below are a few choice formulas for your estimating purposes.
- 50% Rule: total operating costs (repairs, maintenance, taxes, insurance) will equal half of your rental property income. So if your property rents for $1,200/mo, you should expect $600 of that to go to keeping the property up and running.
- 1% Rule: maintenance will cost about one percent of the property value per year. So a property valued at $190,000 should cost $1,900 a year to maintain (or $160 a month).
- Square footage formula: Plan on $1 per square foot for yearly maintenance costs. So a 2,200 foot rental should cost roughly $2,200 a year in maintenance costs.
- 1.5x rule: maintenance costs will average 1.5 times the monthly rental rate. So if your home rents for $1,200, then you should anticipate spending approximately $1,800 a year in repairs.
- Murphy’s Law: anything that can go wrong, will go wrong
While it’s nice to have a guesstimate on how much you should spend on maintaining your rental property, there are just too many variables to accurately estimate. Use whatever formula you prefer to predict your cost, but keep in mind these two estimates:
- 76% of yearly rental property maintenance and repair costs will be higher than you’ll expect
- 99% of rental property repair and maintenance expenses will be higher than you’ll want
Myth #5: What security deposits cover
Security deposits are a cause of contention for many tenants and landlords. Deposits are a part of one of the biggest maintenance myths out there. There are two common myths related to security deposits:
The security deposit covers the last month’s rent. While most landlords require a security deposit, it typically is not accepted as a payment for the last month’s rent. It can be returned in full to the residents, or used to make repairs that are more than normal wear and tear.
The security deposit can be used for any make-ready, between vacancy repairs and cleaning costs. The deposit is intended to cover unpaid rent or pay for necessary repairs and cleaning that are a result from more than normal wear and tear. The security deposit should not be used to replace old countertops or to repaint the color on the walls.
Maintenance myths don’t have to hinder your goals.
Don’t let maintenance and repairs keep you from reaching your financial and business goals. Consider hiring a property management company to handle all of that for you. A good company will know the appropriate cost of materials and labor while keeping your budget and business plan in mind. Schedule a consultation with an RPM Iowa professional today.