Maintenance costs to include in your property management budget
DIY landlords – especially beginner property investors – often fail to budget for the cost of maintenance issues. They allow for the expenses of owning a home, but not those associated with being property managers.
One of the most common mistakes made by first-time investors is neglecting the cost of maintenance – and the time required to keep on top of regular maintenance. Owning and managing a property isn’t quite as easy as simply collecting rent and banking the profit after paying the mortgage.
In this article, you’ll learn about the maintenance costs you need to budget for, and how much to budget.
Why budgeting for buy-to-let maintenance is hard
When calculating your cash flow projections, it’s easy to allow for your regular expenses. The mortgage and landlord insurance are known and regular costs. Maintenance costs are much more difficult to estimate. You may have to replace a washing machine one month, then spend nothing for two or three months, and then fix a window another month. This variability of costs is what makes budgeting for property management so difficult.
The only way to ensure your cash flow projection is accurate is to allow for all possible maintenance costs. By doing so, you can work out a monthly average maintenance expense. Setting this aside in a maintenance fund will ensure you always have the money to pay for unexpected repairs and replacements.
6 maintenance expenses that DIY property landlords can expect
As a DIY property landlord, you should make yourself aware of the maintenance issues that will eat into your cash flow. Equally importantly, you’ll need to allocate time for each. And you can bet your last penny that the unexpected and major issue will happen when it is least convenient for you – while you’re on holiday abroad, or in the middle of a big project at work, for example.
Here are six maintenance expenses that you can expect as a DIY landlord, and that you should discuss with your property manager to increase the benefit of effortless property management.
1. Changeover costs
When a tenant leaves, you’ll need to prepare the property for your next tenant. A professional clean from top to bottom should be carried out. While you may be able to recoup some costs of damage and wear and tear from your tenant, you won’t be able to charge the exiting tenant for the cost of replacing old with new.
You may also need to tidy up the garden, do a little landscaping, repair fences and gates, and increase curb appeal.
2. Maintenance of white goods
You cannot manage how your tenants use the white goods you provide. Families may have multiple loads of laundry to wash – perhaps a daily load, maybe two. The tenant may neglect to clean out the filters. You’ll benefit from a routine maintenance programme. Checks on kitchen appliances during regular property inspections should identify these small issues before they become reasons to replace appliances.
3. The cost of replacements
Irrespective of your regular maintenance routine, nothing lasts forever (although my first washing machine miraculously lasted 14 years!). It’s not only white goods that need replacing from time to time. Paintwork, carpets, roof tiles, fence panels everything has a limited life. Think about how long white goods and other elements should last, and budget for their replacement.
4. Decorating and Flooring
Most tenants will treat your buy-to-let property as they would if they were the homeowner. However, it’s likely that you’ll need to paint and decorate more often than you would your home. Painting is an effective way to reinvigorate a property when a tenant vacates.
Carpet is the usual type of flooring, but also the one subject to most wear and tear. It may be worth having the carpet cleaned professionally every year. It will help to increase its useful life. When replacing flooring, it may be worth considering more durable alternatives such as laminate flooring.
Normal wear and tear rules may mean you can’t recoup all the cost of redecoration from the tenancy deposit.
5. Emergency maintenance
There will always be emergencies. A frozen water pipe that bursts on New Year’s Day. Central heating that won’t switch off in the summer. These emergencies must be dealt with immediately. Routine maintenance checks during property inspections should help to minimise these emergency events, but the best strategy is to expect the unexpected.
6. Seasonal maintenance
Scheduling regular maintenance throughout the year could prevent expensive repair bills. Consider pruning back trees in the winter, clearing gutters in the autumn, and overhauling air conditioning before the summer starts.
Budget for your legal responsibility
As a buy-to-let investor, you have a legal responsibility to ensure your property is habitable. You’ll need to repair broken white goods, fix leaking roofs, and make sure that central heating does what it should. You should expect your tenants to keep the property clean and report any damage or repair issues promptly.
Whatever maintenance expenses you incur, make sure you keep receipts and records. You can offset the costs of maintenance against your profits when calculating your tax liability. And this brings me to how much you should budget for maintenance. Our experience is that setting aside around 5% to 10% of gross rental income each year should be ample to build a defensive maintenance fund. When combined with regular property inspections, having this cash available should mean you never find yourself with a property management bill that harms your profitability.
To discover how a routine of regular property inspections carried out by experienced investment property managers can reduce your maintenance costs, contact Ezytrac today on +44 1522 503 717.
Yours in effortless property management,